by John Benny

UAE, Saudi COVID rules drive enterprises toward e-commerce

Apr 29, 20205 mins
GovernmentInternetIT Strategy

New regulations and an increase in online shopping push companies in the UAE, Saudi Arabia and other countries in the region to adopt technology to support e-commerce revenue.

E-commerce and online delivery in Gulf countries, particularly the UAE and Saudi Arabia, are undergoing massive changes as the coronavirus crisis sends people flocking to websites for essential goods and other products.

Though lockdown rules are slowly being relaxed, curfews and social distancing guidelines are still in effect, continuing to curb residents’ ability to shop at brick and mortar retail outlets. The change in behaviour — some of which may be permanent — has opened up opportunities for enterprises looking to generate more revenue from online sales.

Technology that supports e-commerce is in demand. Rabih Khoury, a partner at Middle East Venture Partners (MEVP), claims that startups that offer order fulfilment and delivery, e-commerce services, SaaS (software as a service), and cloud technology, are doing better than others in the venture capital firm’s portfolio.

Khoury points to Nana, a Riyadh-based online grocery platform backed by MEVP, which saw the size of its business double in the wake of the COVID-19 crisis. While this was a positive outcome, it did raise related issues.

“It doubled so quickly that … they need now more cash and their suppliers are paying late,” Khoury said. “So even though you’re growing, your receivables are extending and you need more cash.”

The e-commerce market in the region is expected to be worth US$28.5 billion by 2022, compared to just US$8.3 billion in 2017, according to a study by Bain & Company and Google.

UAE e-commerce platform sees strong demand

Emirates Delivers, the e-commerce delivery platform launched by the freight division of Emirates, the Middle East’s largest airline, has experienced strong demand from UAE customers in March and April. By using the website, which was launched in October last year, customers can consolidate their purchases from multiple U.S. online retailers into a single package and have it delivered to the UAE.

Due to the coronavirus pandemic, Emirates Delivers reported a month on month jump of 20 percent in shipments delivered over the last month.

“As customers have turned increasingly to shopping online … Emirates Delivers has seen an increase in membership and orders since March 2020,” the company said in a press release.

For years, one of the biggest obstacles for the e-commerce sector in the Middle East has been the consumers’ overwhelming preference for the cash-on-delivery option – a popular mode of payment in the region.

About 62 percent of Middle East and North Africa (MENA) online shoppers prefer cash-on-delivery as a payment method when buying online, compared with less than 5 percent in the U.K. and France, according to a 2019 Bain report. This creates additional expenses for enterprises due to longer turnaround times and higher rejection rates, but recent government regulations could spark a dramatic change in consumer behaviour.

Saudi Arabia bans cash transactions

Earlier this month, Saudi Arabia approved several temporary health rules and regulations for home delivery services of food and essential goods. Under the rules, all online transactions must be carried out using electronic methods, instead of cash.

Other governments in the region have made similar efforts to promote e-commerce. The Bahrain government for example, has launched an online shopping portal,

The government is offering enrollment free of charge to retailers but requires delivery services and online payment.

“The user-friendly online shopping platform was launched in response to COVID-19 market disruptions, which has motivated local enterprises to reconsider how they transact business online,” according to a statement from the Ministry of Industry, Commerce and Tourism.

In response to the new rules, many e-commerce websites have begun disabling the cash-on-delivery option. Hosam Arab, the CEO of UAE-based fintech startup Tabby, expects the move to force consumers to shift away from cash payments, and opt for payments through debit or credit cards.

Customers’ mistrust for electronic payment modes stems from poor shopping experiences. “I think that’s a bigger problem that needs to be solved,” Arab said, during a recent webinar hosted by Magnitt, an online platform designed to bring  venture capital to startups.

The coronavirus crisis, nevertheless, is prompting many brick and mortar enterprises in the region to build an online presence quickly.

While many of those firms had plans to go online over the next two to three years, the current pandemic has “really sped things up,” Arab claimed. “If you look at many of the big groups in the region… they’ve been caught off guard by what has happened.”