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Middle East B2C E-Commerce Report 2014

Online retail sales in Middle East still low, with strong growth potential

According to the findings of this report, B2C Commerce presently accounts for less than 1% of total retail sales in the region, as there are obstacles to overcome to prepare the way for the boom. These obstacles include the low adoption of the online retail channel by local businesses, the predominance of cash on delivery payments, and low consumer acceptance of online shopping, compared to international benchmarks. Still, a few markets lead the region in adoption of E-Commerce. The UAE, Saudi Arabia, Qatar and Israel together account for around half of all sales in the region. The product categories that produce the most revenue in online sales in the region were consumer electronics, computers, and jewelry, including watches. Online shopping for clothing also has begun to gain in popularity.

Mobile commerce has a high potential in the Middle East, as smartphone and tablet penetration is high, and mobile is often the most common mode of connection to the internet in the region. M-Commerce accounted for 10% of all B2C E-Commerce in the region in 2012, with this share expected to double by 2015.

Local merchants serve the region

Several fast growing local merchants have emerged in response to the developing interest in B2C E-Commerce in the Middle East. Among them are mass merchants JadoPado and Alshop, and online electronics store EmiratesAvenue. Three other regional merchants, online mass merchant Souq.com, online fashion store Namshi and flash sales site MarkaVIP together garnered over USD 70 million of investment in 2012. Nevertheless, International sites Amazon and eBay are among the most popular shopping destinations of online consumers in the Middle East, though behind regional player Souq.com in terms of annual spending per shopper. Due to relatively low adoption of the online channel by local merchants, cross-border Internet shopping is common. There are even special services that assist consumers in buying from International websites and getting their orders delivered.

UAE leads in online sales

E-Commerce is growing in the UAE at a rate of over 20% annually off increasing Internet and mobile coverage, while store-based retail is affected by high real estate prices. Over 80% of the population are Internet users, and of this number over 15% shop online; below 10% do so on mobile devices. The most important factors for online shoppers in the UAE were pricing, customer service and ease of use, though security concerns and inability to touch and test products before purchase keep some consumers away from online purchases. The most popular E-Commerce websites were online mass merchant Souq.com, coupon dealer Cobone, Amazon.com and online flash sales website MarkaVIP. Consumer electronics and appliances was the largest product category by B2C E-Commerce sales in UAE in 2012, excluding travel and tickets. The most used payment methods in the UAE last year were credit card and cash on delivery.

B2C E-Commerce is burgeoning also in Saudi Arabia, though largely restricted to sales of clothing, electronics, appliances and travel booking. Annual growth reaching almost +40% between 2012 and 2015 is expected. Over half of the population are Internet users and of them about 10% shopped online. Mass merchants Souq.com and Sukar. com, followed by online fashion sites Namshi and MarkaVIP were the leading E-Commerce websites by Internet audience reach. Cash on delivery is the payment method used by most Saudi online shoppers.

Qatar is another regional leader in B2C E-Commerce. Rapid development of information and communication technology and an online payment infrastructure facilitate growth of E-Commerce there. Internet penetration on the total population reached almost 70% in 2012, with below 5% of the Internet users shopping online. B2C E-Commerce sales are forecasted to grow with a CAGR of over +20% between 2012 and 2015.

Israel also has been a regional leader in Internet shopping, with a double digit share of Internet users making online purchases. Consumer electronics has been the product category with the highest B2C E-Commerce sales, but the fastest growing category in the next five years is expected to be groceries.

Other regional markets are adopting online shopping

Though total sales are not at the level of the regional leaders, Internet penetration and ICT development contribute to burgeoning B2C E-Commerce in a few countries. In Bahrain, B2C E-Commerce accounts for over 5% of total retail sales, as almost 90% of the population is Internet connected and 5% of users shop online. Similarly, nearly 80% of the population in Kuwait use the Internet, and the presence of online payment gateways there favors B2C E-Commerce. In Jordan, Internet penetration is over 70%, with just under 10% of Internet user shopping online, and B2C E-Commerce is expected to increase as trust in online shopping and payment emerges.

While showing growth potential, other markets in the region have lagged behind the leaders. Retail remains largely traditional in Iran, though the spreading Internet connectivity will facilitate E-Commerce. Just over a quarter of the Iranian population used the Internet in 2012. Development of B2C E-Commerce in Iraq has been held back by war, though payment and delivery infrastructure is emerging slowly. Internet users in Iraq accounted for less that 10% of the population last year. In Lebanon, B2C E-Commerce is in early stages of development, with most of the emerged players specializing by product categories. Internet penetration reached over 60% of the total population in 2012, but only a small one-digit share of Lebonese Internet users make purchases online. Finally, despite relatively high internet penetration rates in Oman, B2C E-Commerce is at a very early state of development, with overseas websites as the destination of most online shopping there.

