Abu Dhabi is creating an environment that supports the growth of the e-commerce segment, backed by evolving regulations, strategic infrastructure initiatives, and support for small and medium-sized enterprises (SMEs).
Regulatory Development
In September 2023 the UAE Cabinet announced a new e-commerce law that aims to boost the country’s digital economy and enhance its economic competitiveness. The law is expected to benefit consumers and e-commerce platforms by providing clearer guidelines and regulations. Positive developments are anticipated in areas such as advertising, marketing and cybersecurity.
Another key federal development is the introduction of value-added tax (VAT) and its impact on e-commerce accounting. In October 2022 amendments to the VAT Executive Regulations were introduced, effective from January 2023. As of July of the same year, taxable persons supplying taxable goods and services exceeding Dh100m ($27.2m) per calendar year through e-commerce will be required to keep records of e-transactions based on the emirate in which the supply is received.
Expanded Capacity & Services
Abu Dhabi’s e-commerce landscape is also being enhanced through infrastructure investment. In November 2022 the Abu Dhabi Investment Office (ADIO) and Dubai-based online marketplace Noon signed an agreement to build the UAE’s largest fulfilment centre to support the growing e-commerce industry. Scheduled to open in 2024 the 252,000-sq-metre complex will be built at Khalifa Industrial Zone Abu Dhabi and create 6000 jobs. Meanwhile, Amazon’s new fulfilment centre in Abu Dhabi, construction of which began in June 2022, encompasses a 175,000-sq-metre site and is set to open in late 2023.
The strengthening of Noon’s presence in Abu Dhabi is attracting other players to the emirate. In May 2023 Dubai-based retailer Union Coop started delivery services for online orders in selected areas of Abu Dhabi. The improvement of the e-commerce landscape on both the federal and emirate level has allowed the company to reduce delivery fees and offer free delivery for online purchases worth Dh300 ($81.66) or more.
SME Opportunities
Abu Dhabi’s commitment to digital transformation and the development of robust infrastructure has laid a strong foundation for e-commerce start-ups to thrive. The emirate boasts high internet penetration rates, widespread smartphone usage and a reliable telecommunications network, creating a conducive environment for online businesses. Furthermore, the emirate offers initiatives, incubators and accelerator programmes that provide mentorship, funding and networking opportunities to aspiring entrepreneurs. Emirate government-backed organisations such as ADIO and Hub71 also provide support and resources to e-commerce start-ups.
Successful entry and development in the Abu Dhabi e-commerce sector affords SMEs international recognition to expand their operations beyond the local market. For example, in 2022 the Hub71-backed technology start-up swftbox raised $2m in a seed funding round led by UK-based MENA Technology Fund, with the participation of investors from the US, the UAE, Saudi Arabia and Europe. The company, which operates a same-day delivery platform powered by artificial intelligence, plans to use the funds to enhance technology development, improve user experience and expand its customer base in the UAE and Saudi Arabia. The investment will also support the company’s goal of optimising routes, automating operations, and increasing profitability for retailers and courier companies.
Prospects
The future trajectory of Abu Dhabi’s e-commerce segment is closely tied to the overall retail growth trends in the emirate. These trends are influenced by demographics and the high purchasing power of an expanding foreign population. The evolution of regulatory framework, the development of dedicated infrastructure, and the collaborative relationships between SMEs and institutional support mechanisms will play a crucial role in shaping the segment’s future.
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