Middle East's digital future

How the Middle East is re-imagining its digital future

As MENA’s digital economy passes $100billion, there’s a growing buzz around investment and opportunity in the region.

From the Metaverse and free zones, to e-Commerce and more, MENA is entering a golden age of digital adoption.

Initially slow on digital uptake, governments have made huge in-roads in helping their regions catch up and even surpass other global markets.

Now a whole raft of investment - such as the launch of the Metaverse Academy in Saudi Arabia - is catapulting the Middle East and Africa to new heights and creating opportunities galore for digital retailers and business.

Here, Sarmad Hassan, Country Manager of SQLI Middle East, looks at some of the reasons behind this growth and some of the innovation that is helping shape its exciting future prospects.

The Middle East is internet ready and mobile savvy

With increasing internet penetration and mobile phone usage, the region has never been in better shape for investment.

UAE digital agency Medialinks’ analysis put the number of internet users in MENA now at over 200 million.

Surprisingly for some, consumers in the Middle East also lead the way globally in using mobile apps as their preferred digital channel. A survey by McKinsey & Company, found 51 per cent of those questioned in Saudi Arabia and 45 per cent in UAE, accessed digital services by mobile app, with just 29 per cent in Europe, the majority (54 per cent) of whom still prefer using a provider’s website.

While it’s certainly not a one-size fits all when it comes to growing a brand from region to region across MENA, it shows there are many digital opportunities to be had, with a young, internet-ready and mobile-savvy audience at its disposal.

How the Middle East is investing in its digital future

Online sales in the wider MENA region were expected to pass $50 billion by the end of 2022, with the digital economy hitting $100billion for the first time.

While this growth can be attributed to many different things, what can’t be ignored is the investment and time many countries in the region are putting into nurturing it.

One of the major success stories have been the expansion of free zones which offer tax and customs incentives for businesses operating in them. While Qatar, Saudi Arabia and Kuwait have all launched various versions, the UAE has more than 40, allowing expatriates and foreign investors full ownership of companies launching there.

The Dubai Multi Commodities Centre (DMCC) – the world’s flagship free zone - has recently launched the DMCC E-Commerce Ecosystem. The hub will help accelerate the growth of the e-Commerce sector with easy access to order fulfilment services, delivery options and discounts on licensing and more.

Dubai’s CommerCity – an SQLI partner - gives tax-free benefits to regional and global e-Commerce businesses with a ‘one-stop shop’ of support services including immigration and banking on-hand. Retailers can make use of the logistics cluster which includes AI-powered warehouses.

Investment from the digital giants

Initially billed as a virtual world where you could interact with other people, the Metaverse is set to revolutionise business in the Middle East to the tune of billions of dollars.

While it sounds like something out of a superhero movie, Meta Platforms, the parent company of Facebook, is launching MENA’s first Metaverse Academy in Riyadh, Saudi Arabia, this May.

Based on Web3 – an updated version of the World Wide Web with decentralisation and blockchain – the Metaverse is being touted as the next big thing with regards to reshaping workspaces and businesses digitally. Fashion brands such as Gucci have already experimented with releasing virtual clothing for people’s avatars to wear, but it’s merely the tip of a very big virtual iceberg.

More than a thousand people will be trained at the Academy in the next 18 months.

Last July also saw the launch of a plan to make Dubai one of the global leading Metaverse economies. PwC predicts the Metaverse’s potential contribution to GCC economies could be around $15billion by 2030, worth $4billion with 40,000 new jobs in Dubai in five years.

Meanwhile, Amazon has launched the Amazon Academy in Saudi Arabia, aiming to train more than 30,000 people by 2025. Among courses covered are cloud architecture, artificial intelligence, machine learning, data analytics, end-to-end customer fulfilment and last-mile logistics, preparing the way for more investment from global retail brands and businesses in the region in the coming years.

Changing attitudes across the region

Changing attitudes across the region are also helping to usher in the new digital era. With cash on delivery (COD) rather than online or card payments having been the preferred payment method in the past, the pandemic was a major turning point in shoppers going digital. COD was often a more expensive option for retailers, with higher risks of returned packages and logistical issues, but now contactless has become much more widespread.

A lack of outdoor activities and shopping at malls being looked upon as family time, meant digital took longer to penetrate the region than others globally.  While this is still the case and bricks and mortar stores are still a massive draw for consumers who like to see, smell and touch products before buying, many families are also more receptive to shopping online too.

The Middle East’s exciting digital future

While the Middle East has been notably behind when it comes to digital transformation, better logistics, tax breaks, freezone hubs and innovative ideas have propelled the region into unchartered territories.

Many more brands are investing in their omni-channel strategies, with a young, mobile and digital savvy demographic using online channels and apps more than ever before. SQLI partner Nahdi – the largest pharmaceutical chain in the Middle East and Africa – saw 10 times more traffic to its Adobe Commerce platform at the start of the pandemic, but was digitally ready in the face of the extra demand.

Where distribution and delivery methods varied greatly from country to country, much has been done to make cross-border trading and logistics a more seamless experience. Freezone hubs are just one of the innovative ideas helping new businesses set up and thrive.

With Amazon and Meta among the digital and retail giants setting up and investing in the Middle East, the digital story is really only just getting started.