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Table of Contents

1. Management Summary

2. Middle East (Regional)

  • B2C E-Commerce Trends, 2013
  • B2C E-Commerce Sales, in USD billion, 2012 & 2016f
  • B2C E-Commerce Sales, in USD billion and in % Year-on-Year Change, 2011-2015f
  • Top 3 E-Commerce Markets, by Regional Market Share, in %, 2012 & 2015f
  • M-Commerce Sales, in USD billion and in % Year-on-Year Change, 2011-2015f
  • Share of M-Commerce on Total E-Commerce Sales, in %, 2012 & 2015f
  • Internet User Penetration, in % of Total Population, by Selected Countries, 2012
  • Online Shopper Penetration on Internet Users, by Gender, in %, 2013
  • Annual B2C E-Commerce Spending per Online Shopper, by Product Category, in USD, 2012
  • Access to Online Shopping, by Place and Device, in % of Online Shoppers, 2012
  • Breakdown of Payment Methods Used in B2C E-Commerce, in %, 2012 & 2015f
  • B2C E-Commerce Player Overview, 2013
  • Leading B2C E-Commerce Websites, by Annual Spending per Shopper, in USD, 2012

3. UAE (Priority A Country)

  • B2C E-Commerce Trends, 2013
  • B2C E-Commerce Sales, in USD billion, 2012 & 2015f
  • B2C E-Commerce Sales, in USD billion, 2012 & 2015f
  • Number of Internet Subscribers, in millions, and in % Internet Penetration on Total Population, 2009-2012
  • Online Shopper Penetration, in % of Consumers, 2012
  • Online Activities of Internet Users, Incl. “Purchasing or Ordering Goods or Services”, in % of Internet Users, 2012
  • Most Common Online Activities on a Mobile Phone, Incl. “Online Shopping”, in % of Mobile Internet Users, 2012
  • Breakdown of Perception of the Most Important Factors in Online Shopping, in % of Online Shoppers, 2012
  • Breakdown of the Main Reasons to Not Shop Online, in % Consumers Who Do Not Shop Online, 2012
  • Breakdown of Annual Online Shopping Expenditure, in % of Online Shoppers, 2012
  • Breakdown of B2C E-Commerce Sales by Product Categories, 2012
  • Breakdown of B2C E-Commerce Transactions by Product Categories, in %, 2012
  • Breakdown of the Most Purchased Product Categories in B2C E-Commerce, in % of Online Shoppers, 2012
  • Breakdown of the Maximum of Accepted Delivery Time, in % of Online Shoppers, 2012
  • Breakdown of the Most Used Payment Methods in B2C E-Commerce, in % of Online Shoppers, 2012
  • Leading E-Commerce Websites, in % of Internet Audience Reach, 2012

4. Saudi Arabia (Priority B Country)

  • B2C E-Commerce Trends, 2013
  • B2CE-Commerce Sales, in USD billion, 2012 & 2015f
  • Number of Internet Users, in millions and in % of Total Population, 2009 - 2012 & Q1 2013
  • E-Commerce Activities of Internet Users, Incl. “Make Purchases Online”, in % of Internet Users, 2013
  • Most Popular Online Product Categories, in % of Online Shoppers, 2012
  • Breakdown of Payment Methods Used in Domestic B2C E-Commerce, in %, 2012
  • Breakdown of Payment Methods Used in Cross-Border B2C E-Commerce, in %, 2012
  • Breakdown of Payment Methods Used in M-Commerce, by Purchases Made on Tablets and Smartphones, in %, 2012
  • Leading E-Commerce Websites, in % of Internet Audience Reach, 2012

5. Israel (Priority C Country)

  • B2C E-Commerce Trends, 2013
  • Internet User Penetration, in % of Total Population, 2010, 2011, 2012
  • B2C E-Commerce Sales, by Product Categories, in ILS million, 2012 & 2018f, Ranked by 2013
  • Most Purchased Product Categories in B2C E-Commerce, in % of Consumers, 2013 & 2018f, Ranked by 2013

6. Qatar (Priority D Country)

  • B2C E-Commerce Trends, 2013
  • B2CE-Commerce Sales, in USD billion, 2012 & 2015f
  • Internet Penetration, in % of Total Population, 2008, 2010, 2012
  • E-Commerce Activities of Internet Users, Incl. “Make Purchases Online”, in % of Internet Users, 2013

7. Bahrain

  • B2C E-Commerce Trends, 2013
  • Internet Penetration, in % of Total Population, 2010, 2011, 2012
  • E-Commerce Activities of Internet Users, Incl. ”Make Purchases Online”, in % of Internet Users, 2013

8. Iran

  • B2C E-Commerce Trends, 2013
  • Internet User Penetration, in % of Total Population, 2010, 2011, 2012

9. Iraq

  • B2C E-Commerce Trends, 2013
  • Internet User Penetration, in % of Total Population, 2010, 2011, 2012

10. Jordan

  • B2C E-Commerce Trends, 2013
  • Internet Users, in millions and in % of Total Population, 2009 - 2013
  • Online Shopper Penetration on Internet Users, in %, 2012
  • Leading E-Commerce Websites, in % of Internet Audience Reach, 2012

11. Kuwait

  • B2C E-Commerce Trends, 2013
  • E-Commerce Sales, in KWD million, 2012 & 2013f
  • Internet User Penetration, in % of Total Population, 2010, 2011, 2012
  • Online Shopper Penetration on Internet Users, in %, 2012

12. Lebanon

  • B2C E-Commerce Trends, 2013
  • Internet User Penetration, in % of Total Population, 2010, 2011, 2012
  • E-Commerce Activities of Internet Users, Incl. “Make Purchases Online”, in % of Internet Users, 2013
  • Most Popular Online Product Categories, Incl. Clothing, in % of Online Shoppers, 2012

13. Oman

  • B2C E-Commerce Trends, 2013
  • Internet User Penetration, in % of Total Population, 2008, 2010, 2012
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