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Table of Contents

Introduction

Effect of COVID-19 on the Market/Sales

Who gained from the pandemic? 

Who got affected negatively?

Existing E-commerce Businesses

New E-commerce Businesses 

Investment Opportunities in E-commerce

Existing Gaps in Supply Chain

Effect on E-commerce Giants

Conclusion

References

Introduction

Black swan events like pandemics and economic recessions change the trajectory of businesses, governments, and economies – altering the course of history. The outbreak of COVID-19 is one of such events and its advents have already led to a significant shift in the way businesses and customers behave. Governments everywhere shut down public venues with most of the population working remotely and under social distancing measures, to control the spread of the virus. Although this has impacted every industry, its impact on eCommerce is the most interesting one as lockdowns gave eCommerce companies the significant opportunity for growth, and some companies were able to capitalize on it while other were not (Hamed & El-Deeb, 2020). This paper presents an analysis of the existing eCommerce market in the Middle East and highlights the effect of COVID-19 on the market.

Effect of Covid-19 on The Market/Sales

Considering the impact of COVID-19 on the daily lives of individuals, it is not surprising that it had a great impact on their purchasing behaviour which changed the sales of industries. For instance, local hypermarket and supermarket retailer BinDawood holding, which operates two eCommerce platforms, Daube and BinDawood, saw an increase of 400% in-app installations, and 200% in their average sales, since COVID-19. Moreover, UAE Carrefour saw a 59% increase in online customers (Go-gulf, 2020). Generally, online sales have increased by 52% and the total number of online shoppers has increased by 8.8% since the introduction of the pandemic (Bain, 2020). While online groceries delivery portals experienced the biggest surge in sales, this effect is evident in other online industries too, such as gaming, online communications etc.

Who Gained from The Pandemic?

COVID 19 was a perfect crisis for eCommerce, as an industry which was suffering from weak economics and slow growth, it witnesses a sudden spike in popularity and daily usage (Arabnews, 2019). The video chat app industry, media and entertainment and eCommerce are the ones who saw the positive effect of the pandemic on their business. Alotaibi, Grant & Williams (2020) mentioned that there is a big shift in online grocery shopping behaviour among all age groups and the top products for online purchase were dairy (69%), vegetables and fruits (67%), and bread (62%), therefore companies like Souq, MImzwold, Aido and Letstango significantly benefited from the pandemic.

Who Got Affected Negatively?

However, not every industry got the benefit of the change in the business environment, for instance, ride-sharing services like Uber was unable to operate due to lockdown, along with food delivery services like Careem. In addition to this, the travel and hospitality sector also experienced a significant loss of revenue. Mishra & Gupta (2020) reported that Careem’s business was down more than 80% due to the risk of the virus among the population and that similar businesses are also at high risk. Uber technology reported a total loss of $2.9 billion, as the ride-sharing industry was hit hard by the ongoing pandemic. Apart from this almost every industry experienced supply chain disruptions which translated to limited inventory and cancelled orders.

Existing E-commerce Businesses

Existing eCommerce retailers experience a dramatic increase in their customer as shopping malls were closed due to pandemic. Guercini, Ranganfi & Runfola (2020) highlighted that key players like Majid Al Futtaim (MAF) which operates 24 shopping malls has experienced a 59 % increase in online customers, while Saudi retailer BinDawood holding has seen a 200 % increase in online sales. Moreover, this has also helped existing players like Nana to raise investment in order to expand its operations across the middle eastern region. The grocery market in UAE, Egypt and Saudi Arabia along amounted to an $83B due to the sudden shift in consumer behaviour which led to the rapid growth of the eCommerce sector (Go-gulf, 2020).

New E-commerce Businesses

Wang, Kang & Valentine (2020) mentioned that eCommerce in the Middle East is expected to reach DH95.42 billion by 2021. Considering such growth of the eCommerce sector in the middle eastern region, it is not surprising that after the advent of COVID0-19 several new players also entered the industry in order to capitalize on increasing returns (Revonic, 2019). For instance, GetBaqala, a Bahrain based grocery start has seen a major increase in business, along with MarkeetEx, a grocery and marketplace delivery startup from Oman which received $1 million funding in its seed round. GrocerApp, a Pakistani eCommerce startup suggested that its sales have increased over 100 per cent, while Basket a Jordanian delivery startup witnessed an eight times increase in the business (Grin, 2020).

