The United Arab Emirates has various options for e-commerce and cross-border e-commerce in an expanding market. The country is a shopping heaven and there are tens of stores or retail stores of more than 1.200 brands. Dubai which is one of the largest and best shopping malls in the world is one of the 5 emirates of The United Arab Emirates. There are different shopping malls, plazas and sales points of world-famous brands in Dubai.
Cross-Border E-Commerce in The United Arab Emirates
In recent years, The United Arab Emirates has various options for e-commerce and cross-border e-commerce in an expanding market. It is estimated that e-commerce sales in the UAE will be a total of 20 billion dollars in 2020. An annual increase of 23 per cent in e-commerce is estimated between 2018 and 2022. Electronics and fashion are the most popular product categories in e-commerce in the UAE. The most popular marketplaces in these categories can be listed as Amazon.ae, Noon.com and Namshi.com.
Online Marketplaces in the The United Arab Emirates
Amazon.ae or previously known as Souq.com, is an online marketplace that offers health and beauty products, toys, furniture, electronics and much more. It has become a leading online shopping retailer by offering deals in various products. E-commerce sales and discount are common in this marketplace. Deals are generally updated daily. There are high-level customer services. It offers secure and satisfactory systems for shopping. Amazon is known for offering branded products cheaper than most retailers.
Noon is an important marketplace in The United Arab Emirates for e-commerce and cross-border e-commerce. This is a local e-commerce platform that forms the majority of online sales. Noon was established in 2017 and showed and aggressive growth to ensure a reliable, predictable and efficient marketing experience. Various products such as fashion, electronics, beauty, home and kitchen are among the best sellers on the website.
Namshi broke like a storm in Gulf countries and the Middle East and especially in Dubai. This online store has everything from sports clothing to formal clothing. The customer audience is customers in their 20s. It gathers some famous brands like Topshop and Forever21. Namshi offers fashionable and affordable products. Therefore, this marketplace is popular among young adults. Additionally, it is commonly preferred due to free delivery and free return options.
E-Commerce in The United Arab Emirates
The United Arab Emirates has the most common e-commerce in the region. The country has 7 emirates and 45% of the users shop online. In 2019, 99% of the population of The United Arab Emirates was active on social media. 92% of these people were mobile social media users. Consumer behaviours in The United Arab Emirates e-commerce market are influenced from the social media platforms. In March 2018-February 2019 period, daily e-commerce spending trend to general retail goods trend in The United Arab Emirates was 9%. It is estimated that e-commerce sales in The United Arab Emirates will increase by 23% between 2018 and 2022.
It is estimated that e-commerce revenue in The United Arab Emirates in 2020 will reach 5,746 million USD. It is estimated that the revenue will increase 16.3% per year (CAGR 2020-2024). This means, the market volume will be 10,504 million USD by 2024. Fashion is highlights as the largest segment of the market. It is estimated that fashion category will reach 1.682 million USD market volume in 2020. Unpredicted increase is expressed due to pandemic. It is estimated that e-commerce user penetration will be 67.8% by 2020 and 68% by 2024. The revenue per user is estimated as 856.79 USD. (Source: Statista)
Payment Methods in the The United Arab Emirates
Cash is the most popular payment method used in cross-border e-commerce and e-commerce in the The United Arab Emirates. Other than that, payment with Visa and MasterCard, digital wallets, PayPal, Google Pay and Apple Pay are popular.
Within this framework:
- It is possible to cash on delivery, American Express, MasterCard and Visa on Amazon.
- Credit card or debit card, cash on delivery and Apply Pay for some countries are accepted on Noon.
- Credit card, PayPal or Apple Pay are accepted payment methods on Namshi.
Customs Operations in The United Arab Emirates
In The United Arab Emirates, traditional economic indicators are good other than e-commerce and cross-border e-commerce. Import in UAE generally has 5% customs tax. The customs tax is calculated and collected on product CIF value. Certain food products, fresh fruits and vegetables and livestock are exempt of import tax. However, there is 50% tax on alcoholic beverages and 100% customs tax on tobacco. Gulf Arab Countries Cooperation Council countries, does not impose tax on Great Arab Free Trade Area countries, Iceland, Liechtenstein, Norway, Singapore and Switzerland for import.
Logistic in The United Arab Emirates
When selling a product to The United Arab Emirates with cross-border e-commerce, there are multiple logistic scenarios. It is possible to directly ship from Turkey to The United Arab Emirates. Goods shipped with delivery firms such as PTT, DHL and UPS with Electronic Trade Customs Declaration authorisation can be shipped from Turkey without any problem. Cross-border e-commerce customs procedures in The United Arab Emirates are not as hard as Turkey. There is a low chance to experience problem.
