"The retail industry in the Middle East and North Africa (MENA) is on the verge of a pivotal shift," the consultancy Bain & Company wrote in 2019. While the company was optimistic in its predictions, it could not have anticipated the recent uptick this sector has seen.
In June, a report from the Dubai Chamber of Commerce revealed that retail e-commerce in UAE had grown 53% year-on-year (2020 vs. 2019) as a result of the COVID-19 crisis. Now worth some $3.9 billion, the organisation predicted the market would be worth $8bn by 2025, with mobile commerce adding a further $3.9bn to this mix.
Although not every Middle East country is witnessing this growth, COVID has helped accelerate existing trends, encourage new players and behaviours, as well as draw fresh investment and optimism for the sector across much of the region.
With that in mind, here are seven e-commerce developments to keep an eye on:
1. Continued investment
Although Saudi Arabia, UAE and Egypt typically attract the most investment, the MENA region is rife with e-commerce solutions, although many of these are national services, rather than services covering the whole region.
A number of these have seen new investment as a result of the pandemic. In Iraq, for example, Orisdirecently signed a six-figure deal with Al Sharqiya TV Group, one of the largest media groups in the company. This investment was supported by a matching grant from Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ), a German development agency headquartered in Bonn, through a project focused on "ICT for Youth in Iraq."
2. New online payment options
Historically, cash on delivery has been the preferred payment method in the region for online shopping. However, things are changing.
Checkout.com's report, Digital Transformation in MENA and Pakistan, revealed cash-on-delivery has dropped by 75% since last year, with 60% of MENA consumers now preferring to pay digitally. Alongside this, 24% of consumers in MENA have used a buy now, pay later (BNPL) option this year. That's "more than in the European market," the authors note.
MENA-originated BNPL services like Postpay, Tabby and Spotii have all benefitted from recent investment, as this type of payment model – which enables consumers to spread the payment for their purchases interest free – continues to grow in popularity worldwide.
3. The growth of e-groceries
Not surprisingly, one of the fastest-growing pandemic-related sectors has been e-groceries.
Analysis published last year by the consultancy Kearney estimated that online food delivery and grocery would grow by 30% year-on-year in MENA over the next five years. The average dollar per e-grocery order, currently ranging from $25 to $40, is projected to double by 2022.
Another consultancy, RedSeer Consulting, observed that e-grocery was the fastest growing e-commerce segment in the region. Growth during the early stages of the pandemic was particularly pronounced in Arabia and UAE.
That momentum has continued, and can also be seen in other markets across MENA. MaxAB, a Cairo-based wholesale food and grocery B2B ordering app, raised $40m in Series A funding this summer. The investment is designed to fuel further expansion across the region.
Meanwhile, GoodsMart, a Cairo-based online household shopping service, raised $3.6m in funding to support their expansion plans. Users order items using the app, and provided the request is completed by 10pm, everything is delivered before 6am the next day.
4. The emergence of q-commerce
Food delivery and e-groceries are leading the emergence of a new segment of e-commerce, known as "quick commerce" or q-commerce, for short. By 2024, it is anticipated that this will be a $20bn market in MENA, up from $4bn in 2018.
Last year, the UAE-based startup InstaShop was acquired by Germany's Delivery Hero in a deal worth $360m. The website for Wamda[DR1] , a multi-faceted entity supporting entrepreneurship in the region, noted it was "one of the Middle East's largest exits to date."
Fenix, an electric scooter app, has blended its ride-rental technology with q-commerce and e-groceries, with the launch of F10. Available to users on Reem Island, the service allows users to shop online and have groceries delivered to them within 10 minutes.
5. Bricks and mortar investments and crossovers
Eyewa, a UAE based eyewear e-commerce platform that operates in the GCC and the USA, launched its first retail store in the UAE this summer. Founded in 2017, the company intends to launch 100 outlets in key locations across the region in the next two years, following series B funding of US $21m earlier in 2021.
The move bucks the more obvious trend of retailers moving online, or deepening their digital presence, often as a result of the pandemic.
Although moves by Silicon Valley titans like Uber (who acquired ride-haling service Careem) and Amazon (who bought the e-commerce platform Souq.com in 2017) have attracted considerable attention, this demonstrates how regional investors are also eyeing up expansion opportunities in MENA: not just among startups, but also more established online businesses.
7. Expansion by established players
With all this startup activity taking place, it's not surprising that some of the biggest e-commerce providers in the region are taking action.
What these examples demonstrate is that Bain's earlier predictions for the scope of e-commerce activity in the region are being rapidly realised. Across the region, investment and expansion in e-commerce is beginning to transform the retail sector, creating new consumer experiences, and fresh opportunities for businesses and startups alike.
COVID's role in this should not be underestimated. The early stages of the pandemic added rocket fuel to existing trends, with additional innovation and investment further hastening the development of this sector. As this online transformation continues to gather pace, MENA's e-commerce evolution appears to show no signs of slowing down any time soon.