MENA’s Online Retail is the Largest Contributor To the Digital Economy

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MENA’s consumer digital economy is set to double in the coming three years to reach $100 billion, according to a new report by RedSeer.

The strategy consulting firm has been tracking the development of the consumer digital economy for years, leveraging this know-how to find that while the Middle East and North Africa’s market is relatively small compared to powerhouse regions, relatively speaking MENA’s industry is punching above its weight. 

Much of this is owed to “some of the most positive digital metrics across the world” said Sandeep Ganediwalla, Managing Partner of RedSeer in the Middle East, with over 85 per cent of the population enjoying access to the internet (this number is over 95 per cent in the UAE and KSA) and an e-tail penetration of over 5 per cent (8-10 per cent in the UAE and KSA). 

Across the region, online retail (excluding grocery) is the largest contributor to the digital economy with an annual gross merchandise value (GMV) of $40-45 billion in 2023 followed by online travel, which however has seen its share not surprisingly drop considerably due to the travel restrictions imposed by Covid-19 measures. 

UAE and KSA are per RedSeer’s analysis the pillar of the digital economy in MENA – contributing around 70 per cent of the total digital economy. Today, over 90 per cent of customers in UAE and KSA say they bought a retail product online – higher than even some of the more developed markets where digital retail consumption is around 70 per cent.

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Notable about MENA’s digital economy is that it is significantly more fragmented than those of for instance the US or China. In China, for example, the top three players in the online retail segment capture 80 per cent market share, compared to around 35 per cent in the UAE. “This makes the Middle East e-tail sector one of the most democratic,” said Ganediwalla. 

As the market matures further, RedSeer predicts that the market will continue to see growth, however, the growth anatomy is slowly expected to shift from consumer adoption toward increased frequency instead as more and more consumers become acquainted with the online channel and become repeat customers.

For eCommerce players, living up to customer expectations will become an increasingly important determinant of success. Ganediwalla: “More than 60 per cent of consumers are now choosing experiential factors such as service quality, delivery speed and product description in their decision making. Players will have to provide a better experience in addition to discounts to create a right to win in the digital economy.”