Investment Opportunities in E-commerce

The aforenoted review of business growth suggests that the current environment of Middle Eastern e-commerce sector is laced with investment opportunities. One of the key opportunity is present in the grocery market as it has the potential to grow 18 times to reach global penetration rates (Habeeb & Sudhakar, 2020). Moreover, it also has the opportunity to transform the 2nd highest consumer spending bucket. This is mainly due to the fact that only 0.1% of grocery sales in Middle Est take place online, as compared to 1.8% globally, and this is likely to grow considering the post-pandemic consumer behaviour and the rapid growth of the e-Grocery market in the region (Entrepreneur. 2019).

Existing Gaps in Supply Chain

However, in order to support such an investment, it is important to address the existing gaps in the supply chain. For instance, only 20% of eCommerce platforms offer to deliver to the regional customers which creates a demand-supply imbalance in the region. In addition to this, penetration in the region is also low due to gaps in supply due to a lack of effective partnerships (Andreey, 2020).

Effect on E-commerce Giants

AliExpress, eBay, Amazon and similar global eCommerce giants have also taken a keen interest in the Middle East region and are actively marketing to promote their services. However, at the same time, their presence threatens the local business which has led to an increasing number of regulations for establishing eCommerce business in the region. This includes regulations for privacy, online contracting, content and promotions. Legislative measures also govern social media and technical aspect of the business in order to protect consumers and safeguard local industries (Deloitte, 2020).

Conclusion

In conclusion, it is evident that the e-commerce market in the Middle East is significantly affected by the advent of a global pandemic. While it had a positive impact on the online delivery business, at the same time, it is also responsible for significant losses for ride-sharing and food delivery business. However, the changes in consumer behaviour due to COVID-19 are likely to continue after the pandemic, which presents a significant investment opportunity in the sector, especially in e-Grocery. Moreover, new startups need to establish effective partnerships in order to address existing gaps in the supply chain and will also have to deal with regulatory measures.

References

Alotaibi, M., Grant, D., & Williams, T. (2020). E-commerce fulfilment in the Gulf Cooperation Council. In Proceedings of the 21st logistics research network annual conference 2016.

Andreev, O. (2020). Information technologies, e-commerce retail platforms and the impact on the regional economy. Journal of Talent Development and Excellence, 12(2s), 4205-4216.

Arabnews. (2019). Start businesses that are shaking up the Middle East. Retrieved from https://www.arabnews.com/node/1438396/business-economy

Bain. (2020). E-Commerce in Mena. Retrieved from https://www.bain.com/insights/ecommerce-in-MENA-opportunity-beyond-the-hype/

Deloitte. (2019). E-commerce. Retrieved from https://www2.deloitte.com/xe/en/pages/about-deloitte/articles/we-are-25/e-commerce.html

Entrepreneur. (2019). All set for growth. Retrieved from https://www.entrepreneur.com/article/328467

Go-gulf. (2020). How COVID-19 is impacting E-commerce? Retrieved from https://www.go-gulf.com/how-covid-19-is-impacting-e-commerce/

Grin. (2020). The growth of e-commerce in Saudi Arabia. Retrieved from https://www.grin.com/document/312495

Guercini, S., Ranfagni, S., & Runfola, A. (2020). E-commerce internationalization for top luxury fashion brands: some emerging strategic issues. Journal of Management Development.

Habeeb, S., & Sudhakar, K. F. (2020). A Review of Antecedents of Online Repurchase Behavior in Indian E-Commerce Paradigm Shift. In Handbook of Research on Social and Organizational Dynamics in the Digital Era (pp. 550-568). IGI Global.

Hamed, S., & El-Deeb, S. (2020). Cash on Delivery as a Determinant of E-Commerce Growth in Emerging Markets. Journal of Global Marketing, 1-24.

Mishra, O. N., & Gupta, S. (2020). Antecedents and Impact of E-commerce Adoption among New Venture Firms: Evidence from Tourism and Hospitality Industry. Vision, 0972262920927940.

Revonic. (2019). The state of eCommerce in the Middle East. Retrieved from https://www.revonic.com/en/news-and-events/2019/12/state-of-ecommerce

Wang, T., Kang, J. W., & Valentine, V. F. (2020). A holistic analysis of national e-commerce and logistics development. Maritime Economics & Logistics, 1-14.

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