Expanding your eCommerce Business to the UAE

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  According to a joint study by Dubai Economy and Visa, the UAE is emerging as the fastest growing eCommerce market in the MENA (Middle East & North Africa). Another report says that the total value of eCommerce transactions in the UAE was projected to touch $16 billion in 2019 with an annual growth rate of 23% from 2018 to 2022. The growth factors behind this unprecedented rise in the UAE’s eCommerce business are many and sometimes reinforcing one another. Some of these factors are growing digital penetration with smartphones and the internet, increased online spending, increased confidence on and usage of mobile wallets, proactive government initiatives, better logistics and infrastructure, etc. However, before setting up or expanding your eCommerce business to the UAE, you need to contemplate on some important factors which we have listed below. The Offering Irrespective of the geography, playing with a business idea involves asking what specific needs/problems your product or service shall address?  No matter how good your product is or the associated services are if it is not fundamentally addressing any need/problem/expectation of the customers, it would be of no use to them. You need to identify the areas where the customers’ demands or higher expectations are not being met adequately. Or even the identify market segments that can be better catered to with your existing offering or with value-additions to it. In the UAE’s market, you will find almost every global brand. Your overall offering will get to stand a tough test there. Market Analysis The UAE’s market is unlike any other. It is a wealthy nation with a cosmopolitan atmosphere. Here, you can hire Lamborghinis and Ferraris on rent. It is one of the hottest shopping destinations in the world. It is said that it is very difficult to impress customers in the UAE. Thus, it becomes even more pertinent to plan and carry out a meticulous and careful market analysis if we are talking about expanding a business to the UAE. A good market analysis can provide specific insights on market needs and problems, relevant market segments, customer profiling, trends in customers’ tastes and preferences, buying patterns, the intensity of competition, industry trends and forecasts etc. Feasibility Study Feasibility study answers whether a business or a business idea would be feasible or not and if a compatible business environment exists. A feasibility study assesses the actual ground-situation by taking into consideration all the relevant environmental factors that would directly or indirectly have an impact on business and its continuance. For example, it is important to be convergent with the laws and regulations governing international eCommerce business and such companies in the UAE. If a particular product/service is reserved for the domestic companies, then a contrary business idea falls flat in the first place. Another important aspect to consider is the taxation environment in the UAE for eCommerce businesses – applicable tax rates, penalties, surcharges, export and import duties, etc. This affects the profitability of a business project. Other important considerations include labour laws (which may be different from what it is in your home country), presence of necessary supply chain and distribution network and infrastructure, support of banking services, meeting technological requirements, etc. Business Plan Once you assess that your intended offering has a potential market and business is feasible, next you’ll have to figure out how you will create and deliver this offering to the target market segment over and over again. This will include considering regulatory permissions and compliances for doing business, laying out the logistical, supply chain and distribution network plan from source to destination and vice-versa, human resource management, marketing strategy, office and administration, financial planning (capital requirements, profitability, break-even, etc.), technology and technology partners, etc. Mode of Entry There are several modes of entering as a business entity into a new geography. Different modes of entry are establishing fully owned subsidiaries, partnerships, franchising, mergers and acquisitions, strategic alliances, joint ventures, exports, etc. There are pros and cons of each of these entry modes in different countries. For example, Amazon acquired the UAE’s Souq to cater to the host country’s markets. Marketing Strategy We highlighted this earlier in the article that impressing customers in the UAE can be a tough job with global brands functioning at full-throttle. There might be a tiny window to communicate the value of your offering to your customers; done wrong and they might never look back at your communications whether hoardings or social media campaigns. The challenge could be even bigger with low-priced, homogenous products where brand alone could play the make or break. The UAE is a relatively small country in terms of geography and thus, there is hardly any excuse for inefficiencies in the delivery and distribution network. Competing with big brands on the front of digital marketing can be difficult. No competitive business in the UAE can afford to play below the industry standards and customers’ expectations. Financial Planning Financial planning is already touched in a feasibility study but after a business plan is prepared, more precise details are available for better financial assessment for the proposed business venture. Irrespective of markets and geographies, some important aspects to be covered under financial planning include:
  •         Assessment of capital requirements, source(s) of capital, capital structuring, cost of capital, terms of repayment, etc.
  •         Operational expenditure budget
  •         Sales forecasts
  •         Projected cash flow
  •         Planning for working capital management
  •         Projected income statement
  •         Projected profit and loss statement
  •         Projected balance sheet
  •         Break-even analysis
  •         Ratio analysis
Web/App Customization: Last but not the least, comes the forefront platform customization. This is where your brand interacts with your customers at the working level. Other things would not even arise if your customers could not properly interact with your eCommerce website or application. This gives rise to the need to customize an eCommerce website/app to make it compatible with the audiences for whom it is meant. Such customization include using the host country’s official language(s) to display content like website content, headings and title pages, navigation links, product descriptions, addresses, etc. The prices also need to be reflected in the host country’s official currency. There can be more of these customization to fine-tune the local requirements.

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