The UAE’s digital sector is projected to grow at a faster clip of over 16 percent annually for the next six years, positioning it as the gateway for global brands and international investors to tap into the $1.5 trillion MENA consumer spending market, a latest research said.
A convergence of factors such as strong demand, forward-thinking governance, top-notch infrastructure, and accessible funding is grooming the country as the top-notch destination for overseas companies for their larger play in the region.
“Companies and brands can commence the ride on the journey starting at a $100 billion now to unlock the potential of an over $500 billion digital economy in the MENA region by 2030,” said the study by RedSeer Strategy Consultants, a global consultancy for new age sectors.
The study, however, cautioned companies and investors that the UAE market’s distinct attributes warrant a customised approach for success and scale. “Unveiling this paradigm holds the key,” it said.
The study said the UAE currently powers about 30 percent – or $34 billion – of the $111 billion MENA digital economy, and the 16 percent expected growth makes the market very lucrative for e-tailing as well as certain other nascent sectors.
UAE’s digital economy undergoing major transitions
The RedSeer study also revealed that the UAE market is currently seeing significant transitions unfolding.
“The shift from [digital] products to [digital] services, evolution from B2C to B2B platforms, and finally, the emergence of Gen Z as a dominant force are among the significant transitions unfolding in the UAE market currently,” it said.
The study said while established sectors like online retail, travel, and foodtech remain pivotal, emerging sectors such as fintech, healthtech, on-demand services, and smart logistics are primed for stronger growth.
“In the coming years, B2B platforms in areas like agritech, SaaS, and logistics will gain momentum,” the study projected, adding that the UAE’s government is proactive in not only recognising these emerging trends but also in fostering an environment that supports them.
RedSeer said the B2C digital economy channel split in the UAE is poised to see major changes in the coming years, with the share of digital services expected to spike to 57 percent by 2030 from the estimated 46 percent in 2022, while that of digital products projected to decline to 43 percent by end of the decade from 54 percent last year.
Retail, auto-corn and real estate are listed among major digital products, while digital services include online travel, edtech, healthtech, food delivery, event bookings, on-demand services and fintech.
“High level of digital enabler penetration and online time spent will help several e-commerce sectors including online retail, travel, and food delivery to scale up rapidly in MENA over the coming years,” the study said.
It said the UAE has also been at the forefront of this growth in recent years, powering a disproportionate 30 percent of the region’s digital economy.
Agritech, D2C among the prominent sectors to emerge in near future
The RedSeer study said the UAE’s digital sector will also see the emergence of some newer sectors in the coming years.
Prominent sectors on the radar include D2C, agritech, B2B, and SaaS.
“Agriculture is a sector receiving strong government impetus as the country aims to become the world’s best in food security index by 2051,” the study said, pointing out that one of the key mandates within the food security strategy is to reduce food imports – currently constituting about 80 percent of consumption, significantly over the next few decades.
The potential for digitising the B2B value chain, encompassing both upstream and downstream segments, is also significant. Besides, the manufacturing sector also is expected to thrive, aligning with the government’s push to amplify manufacturing output in the nation, it said.
“With investors looking for asset light models with stronger unit economics, SaaS is a strong theme that is emerging, cutting across all key sectors.”
RedSeer said the forthcoming decade will also witness the ascendance of Gen Z within the consumer landscape.
“By 2030, Gen Z is expected to contribute a substantial 30 percent of e-commerce spending,” the study projected, adding that consequently, it is imperative to strategise and tailor solutions to cater to this emerging cohort.
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