Fulfillment in The United Arab Emirates
There are fulfillment torwarehouse/handling services for firms that want to do cross-border e-commerce and e-commerce with The United Arab Emirates. These services enable firms to save on time, money and labour over the long run.
- Amazon, Noon and Namshi marketplaces have their own fulfillment services. Companies can ship the products to the warehouses of these firms and these firms store, pack and deliver the goods in 1 day. Amazon Fulfillment services are globally known. Amazon deals with all sales-related procedures. The only thing that the companies must do is to send their goods to Amazon warehouses! Amazon delivers the products to customers in 1 day.
- Noon Fulfillment service enables same day delivery for all orders placed in the morning for Dubai. The orders from the other parts of the emirates are delivered in 24 hours after ordering. When orders are received with “Back to Back” sales model depending on the company’s selection, the products are delivered from warehouses to customers.
- Namshi Fulfillment delivers the products from warehouses in certain locations to customers. They are closely interested in customer satisfaction. The greatest advantage to use this service is to minimise the late delivery from Turkey due to transportation and customs. Namshi Fulfillment service eliminates this problem.
Establishing an E-Commerce Company in UAE
E-commerce activity volume in UAE is upwards. You need to operate as a licensed company for e-commerce in The United Arab Emirates and other commercial activities. Government institutions, Dubai International Finance Centre (DIFC) offer a business-friendly environment for e-commerce companies. Dubai Financial Service Authority that provides licenses for financial services in DIFC ensures full-support service (e-payment service) for e-commerce businesses. Additionally, a framework is provided for activity development. E-commerce operations in UAE (data protection, certain electronic operations and e-commerce laws) has a wide legal framework. How can you establish an e-commerce company in UAE?
The main things to consider for e-commerce and cross-border e-commerce in The United Arab Emirates are as follows:
Choose the format of the legal entity: The basic thing to consider when structuring a business in UAE is to have all necessary licences for a commercial business type to operate in the desired commercial activities. Additionally, foreign property limitations must be considered. The Emirates citizens must have the 51% of the capital. Foreign property limitations are valid for companies with limited liability registration and licenced by the Electronic Development Department.
Choose the right commercial activity: E-commerce is a general term including all aspects of online commercial activities and services. The Ministry of Economic Development and Free Zone officials have developed license categories that include e-commerce in addition to traditional trade activities. Any company that plans to be in e-commerce in UAE must select the most suitable activity and get the suitable license.
Do you need to establish limited liability company? This depends on the business plan and commercial activities of the company. As a general rule, licensing in UAE means legal jurisdiction outside the free zones to operate in any Emirates. A license by the Department of Economic Development is necessary. For example, a company that plans to supply goods or services to a customer living in Dubai must obtain a license from Dubai Department of Economic Development. This includes having a UAE-citizen to the corporate structure as a shareholder and a limited liability company.
Logistics and storing in e-commerce: Logistics, storage and delivery activities are critical in an e-commerce business. Customer experience is important for a competitive market and all consumer expect seamless services for online purchasing decision, payment channel integration and delivery to door. An e-commerce business has options to outsource the logistic or work with third-party logistic providers (3PL).
What are the basic legal issues? In UAE, important legal issues such as forming any legal entity should be considered. Visa quote is necessary to employ foreign workers under the employment law. For this purpose, approval from UAE Ministry of Human Resources and Orders is necessary. All corporate entities in UAE must have a workplace (office or warehouse/industrial facility). Therefore, an office or a warehouse must be rented as a part of incorporation. If legal entities estimate to exceed taxable supply of 375,000 AED per year, the entity must be registered to Federal Tax Office. The registration is optional if the supplied goods will be above 187,500 AED and below 375,000 AED.
UAE and especially Dubai continues to be the fastest growing e-commerce country. UAE has high internet penetration. Adopting and supporting e-payment platforms make the task easy for the customers. Thus, the trust in e-commerce and e-payment platforms are increasing. Logistic infrastructure is designed with high-standard. Brick and mortar retailers adopt their own e-commerce and e-payment platforms. UAE government supports start-ups and entrepreneurship with incubation centres (FinTech Hive, Dubai Future Foundation). Therefore, e-commerce and cross-border e-commerce in The United Arab Emirates spread to emirates countries. It is time to do e-commerce and cross-border e-commerce in UAE!
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