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Middle East E-commerce Market Set To Reach $13.4 Billion By 2020


May.15.2015 0 Comments

apigee-mobile-shopping-surveyPayFort, a leading online payment gateway and payment solutions provider in the Middle East region, released a new report titled State of Payments in the Arab World at the Ecommerce Show Middle East 2015 in Dubai. The report focuses on entertainment and events, marketplace services, and e-commerce in general including vital data on acceptance rates, chargeback ratios, the volume and size of current transactions and demographics.

After surveying hundreds of merchants and thousands of consumers in the UAE, KSA, Egypt, Kuwait, Lebanon and Jordan, PayFort anticipates that events and entertainment will generate an additional $75 million than 2014’s revenue of $125m, creating more than $200 million annually for the region by 2020. Merchants that sell physical products online such as electronics, clothes and white goods constitute the second largest e-commerce sector in the region, generating $7 billion in 2014. PayFort anticipates that this market will almost double in the next five years, growing in size to $13.4 billion by 2020.

PayFort also did an examination of smaller e-commerce sectors including classifieds, listings, services and other non-physical products sold online, dubbed “marketplace services.” After surveying more than 4,000 online buyers across the UAE, KSA, Egypt, Jordan, Lebanon and Kuwait, PayFort gathered significant insights on the demographics of customers who utilize e-commerce. PayFort found that e-commerce is generally dominated by Saudi Arabia and Egypt, the two largest population centers in the Middle East. Coming close behind these two countries is the UAE with its strong rate of internet penetration. PayFort anticipates that these three major markets will continue to drive change in the world of Arab e-commerce. While Egypt has the largest number of online buyers, the UAE and Kuwait have higher proportions of e-commerce customers per capita.

Social networks play an increasing role in e-commerce, though no one network dominates the entire region. While Facebook rules Egypt and the UAE, Instagram and Twitter dominate Saudi Arabia. Surprisingly, PayFort found that Lebanon heavily relies on the professional network LinkedIn. PayFort determined that with the exception of the UAE, men typically buy much more than women online across the region. PayFort recommends that Arab governments place more focus on bringing e-commerce to their populations.

People aged between 26 to 35 are the largest population of people who utilize e-commerce. However, what customers tend to buy online varies significantly by country. Unlike other regions where credit or debit cards are an essential part of e-commerce, Middle East continues to prefer cash on delivery. This trend is particularly prevalent in Egypt, where 72% of consumers use cash for their e-commerce activity. Easy installment payment plans are also a popular payment method in the region with 56% of online travel agents (OTAs) claiming them to be an integral part of their business.

PayFort found that the acceptance ratios for e-commerce companies remain low as many start-ups begin without fully developed checkout pages. The largest challenges for online payments come from reliance on cash on delivery as a payment system and high chargeback ratios.