Thinking about e-commerce business expansion to Dubai? Then you must consider a few points before moving ahead.
The Gulf region is set to grow exponentially within the next few years. UAE holds a special position amongst all the countries in the Middle East. It is one of the most prosperous countries in the region. The internet penetration rate in the UAE is 90%, which is considered to be one of the highest in the world.
UAE has also joined the smartphone revolution and 82 % of the total population are active mobile internet users. According to the Google consumer barometer, around 89 % of users reported that they access the internet every day, this makes UAE an ideal market for e-commerce.
The e-commerce sales in the emirate region are heavily skewed in favour of Dubai as the city houses 6 out of 10 of all online buyers.
According to an estimate, in Dubai, the e-commerce sector will contribute 12 billion AED to the local GDP by 2023. The executive council of Dubai is chalking out plans to attract foreign direct investment into the city with a specific focus on The e-commerce industry. The council aims to reduce the cost of doing business in e-commerce by 20% by reviewing the cost of storage, VAT, transportation as well as custom clearance fees. </>
Let us look at some of the most important considerations that you should focus on before taking a plunge in the vibrant e-commerce sector of Dubai.
Following points are generic but content should be focused on Dubai’s (UAE) e-commerce market….
Before expanding your e-commerce business to Dubai, you must conduct thorough market research. This will include gaining knowledge about the demographics, assigning the market segments and identifying your target customers. By hiring the correct e-commerce partner, you will and sure that the market research is conducted properly.
You need to first identify the market size for your particular segment. Suppose you are planning to open an e-commerce jewellery platform, then you need to identify the potential of the market before venturing out into Dubai. For example, 41% of the e-commerce market in Dubai is occupied by software products while fashion accessories account only for 14% of the market. It is evident that there is low penetration in the fashion accessories market and an e-commerce website catering to the fashion accessories demand has a huge potential to grow in Dubai’s e-commerce market.
Next process would be segmenting the market. You can segment the market based on various factors like geography, age, interests, gender, occupation and income groups. To succeed in market segmentation, you will need to define your ideal customer first. An ideal customer is a customer who has the highest propensity to buy your product or service directly. These are the customers who will be actively engaged with your brand and help in spreading the word about it. These will be our target customers and by conducting accurate market segmentation, you will be able to identify your target customers quickly.
On the competition front, Dubai presents a wonderful opportunity as the e-commerce market in this region is still taking baby steps. As the Government of Dubai is encouraging foreign direct investment, it is the perfect time for new entrants to foray into the e-commerce space of Dubai and make a name for themselves. Although this does not discount the need for a thorough competitive analysis which details the strengths and weaknesses of your present as well as potential competitors.
Assess Business Feasibility
You need to know about the licensing procedure for a business set up before you start your e-commerce business in Dubai. Setting up a business in Dubai is quick and easy and the business owners can choose to do business in a free zone or a non-free zone. Also, some authorities allow you to set up as a freelancer or professional services provider. To boost the e-commerce sales in particular industries or segments the UAE government has themed a number of free zones around these particular industries or segments. You can take advantage of these free zones in case your product falls under this category.
There are various themed free zones like the Dubai internet city, Dubai design district and Dubai media city which can help an e-commerce startup who is planning to set up shop in Dubai. You can take the help of an e-commerce consultant to know more about these free zones.
You need to look at your business model and choose the best method of licensing your business. Although Dubai has some of the lowest taxation rates for businesses in the world, it would be wise to know about the taxation rate for your specific e-commerce business.
Dubai is a prominent port in the international supply chain and you will find many supply chain and distribution partners who would help you in setting up your e-commerce business in Dubai.
As a large number of migrant labourers work in Dubai, you won’t find any hassle in hiring proper human resources here.
The Dubai infrastructure is considered to be one of the best in the world and you will find no dearth of world-class amenities in terms of office spaces.
No business can succeed without a robust business plan. The same holds true for The e-commerce business and in order to make it successful you will need to chalk out a broad plan which will include points such as
- How you intend to market your product
- Who will be your target customers
- How will you manage the operational part (logistics, customs clearance, accounting and human resources) of the business
- How much capital will you need to invest and how will you reinvent the business proceeds
Form of Entity
You will need to identify the form of entity for doing business in Dubai. You can have a partnership firm or a franchise or you can have a private limited firm in Dubai.
In certain cases, you will be required by law to have a UAE based company as your partner before the authorities allow you to conduct business in Dubai. But this is not a cause of concern as there are many established business houses doing business in Dubai for years now. They are experienced businessmen who are adept at doing business in Dubai and will help you in making your e-commerce journey smooth in Dubai. An experienced retail e-commerce consulting firm can help you in identifying such a business partner and in finalizing the deal.
Understand that in Dubai, if you do not find a competent local partner then in certain cases you can also hire a local service agent who will help you in expanding e-commerce business to Dubai. A local service agent will help you in registering with the Government of UAE for a fixed annual fee and will help you in setting up your e-commerce business in Dubai. Identifying the correct LSA is the key here and an e-commerce business consultant can help you with this.
Financial Forecasting and Analysis
Like any business, the e-commerce business also entails conducting thorough financial forecasting and analysis before going ahead. You need to calculate the cost of doing business in Dubai which can include the taxation rates, cost of setting up a business which includes hiring logistics and supply chain partners, leasing out office space as well as hiring new employees. After taking account of all these costs you will get to know about the profitability of doing e-commerce business in Dubai.
It would be prudent to consider all the above-mentioned factors before diving into the deep sea of e-commerce in Dubai. Dubai offers wonderful opportunities in terms of e-commerce businesses and there is much room for growth in this growing market. When you choose to do business in Dubai you will also gain access to the huge market of North Africa.
By taking the services of an expert e-commerce business consultant you will gain much-needed leverage, which will help you in mitigating all the obstacles that you can face while setting up an e-commerce store in Dubai. Grow your online store to Dubai and reap rich dividends of this wonderful business opportunity.
Your Retail Coach (YRC) is a retail consulting and outsourcing company in India offering a wide range of services in retail offline, retail eCommerce and retail omnichannel catering to a multitude of industries.