x Abu Dhabi, UAEFriday 21 July 2017

Emirates online shoppers most prolific in the region

Shoppers in the Gulf doled out US$3.3 billion on online purchases last year, and nearly 60 per cent of purchases were made in the UAE.

Online spending in the Gulf is projected to rise about 30 per cent this year and reach close to $15bn in 2015. Ross Franklin / AP Photo
Online spending in the Gulf is projected to rise about 30 per cent this year and reach close to $15bn in 2015. Ross Franklin / AP Photo

Residents of the Emirates are increasingly doling out the dirhams to shop online, and now account for nearly 60 per cent of the Gulf's US$3.3 billion (Dh12.12bn) e-commerce industry.

While internet usage remained significantly lower in the UAE than Saudi Arabia last year, consumers in the Emirates bought $1.9bn worth of goods online, or more than 57 per cent of all purchases made in the region.

Those in Saudi Arabia spent the second-highest amount, $520 million, according to a new study commissioned by Visa Middle East and conducted by IMRG International, a retail industry group.

Online spending in the Gulf is projected to rise about 30 per cent this year, according to IMRG, and reach close to $15bn in 2015.

"The potential here is massive," says Stephen Leeds, the business leader for e-commerce at Visa Middle East.

But IMRG notes the e-commerce market in the Gulf "is still in the early stages".

Globally, major players such as Amazon.com and Apple's digital iTunes store helped rake in about $790bn in sales for the industry last year.

E-commerce executives in the UAE warn certain hurdles are holding their businesses back in the local market.

They cite high commissions and transaction fees they must pay banks for shoppers to use credit cards online.

Unlike big businesses such as Amazon.com, most e-commerce companies in the Emirates are still small to medium sized, and they cannot always negotiate down fees with banks, they say.

"Credit card commissions are high, and there is a transaction fee as well," said Ronaldo Mouchawar, the chief executive of Souq.com.

Mr Mouchawar pegs the local commissions at 1 to 1.5 per cent higher than they are abroad, which might not sound like much, but "it's an issue for sites where margins are smaller", he said.

At EmiratesAvenue.com, each iPhone sold garners a 3 per cent margin, said Julien Pascual, the site's founder.

He said the commission banks wanted to charge him ranged from 5 to 7 per cent because his business was still growing.

That means, for now, he is only accepting cash on delivery through his site.

Yet 83.8 per cent of online shoppers in the UAE say they prefer using credit cards to make payments online, according to IMRG's report, and Mr Pascual acknowledges he may be missing out on business.

"It's a vicious cycle," he said, "because the banks tell us 'if you had more sales then we could reduce the costs or commission.'"

nparmar@thenational.ae