News

Pandemic gives major boost to GCC e-commerce sector

11 October 2020

The GCC e-commerce sector is forecasted to reach a value of US$50bn by 2025, according to a new report by global consulting firm Kearney Middle East.

The report titled ‘GCC e-commerce unleashed: A path to retail revival or a fleeting mirage?’ predicts that e-commerce will become the main source of growth in the retail sector over the next five years.

The report forecasts a larger acceleration in e-commerce between 2020 and 2022, at 20 per cent compound annual growth rate (CAGR), and 14 per cent until 2025, mainly due to the shift taking place in retail markets due to the COVID-19 pandemic. Without COVID-19, the same growth was projected at 14 and 10 per cent, respectively. This highlights the impact of the pandemic on accelerating the growth of the sector in the region.

“E-commerce continues its rapid growth in the region. In our last e-commerce outlook for the GCC in 2017, we forecasted growth of 35 per cent CAGR, which was essentially more than a four-fold jump in value for the sector between 2015 and 2020. By the end of 2019, it was worth just short of US$18bn, with signs of maturing growth and intense market competition,” said Adel Belcaid, partner at Kearney Middle East.

“However, the COVID-19 pandemic caused an unforeseen push and gave a new, accelerated lease of life to the sector, in line with what we have seen in global markets. This is due to a rapid change in consumer behaviour, with unprecedented adoption of e-commerce by all population segments, spurred to a large extent by the new normal of social distancing, lockdowns and reduced capacity in physical stores,” Belcaid added.

While the report highlights the effects of a more definitive shift to online on major retail groups, it also explores the likely implications and imperatives on the two other key actors within the retail ecosystem; real estate and small and medium enterprises (SMEs).

The key challenges including the rise of pure-play e-commerce marketplaces, the large investment in digital by retail giants, and the declining physical store sales pose a threat to commercial real estate and the survival of SMEs that have not yet adopted to online sales channels, the report said.

An earlier survey by Kearney in the UAE indicated that just 36 per cent of SMEs have made the investment so far, while only 4 per cent are planning to sell online in the future.

“The projected growth in GCC e-commerce rests on crucial factors like the logistics infrastructure, flexible manpower models and centrally governed policies. All stakeholders should take note and revisit their strategies, operating models and policies to adapt and make the best of this e-commerce driven new normal. Those who have already made the investment have weathered the storm and are well-positioned to lead in the post-COVID-19 retail revival. More than ever, those who fail to make the required changes and investments will be sidelined and put their very survival in question,” Debashish Mukherjee, partner at Kearney Middle East said.

Source: https://muscatdaily.com/Business/388302/Pandemic-gives-major-boost-to-GCC-e-commerce-sector


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