With 5% VAT, is online shopping still a good option?
You are home relaxing on a weekend day.
You remember you need to go to the mall for some purchases.
But the weather is really bad with lots of traffic outside.
No need to worry! There is always an option to shop online.
Research shows that online purchases from local retailers may still be a good option even after the introduction of 5% VAT in the UAE and Saudi Arabia.
In fact, online shopping seems to be growing in these countries as online payment platforms are expanding to the region, the latest being PayFort, owned by Amazon.
PayFort registered a new wholly owned company in Saudi Arabia to expand its business there.
Why is online shopping in these countries still attractive?
Local vs international online shopping
A study by The National says that VAT may prevent UAE citizens to opt for international online orders but not local ones.
It said that ordering products online from abroad is no longer a good option because buyers will have to pay, in addition to the recently imposed 5% VAT, delivery charges, handling fees or additional tax from the country of origin.
However, people will resort to local online platforms since they will pay anyway the 5% VAT whether they buy the product online or from a retail store but at least they will be saving customs and delivery charges.
More appetite for pre-loved goods
According to EZheights, a Dubai-based e-commerce portal, UAE residents are increasingly turning to e-commerce to buy and sell used goods, and the introduction of VAT will further fuel that drive.
“The introduction of VAT across the GCC region will drive consumers and businesses to embrace money-saving options such as by making second-hand purchases,” Adham Saleh, Managing Director of EZHeights.com, was quoted as saying.
A report by the portal suggests that a higher monthly outgo thanks to increasing levels of consumer debt in the form of credit cards, personal loans and mortgages are prompting a growing number of the UAE’s expats to re-think their lifestyle spending patterns and rein in their outgoings.
“One way they’re achieving this is by opting to buy goods second-hand – as well make a little bit back by selling some of their own unwanted items,” according to the portal.
“We’ve seen a noticeable surge in the number of locally-based buyers who are using our popular classified section to purchase a wide variety of second-hand items – everything from cars, electronics, household appliances and toys to pre-loved designer name clothing and handbags,” it added.
A study by Emirates 24/7 reveals that tech-savvy UAE residents are fast getting comfortable with paying online for their purchases.
“Coupled with an improving internet penetration, rising smartphone ownership and declining cost of transaction and delivery, they are flocking to online sales platforms like never before,” it said.
A recent report by intelligence provider yStats.com said the e-commerce market in the Middle East and Africa has the potential to grow at small double-digit rates in the next five years, with the B2C segment forecasted to account for close to one-third of the total online sales in the region.
“Driven by improving Internet penetration, rising ownership of mobile devices and payment cards, online retail in these countries is set to boom in the near future,” the report adds.
yStats.com says the UAE is leading the region in this domain. “This country has the highest Internet, mobile device and payment card penetration, which all contribute to making the UAE the market with the largest B2C E-Commerce sales,” it states.
Meanwhile, the Kingdom of Saudi Arabia’s e-commerce market is set to more than double to $22 billion by 2020, the second-highest in the Middle East, according to a recent report by PayFort.
The wider Middle East’s e-commerce market is set to more than double to $69 billion.
Shoppers in the region are in luck to witness a fierce competition among e-commerce platforms aimed at offering them the best offers, promotions and services throughout the year.
Among the latest moves in this direction is the launching of Amazon Global Store by E-commerce giant Souq, allowing customers in the UAE to choose from over one million products.
Other online platforms have also signed numerous partnerships to provide their customers with international brands.
Noon signed earlier this year a partnership agreement with United Electronics Company (eXtra) that establishes the Saudi electronics giant as Noon’s exclusive partner for a range of consumer electronics and home appliance items such as Samsung, LG, Sony, Braun, Kenwood and Moulinex, among others.
According to the Entrepreneur, a platform for news about entrepreneurs in the world, Wadi has in 2017 brought on prominent partnerships with international brands, including Nokia, Samsung and Reebok.