Why should you start a dropshipping business in the UAE?

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Golden dunes, rich oil wealth, and the tallest tower in the world, the Burj Khalifa, are famous icons of the United Arab Emirates (UAE). Besides an impressive number of tourists each year - 22 million in 2019 alone, according to World Data - the UAE is sprinting ahead as a global business and logistics hub.

Country information

Founded in 1971, the UAE is a federation of seven states, Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain. It is situated in the south of the Persian Gulf, neighbouring Oman and Saudi Arabia. The capital is Abu Dhabi but the largest city is Dubai.

Statistics from the International Monetary Fund in 2021 cite the UAE as the sixth wealthiest country in the world. The country's wealth is heavily reliant on petroleum and gas, as it ​​holds the seventh-largest oil reserves globally.

The wholesale and retail trade industry is the biggest source of the UAE's revenue after oil and gas. In 2020, it made up 13.6% of the GDP, says Statista.

Dropshipping in the UAE

Now that we know some background about this Western Asian country, let's get down to business. We have established that the UAE is a wealthy country so it's time to see some data about e-commerce. Here's a snapshot of the dropshipping benefits in the UAE:

  • Accelerated growth of e-commerce since Covid-19
  • Highest purchase and use of smartphones in the Middle East and North Africa
  • UAE central bank expects the economy to grow 4.2% in 2022
  • Pet care, furnishings, and household equipment could be promising retail opportunities online
  • Excellent logistics infrastructure throughout the country
  • No corporate tax and no personal income tax
  • Booming e-commerce market

    Like many countries across the world, the UAE has experienced accelerated growth in the e-commerce market as a result of Covid-19.

    The forecasted value of UAE e-commerce sales in 2022 is $27 billion USD, as reported by Statista. Growth in this sector was by an average of 23% each year, 2018-2022.

    The World Bank reported that 100% of the 9.89 million population of the UAE were using the internet in 2020. This makes it the most digital-friendly country in the Middle East and an e-commerce opportunity with huge potential.

    According to Euromonitor, during the Coronavirus pandemic 2019-2020, these were the e-commerce products with the most sales:

  • Food and drink (triple-digit growth rates)
  • Electronic products (triple-digit growth rates)
  • Beauty and personal care, pet care, and apparel and footwear (more than 50% growth rates)
  • Products expected to have the highest sales:

  • Personal accessories and eyewear (predicted CAGR of 20% from 2020 to 2025)
  • Media products, pet care, and home care products
  • High use of smartphones

    The Government of Dubai Media Office reported that the UAE has the highest smartphone penetration rate in the Middle East and North Africa. This has led to an increase in people shopping on their phones.

    In 2015, the ratio of phone shoppers made up 29% of the overall e-commerce sales. As the internet becomes ever-entwined into our lives, this percentage rose to 42% in 2020.

    That's a retail market value of $1.6 billion USD. An impressive 56% higher than in 2019. By 2025, analysts predict the value of the mobile e-commerce sector will reach $3.9 billion USD 2025 (growing with a CAGR of 18.9% from 2020 to 2025).

    Further information from Global Media Insight tells us that smartphones in the UAE accounted for over 60% of internet users in 2021, with only 37% using a desktop.

    Around 9.75 million people in the UAE have a smartphone - that's 97.6% of the population. With such a high number of smartphone users in a wealthy country, there is a lot of potential for new e-commerce and dropshipping businesses.

    Impressive logistics

    The UAE is strategically located between Asia and Europe, making it ideal as a transport hub between the East and the West. The three largest cities, Abu Dhabi, Dubai, and Al Sharja are on the coast to easily profit from sea freight links in the Persian Gulf.

    Dubai International Airport has retained its title as the world's busiest airport. In December 2021, the airport seated almost one million more passengers than the second-busiest airport, London Heathrow.

    According to PR Newswire, the UAE's logistics market should generate over $30 billion USD by 2025.

    Over the last decade, the country's government has invested heavily in the transport network. Most recently, a $13.6 billion USD railways programme has been launched to improve connections between the key centres of trade.

    An excellent logistics network means products can be delivered to customers promptly. This is a key insight when considering a dropshipping venture.

    Overall economy

    Despite the downturn in oil prices during Coronavirus, these are bouncing back and the UAE's economy is expected to have a 4.2% increase in 2022, says Reuters. This is the fastest increase the country has experienced since 2015.

    Taking this into account along with the attractive tax system, dropshipping in this country appears to be a worthwhile investment. A huge draw for starting a business in the UAE is that there is no personal income tax. There are also tax-free business areas known as "free zones."

    Check these two resources for tax information:

  • Expatica: Guide to the tax system in the UAE
  • UAE Government website
  • Summary

    Hopefully, this article gives you some useful insight into the possibilities for e-commerce in the UAE. The articles we have gathered point to some market opportunities worth investigating.

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    Make the most of some of our other resources :

  • How to find a worthy dropshipping supplier
  • What is Shopify and what does it mean for dropshippers?
  • 7 Personal branding tips to kickstart your dropshipping website
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