E-commerce in The Middle East: Obstacles and Innovation

For e-commerce ventures like Jumia Egypt, Souq and Namshi , the Middle East, which consists of 22 countries with over 422 million people, is considered a very attractive market for e-commerce. That is because almost half of the population is under the age of 25 and has average or high income. However, these companies face a lot of challenges like the closed culture of these regions and the governmental red tape procedures.

Many E-commerce startups such as Jumia Egypt, Rocket Internet owned E-commerce venture, have faced these obstacles but with innovation and presentence, they were able to overcome them. The idea of buying online is still in its cradle in the Middle East that is why e-commerce startups have to be smart about how they deal with their targeted audience. For example, In Egypt many people fear online money transactions; this has created a trust issue which was overcome by introducing (remove the) Pay on Delivery option. ViaPOD options costumers would pay for their orders only after they receive it.

What gives e-commerce a huge advantage over other methods of purchasing in the Middle East is the fact that you would have your order delivered at your doorstep.  Traffic congestion has become a curse in many countries in the region that is why the number of online shoppers increases every day. Nevertheless, this advantage faces another obstacle which is; unreliable delivery options.  In many Arab countries like Egypt, there are often road accidents and constructions that delay delivery of orders. What is more, companies like Aramex and DHL don’t have strong operations in the Middle East which also contributes to the delay or even the damage of the orders.

Furthermore, local regulations and government policies are among the deterrents of e-commerce in the Middle East. Lack of clear laws and regulations for E-commerce implementation and taxes drive many investors away from investing in the Middle East. Also, there is no cooperation between Arab governments and private sectors in the e-commerce field. For instance, there is no certified governmental authority that gives the qualified e-commerce websites trust certificates.  Above all, the biggest red tape obstacle that faces e-commerce in the Middle East is the time and effort consumed to finish the paper work required to establish a new e-commerce business. However, it is worth mentioning that the presence of local a business partner solves many of obstacles posed by the Arab governments.

Despite those obstacles, e-commerce is booming in the Middle East because of its appeal and convenience for many Arab shoppers.  What is more, the fact that there are many expatriates and transient populations in the Arab world gives e-commerce another boost. Similarly, the liberal investment policies in Middle East are a big draw for e-commerce investment in countries like Saudi Arabia, Emirates and Egypt.

E-commerce sales were $9 billion in 2012 and it is expected to reach $15 billion by 2015. According to ArabNet, there are over 4.4 million online shoppers in the region spread across UAE, Egypt and Saudi Arabia. 60% of online shoppers in the region said that better offers and competitive prices are what drive them into buying online. The internet penetration in the region has recently reached over 40% with a total of 90 million people. E-commerce penetration is expected to reach further growth.

In a nutshell, despite many obstacles, the Middle East is considered a good environment for e-commerce opportunities. Real e-commerce entrepreneurs should learn how to cope and make use of the Arab world culture and exceptional circumstances. Ventures like Jumia Egypt, Namshi, Souq and Lamudi are among the most successful e-commerce websites in the Middle East.