10 Sunrise Sectors Post COVID-19 Series | Dawn of E-Commerce Business in the UAE
1st Sunrise Sector: E-Commerce Business
Ever since pandemic has spread its wings across the globe our business advisory has observed serge in the particular type of business enquiries. Hence we thought to share with our readers and potential investors about the ten sunrise sectors which are making the buzz among the startups and entrepreneurs. To being with we are covering E-Commerce business which has witnessed serge not only in the world but also in the UAE.
The COVID-19 crisis that began in China in late 2019, has forced the world into a health crisis and an economic downturn in 2020. The COVID-19 pandemic has rewritten the normal standards of life and set the stage for a new world that would be driven by a digital economy. The continuous lockdown has led many traditional business setups in the UAE to take the backseat and the businesses that are hugely dependent upon the digital infrastructure such as e-commerce have recorded growth. The e-commerce sector has always been growing in the UAE but the lockdowns, the temporary closure of many traditional business setups, and social distancing measures created a new e-commerce boom in the country.
Since the UAE is equipped with a robust digital infrastructure, e-commerce has emerged as one of the top sunrise sectors during the pandemic. In the long run, the sector is expecting more investments as e-commerce is among the few industries that responded well to the economic crisis precipitated by the COVID-19 outbreak. In this background, setting up an e-commerce business in the UAE would help the investors turn the crisis into an opportunity in the long run. The UAE offers opportunities to form an e-commerce company in both mainland and some of the 40 free zones. With the help of efficient company formation specialists, the entrepreneurs can reap the benefits of the new boom by setting up their business in the UAE.
Factors that Help UAE E-Commerce Sector Amid COVID-19 Pandemic
a) Change in Customers’ Perception
The COVID-19 has forced the consumers in the UAE to change their shopping patterns due to lockdowns and social distancing practices. Many of them shunned the routine of going shopping malls in favour of ordering essential items through online platforms. Online platform ITCAN recently revealed that there was an upsurge in online orders for skincare and personal hygiene items in the UAE during the lockdown period. The rate of orders for skincare jumped to 143.96%. Among this 99.92% of the surge was contributed by the new users. The makeup products posted a 275% surge in growth and the new users accounted for 148.57% of the orders. The new social order created by the COVID-19 is likely to stay here for a long period and hence investing in the e-commerce platforms will be a viable option in the UAE.
b) Solid Digital Infra Structure
The UAE has always supported the growth of e-commerce business with a well-planned strategy and supportive policies. The following factors have contributed to the growth of e-commerce business in the UAE,
- Widespread use of mobile phones
- The tech-savvy millennial who form 30% of the population
- Efficient & Secure digital payment systems
- Support from the government
On the back of the above-mentioned factors, the e-commerce business in the UAE has been growing at a rate of 23% every year. The UAE has a well-developed e-commerce market with a penetration rate of 4.2 per cent.
c) Robust Business Setup Opportunities in Mainland and Free zones
The UAE offers efficient company formation opportunities for e-commerce startups in both mainland and free zones. The e-commerce license offered by the Department of Economic Development (DED) in the respective emirates enables the entrepreneurs to conduct their trade in the wider UAE market. For example, the DED Dubai offers an e-commerce license which is mandatory to establish an e-commerce firm in Dubai mainland. With the license, the company can sell the products to its clients in the UAE market. However, the DED mandates that the companies need to have a registered physical office in the mainland to conduct business activities.
Many free zones also offer an e-commerce license, which enables the entrepreneurs to conduct trade with some restrictions. In the free zones, the companies can conduct the online business if it is set up just as an online platform that facilitates the trading. The companies, in this case, can just act as an electronic medium that facilitates trading as a middleman. The free zone e-commerce companies have to reach an agreement with the suppliers for the selling of products and therefore the requirement of the warehouse is eliminated.
Whether to set up the e-commerce company in the mainland or free zone is a strategic decision and it requires professional assistance. A reputed business set up a consultant firm in Dubai, UAE could come to the aid of the entrepreneurs in such situations.
How Growth in E-commerce Would Help UAE Economy in General?
The COVID-19 crisis has exposed the consumers to a new pattern of shopping the essential things. As this new mode of online shopping has become successful, the consumers are likely to stick with it even if the COVOD-19 crisis passes. The growth in the e-commerce sector would also have a positive impact on other sectors including logistics and warehouse real estate.
Investment Capital Firm Delma Capital has said in a recent article that the demand for top-quality logistics and warehouse real estate will grow along with the growth in the e-commerce sector. It says every $1bn of e-commerce sales requires 116,130m2 to 139,355m2 of logistics real estate.
How UAE Business Setup Consultants Play Their Role?
The uncertainty created by the COVID-19 pandemic has led to the emergence of some sunrise sectors that are likely to post robust growth in the coming days. E-commerce enjoys a top position among these sectors as only a digitally-driven economy could help the UAE economy recover from the current crisis. As the future of business is likely to be driven by transformation, investing in e-commerce startups seems to be a viable option. However, setting up an e-commerce business in Dubai, UAE is a strategic decision as selecting the right jurisdiction would determine the success of the business. The mainland offers the opportunity to trade with the wider UAE market while the free zones have many restrictions on trading and activities. To make the right choice, the entrepreneurs require the assistance of a reputed company formation specialist like Jitendra Business Consultants (JBC).
JBC is composed of a strong team of highly qualified business setup consultants who could assist the clients in all the steps of company formation right from registration to incorporation. JBC has been strongly supporting investors for years by offering top-notch business solutions and continues to do so flawlessly even amidst the challenges posed by the global pandemic. JBC can help the investors turn the crisis into opportunity by setting up a business in Dubai, UAE without any hassles.