UAE online retail market on course for $1bn barrier

UAE shoppers have been slow to catch on to online shopping but now those numbers are growing fast.

A study says about 50% of shoppers visit a store's website before they go to the outlet. Jaime Puebla / The National

The online retail industry in the UAE is expected to be worth US$1 billion by 2020 as more shoppers swap the mall for the web.

Research by Tata Consultancy Services found that the industry, which was worth $280 million last year and is growing at a compound annual rate of 18 per cent.

Other estimates are broadly in line with the prediction.

"Online retailing is the fastest form of retailing when it comes to non-store based retailers in the UAE.

"It is expected to grow by 17 per cent by the end of 2013," said Fatemah Sherif, a research analyst at Euromonitor International.

"Despite this form of retailing growing from a small base in comparison to store-based retailers, internet retailing has seen very fast growth over the past three years," she added.

Consumers are driving the trend, with a high degree of smartphone penetration, at 61 per cent, and social media, at 73 per cent, making the UAE favourable for internet shopping, said Tata.

About 16 per cent of internet users already shop online, according to a report released by Tata yesterday at the InRetail Summit in Dubai.

And about 50 per cent of shoppers visit a store's website before they go to the outlet.

But the numbers of people using the internet for research before they hit the malls may be even larger, according to some estimates.

"Two thirds of the customers in this market already are researching online before they go to shop and the thing that can make us all better retailers is the information that we get from those added touch points we now have for the customer so that we can sell more stock when and where she wants to buy it," Mike Bermingham, the head of merchandising and ecommerce at Landmark Group, which established a presence online last year, told the InRetail summit.

However, the adoption of internet retailing has arguably been slow among some companies.

About 75 to 80 per cent of brick and mortar retailers in the Emirates have begun their online journey, but only a "handful" have launched dedicated shopping sites so far, according to Tata.

The UAE is home to the region's only online mall, Tejuri.com, which launched this year.

About 1 million people have visited the site so far but the number of visitors is rising sharply at about 20 per cent per month.

It aims to increase the number to 1 million a month over the next 18 to 20 months.

"We are not a retailer. We are a mall operator, so our success is very much driven by the number of stores that have joined Tejuri in the last six months and it has 100 per cent increased from where we started in March and where we are today [with around 70 stores]," said Ayaz Maqbool, the managing director at Tejuri.

It aims to expand the number of retailers to about 112 by the end of the year. "We explain to them it's all about time, though [internet shopping is] not so prominent here but a time will come because you have so much of a youth population here which enjoys the highest penetration in the internet across the globe and has the maximum number of smart phones per capita, that ecommerce will penetrate here faster than anywhere else in the world therefore can you afford to ignore it?" added Mr Maqbool.