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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.
The UAE has also joined the smartphone revolution and 82 % of the total population are active mobile internet users. According to Google Consumer Barometer, around 89 % of users reported daily access to the internet. The eCommerce sales in the region are heavily skewed in favour of Dubai as the city houses 6 out of 10 of all online buyers. These statistics attract companies for eCommerce business expansion to Dubai
According to an article in the Gulf News, Dubai Executive Council seeks to increase the share of eCommerce in the local economy. The council is chalking out plans to attract foreign direct investments in the eCommerce sector. It also aims to reduce the cost of eCommerce operations by a fifth.
In this post, we’ll look at seven important considerations in planning for expanding eCommerce business to Dubai.
If you are planning to expand your eCommerce business to Dubai, you must conduct a thorough market analysis first. This will include gaining knowledge about the demographics, identifying the market segments, defining your target segment, market size, competition, substitute products, etc.
Suppose an eCommerce apparel enterprise wants to expand its business to Dubai. It becomes important for the firm to ascertain the market potential among other key market variables.
A report from 2018 shows that software products hold 41% of the country’s eCommerce market while clothing and fashion accessories hold 17% and 14% respectively. It is evident that there is low penetration in the fashion and clothing segment. But only further market research could tell whether there is market potential or not. If the market volume of retail fashion and clothing is good, it could be a good sign but that also needs to be further examined. Presence of similar competitors is a quick way to shed some light on market potential.
There are various market research agencies in Dubai whose services can be hired for better information and insights.
Feasibility study answers whether a business or a business idea would be feasible or not and if a compatible business environment exists. A feasibility study assesses the actual ground-situation by taking into consideration all the relevant environmental factors that would directly or indirectly have an impact on business and its continuance.
For example, it is important to be convergent with the laws and regulations governing international eCommerce business and such companies in the UAE. If a particular product/service is reserved for the domestic companies, then a contrary business idea falls flat in the first place.
Another important aspect to consider is the taxation environment in the UAE for eCommerce businesses – applicable tax rates, penalties, surcharges, export and import duties, etc. This affects the profitability of a business project.
Other important considerations include labour laws (which may be different from what it is in your home country), presence of necessary supply chain and distribution network and infrastructure, support of banking services, meeting technological requirements, etc.
Once you assess that your intended offering has a potential market and business is feasible, next you’ll have to figure out how you will create and deliver this offering to the target market segment over and over again.
This will include considering regulatory permissions and compliances for doing business, laying out the logistical, supply chain and distribution network plan from source to destination and vice-versa, human resource management, marketing strategy, office and administration, financial planning (capital requirements, profitability, break-even, etc.), technology and technology partners, etc.
Dubai has a large community of expatriate professionals which is an advantage from an HR perspective. The city’s infrastructure is considered to be one of the best in the world and it is not very difficult for businesses to have access to world-class amenities.
Mode of Entry
There are several modes of entering as a business entity into new geography. Different modes of entry are establishing fully owned subsidiaries, partnerships, franchising, mergers and acquisitions, strategic alliances, joint ventures, exports, etc. There are pros and cons of each of these entry modes in different countries. For example, Amazon acquired the UAE’s Souq to cater to the host country’s markets.
Impressing customers in the UAE can be a tough job with global brands functioning at full-throttle. There might be a tiny window to communicate the value of your offering to your customers; done wrong and they might never look back at your communications whether hoardings or social media campaigns. The challenge could be even bigger with low-priced, homogenous products where brand alone could play the make or break.
The UAE is a relatively small country in terms of geography and thus, there is hardly any excuse for inefficiencies in the delivery and distribution network.
Competing with big brands on the front of digital marketing can be difficult. No competitive business in the UAE can afford to play below the industry standards and customers’ expectations.
Financial analysis is already touched in a feasibility study but after a business plan is prepared, more precise details are available for better financial assessment for the proposed business venture. Irrespective of markets and geographies, some important aspects to be covered under financial planning include:
- Assessment of capital requirements, source(s) of capital, capital structuring, cost of capital, terms of repayment, etc.
- Operational expenditure budget
- Sales forecasts
- Projected cash flow
- Planning for working capital management
- Projected income statement
- Projected profit and loss statement
- Projected balance sheet
- Break-even analysis
- Ratio analysis
Last but not the least, comes the forefront platform customization. This is where your brand interacts with your customers at the working level. Other things would not even arise if your customers could not properly interact with your eCommerce website or application. This gives rise to the need to customize an eCommerce website/app to make it compatible with the audiences for whom it is meant. Such customizations include using the host country’s official language(s) to display content like website content, headings and title pages, navigation links, product descriptions, addresses, etc. The prices also need to be reflected in the host country’s official currency. There can be more of these customizations to fine-tune the local requirements.
Your Retail Coach (YRC) is a retail consulting and eCommerce outsourcing company in India offering a wide range of services in retail offline, retail eCommerce and retail omnichannel catering to a multitude of industries.