UAE online retail sales to touch $1.5bn in Q4 this year

Grocery sales will drive much of this growth, with 85,000 e-grocery orders estimated per day in this period, new report says

A worker fulfills a customer's e-grocery order at a warehouse. Online grocery sales in the UAE are estimated to see an increase of more than 260 per cent in the fourth quarter, reaching $300 million, Show more

Online retail sales in the UAE is expected to cross $1.5 billion in the fourth quarter of this year as Covid-19 pandemic drives users to increasingly shop online, according to a new report.

This compares to $1bn worth of retail sales in the last quarter of 2019 and $1.3bn in the third quarter of this year, RedSeer Consulting said in its latest report.

Much of this growth in online sales is being driven by groceries.

Online grocery sales is expected to grow more than 260 per cent annually in the fourth quarter to reach $300 million. The consultancy expects 85,000 e-grocery orders per day in the three months to December, compared to 20,000 orders in the fourth quarter of last year.

“Grocery is a high frequency item, unlike fashion or electronics which people typically spend on only once in a quarter,” said Sandeep Ganediwalla, managing partner, RedSeer MEA. “Because customers could not delay their food purchases during the stay-at-home restrictions, the volume of online grocery sales went up by almost 500 per cent compared with before the lockdown.”

One in three online orders in the fourth quarter this year is expected to be for groceries. Among various categories, online grocery is tipped to be the biggest gainer, accounting for 20 per cent of the total market share this year, up from 9 per cent in 2019.

“Quick commerce players like Talabat and Instashop controlled less than 5 per cent of the e-grocery market before Covid-19, but now account for 10 per cent of total value and 20 per cent of volume in the online grocery market,” Mr Ganediwalla said.

Two-thirds of UAE consumers made their first online grocery purchase due to stay-at-home measures this year, according to the Visa CEMEA Impact Tracker.

This also resonates with a PwC survey of 501 Middle East consumers in July, which found that about half of those polled are now doing their food shopping online or by phone. Of those that shop online, 92 per cent said they will continue purchasing digitally even after the pandemic is over.

Although electronics will be the slowest growing category in online retail sales during the fourth quarter, it is estimated to account for online sales worth Dh650m in the fourth quarter, according to RedSeer Consulting.

“Although online electronics growth is slowing down, it continues to be a bellwether category, with around 40 per cent share of the overall online retail segment. To put this in context, this is more than twice the contribution that the electronics category contributes to the overall [online and offline] retail sales,” Mr Ganediwalla said.

He estimated that customers would prolong their buying cycles on high-ticket electronics items such as mobile phones. “We expect accessories such as headphones, covers, chargers, etc., to drive the volume during this festive sales season.”

Online fashion sales in the UAE are expected to increase to $450m in the fourth quarter, an increase of 50 per cent compared to $300m in the same period last year, the report showed.

“This category will see increased growth on the back of pent-up demand after a muted Ramadan. People are expected to loosen their purse strings and make impulse purchases,” Mr Ganediwalla said.

Top selling products in the online fashion sector are expected to be clothes and watches, followed by shoes.

The RedSeer report added that UAE’s total retail sales, online and offline combined, in the last quarter are expected to be higher than Ramadan sales.