Why and Where to Set Up an E-commerce Business in the UAE

As few as 5 years back, online shopping or e-commerce in the United Arab Emirates was not as large a market as it is today, in a recent article on Entrepreneur.com, Dubai Customs is quoted as saying that there is an expected rise in e-commerce sales in Dubai to US$27 billion in 2022. This meteoric rise can be directly linked to a few factors, one of them being the Covid-19 pandemic. However, that is not the only reason, the UAE has developed favourable business conditions for investment.

The unprecedented adoption of e-commerce is as a direct result of what is known as ‘the new normal’. Due to this shift, there was an unparalleled number of e-commerce licenses issued in the UAE, with a specific focus on foreign investors, during the last few years. In 2023 there are endless opportunities within the UAE, the most advanced e-commerce market in MENA, for entrepreneurs and investors ready to take their business to the next level of success.

The UAE is well-positioned to take full advantage of the burgeoning e-commerce industry, due to the geographic and economic landscapes. In addition, Dubai is considered a gateway to the rest of the world, with one of the largest and most technologically advanced logistics infrastructures across the globe, whilst providing a more than advantageous landscape for business growth and job creation.

Although Covid-19 has spurred the changes, there are other factors attracting investors and entrepreneurs alike to the UAE:

• The UAE Government is dedicated to supporting entrepreneurial initiatives.
• There are fast business incubators for entrepreneurs to take advantage of, such as Area 2071, Hub71, FinTech Hive, and Dubai Future Foundation;
• 100.9% internet penetration in the UAE;
• The promotion of a cashless economy and digitization of transactions through the UAE Government policy initiatives;
• Adoption of e-payment platforms, like Smart Dubai, Payfort, Ali Pay, CC Avenue, and PayTabs;
• Online users’ trust in e-commerce and e-payment platforms has increased substantially;
• Unrivalled logistics infrastructure across the UAE.

As mentioned, the UAE is deemed to be the most advanced e-commerce market in MENA, with a penetration rate of 4.2%, and this was expected to increase by an average of 23% by 2022.

Source: Fitch Solutions data

The continuous support and innovation for start-ups in the UAE is directly responsible for the growth and success of the e-commerce market. The UAE’s e-commerce landscape is diverse and has a robust and emerging set of innovative e-commerce players in the region, at varying levels of success, from well-established brands to newer, agile businesses. Top e-commerce players are:

• Aido
• Amazon
• Awok
• Careem Eats (previously Uber Eats)
• CarrefourNow
• Deliveroo
• Ebay
• FarFetch
• Mumzworld
• Noon
• Namshi
• Ounass

Some of the world’s key e-commerce players have chosen to set up companies in the UAE Free Zones. UAE Free Zones offer business licenses, whilst delivering valuable stimulus packages for foreign investors that want setup their new e-commerce businesses, such as:

• Sharjah Media City (SHAMS) offers 50% off for a 1-year e-commerce license.
• Ras Al Khaimah Economic Zone offers now the most cost-effective e-commerce set-up packages for online businesses.

Many UAE Free Zones have, in answer to the staggeringly fast growth of this market, developed and launched several options to set up e-commerce businesses: Dubai Multi Commodities Centre (DMCC), Dubai Internet City, UAQ FTZ, Dubai South offer its customers cost-effective e-commerce packages and a perfect infrastructure.

There is even a dedicated e-commerce Free Zone which is coming up in Dubai soon. The Dubai Commercity is a dedicated e-commerce Free Zone in Dubai and will be completed in 2021.

On the UAE streets, an increasing number of riders from delivery aggregators such as Careem, Deliveroo, and Talabat can be seen. The reliance on these delivery applications boosted higher e-commerce penetration of the Quick Service Restaurants category in the UAE. The more traditional retailers are providing their customers with an additional online retail platform to augment their revenues. For instance, Carrefour and Lulu Group, two of the largest retailers in the UAE, greatly increased their share of sales through their online shopping portals since 2020.

Apart from online retail, there is a scope and large opportunities in the UAE for further expansion into such e-commerce business sectors as Industrial Goods, Industrial & Commercial Services, Transportation, Automobiles & Auto Parts, Cyclical Consumer Products & Services, Retailers, Food & Beverages, Personal & Household Products & Services, Banking & Investment Services, Insurance, Healthcare Services & Equipment and others.

The category spending for e-сommerce, year-on-year, is continuing to evolve, with new sectors establishing their footprint in the UAE.

A huge benefit of the e-commerce business model is the speed at which they can be scaled, more so than traditional retail stores. According to Statista research FMCG (fast-moving consumer goods), healthcare, apparel and beauty & personal care categories have seen the highest surge of online activity and top the virtual shopping list in the UAE.

The relevance of e-commerce has never been more obvious than it is in the UAE right now. The UAE is on the verge of a pivotal shift away from the traditional brick-and-mortar shopping experience to online shopping and e-commerce transactions.

Recent statistics illustrate this change very clearly:

• According to the UAE Ministry of Economy data 2,469 licenses were issued to the e-commerce retail business sector during 2020 – the highest number of business licenses to be issued in a sector.
• Data from the National Economic Register, in coordination with relevant economic authorities, showed a 300% increase in consumer demand for e-commerce services in the UAE was recorded in the first five months of 2020.
• Emirates News Agency reports that the DED Trader license in Dubai, which supports the growth of UAE e-commerce, has also seen a surge in applications – the total number of DED Trader licenses issued during 2020 reached 5,799, an increase of 132% compared to 2019.

Source: UAE National Economic Register, wam.ae

The share of online sales in the UAE retail market is 13.8% now and is expected to grow by an average of 3.9% by 2027, which makes this market an attractive destination for e-commerce investment. With market barriers easing, as well as improved infrastructure, ease of obtaining business licenses and better warehousing facilities, the UAE is poised for exceptional growth with a promising future.

An experienced and trusted team of Business Setup Experts at My Business Consulting DMCC offers professional assistance to foreign entrepreneurs in choosing the right Free Zone for your business in the UAE, helping you on each step of the company formation process, bank account opening, obtaining UAE Residence Visa as well as provides professional support in Accounting and Tax Compliance.

We have extensive knowledge about the UAE business trends, culture, and setup procedures as well as governmental policies and programs to guide our clients in the highly-dynamic UAE market.

Kindly email us at [email protected] or drop a message at
WhatsApp Business +971 58 811 9981 to get the best advice for free from our Business Setup Experts.