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Dubai traders are optimistic about the future of ecommerce.

Dubai traders are optimistic about the future of ecommerce E-commerce has already had a huge impact on international business. As it has the capacity to increase market sizes, improve efficiency and effectiveness, and transform business processes. In the fast moving world of e-commerce, businesses are rushing to gain a share of this rapidly evolving market. The UAE and Dubai's economies are no exception. In 2006, e-commerce worldwide was estimated at US$6.8 trillion growing by more than 935 per cent from $657.0 billion in 2004. Within UAE, during 2007, e-commerce (B2C) is estimated at $ 1.16 billion (AED 4.3 billion) according to a report by Arab Advisors Group in Sep 2007.

Dubai Chamber conducted a survey in Feb 2008 to monitor the e-commerce market in Dubai, its implications, regulations, impact and future prospects in order to provide policy recommendation for improving the practices of e-commerce in order to be the best environment in the region/world for doing e-commerce.The number of companies that responded to the survey amounted to 332 companies giving a response rate of 13.4 per cent from the selected sample.

Ecommerce survey resultsActivity and Size distributionSurvey results show that 44.8 per cent of the respondents to the survey belong to the wholesale retail trade and repairing services sector, 19.4 per cent to the manufacturing and electricity, gas and water industries, 14.2 per cent to the construction, 6 per cent to the transport, storage and communication sector, 6 per cent to the social & personal services sector, 5 per cent to the financial corporation sector and collectively 5.2 per cent to the other sectors

Despite the high internet penetrations witnessed in UAE (40% in 2006), still a large proportion of companies are not using the internet for business purposes. The survey results reveal that 43 per cent of the responding companies are not using the ecommerce. This may be attributed to the Dubai's economy structure and the selected sample as the small and medium companies who are working in retail wholesale and repair services dominated the sample and they are less involved in ecommerce.

Uses of ecommerceFigure 1 ranks the major 5 uses of e-commerce in companies in Dubai. It is evident from the figure that the majority of companies are engaged in e-commerce uses it for more than one of its facilities. About 115 (or 64%) of respondents use it to receive orders. A smaller proportion of companies, just over half (52%), uses it to place orders. Interestingly, a much smaller proportion actually uses it to make or receive electronic payments (30%) indicating that orders are made and received via the internet, but it is often not used to actually carry out the transaction in terms of payment. Following placing orders, the second most used function of e-commerce in Dubai, is in identifying possible suppliers with 58% of respondents claiming to use this function.

Figure1: Uses of ecommerce

Methods used for ecommerce While Figure 1 showed that some users of e-commerce are reluctant to use the internet to process transactions, Figure 2 shows that electronic payment is the most common method used for e-commerce, with 91 or (50%) of respondents using this facility. As there are only two internet providers in UAE, users are forced to operate through a local area connection with either DU or Etisalat. 31% choose to operate their local area connection through a wireless local area network. Wireless (or Wi-fi) is becoming increasingly common place in offices, cafes, shopping malls and free zones throughout the Emirate.

Figure 2: Methods of ecommerce Benefits of e-commerceThe most cited benefit of e-commerce, with nearly three quarters of respondents engaged in e-commerce in Dubai citing it, is in the improvement in communication that it affords, followed closely by the access to information it provides. Other cited benefits that the internet has brought to commerce are numerous and far reaching, from increasing the efficiency of commerce, reducing costs, increasing turnover, improving quality, improving market share and broadening circles of suppliers and customers.

Challenges and Prospects A quarter of respondents engaged in trade have faced legal problems and security problems. This explains the trend observed earlier where traders use the internet to gain information and place and take orders but prefer not to close deals on-line. Almost a quarter of respondents cite poor service provision as a problem in Dubai. Poor service provision disrupts the flow of business. A fifth of electronic traders cite regulations in Dubai as a major problem facing trade, While 12% claim that problems with the specification and quality of products and slow processing of electronic orders cause challenges and barriers to electronic trade.

Despite the problems faced the ecommerce traders, almost two third (67%) of them are extremely optimistic with respect to the future of e-commerce and 31% are somewhat optimistic. This suggests that the benefits of e-commerce outweigh the constraints and problems with e-commerce; only 2% of respondents are 'somewhat pessimistic' about the future of e-commerce. Having the above challenges and future optimism of the traders about ecommerce, the following can be recommended. Ecommerce practices in the UAE have to be upgraded to the level of international practices through international partnerships with giant providers. Internet providers need to invest more on the quality of services provided and security issues in order to make online transactions efficient and safe. Validity of online contracts and authentications need to be regulated and recognized to facilitate business deals. Quality of products and services need to be monitored and controlled.

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Date:May 12, 2008
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