Start An Online Business In UAE – The Ultimate Guide

  • March 14, 2022
  • 10 Minutes

Index

The trend of online shopping gained unprecedented momentum during the Covid pandemic. Globally people suddenly found their movements restricted or completely stopped due to the imposition of lockdowns. Many businesses scampered to create an online version of their offline stores. While businesses with the foresight and appetite to vet the eCommerce environment beforehand saw their profit margins soar exponentially.

The UAE also saw tremendous affiliation to the eCommerce business during the pandemic. Just the online retail sector reached a record $3.9 billion in sales in 2020. The consumer electronics market jumped to 31% while the food and drink industry saw earnings of more than $400 million. This positions the UAE as the best option globally to start your online eCommerce business.

Understanding the eCommerce Environment

Souq.com got the ball rolling way back in 2006 in Dubai. It was the region’s first eCommerce store, dubbed by many as the Amazon of the Middle East. Ironically Amazon did acquire the company in 2017 for a whopping sum of $580 million. According to sources, the eCommerce store had garnered about 50 million customers at the time of acquisition.

Today, the climate in the UAE is filled with potential as the eCommerce market blooms with a forecast of 23% growth between 2018 to 2022. The value of eCommerce sales is also projected to be around $27 billion, quite a jump from the 2019 projections of $16 billion. Worldwide, the UAE has gained a reputation for being the most advanced eCommerce market in the MENA region.

Still thinking of why you should start an online business in UAE, then check out these facts:

  • Almost 99% of the people living in the UAE have access to the internet.
  • The highest smartphone penetration rate with the UAE m-Commerce market increased from 29% in 2015 to 42% in 2020.
  • Successful adoption and support by the government agencies for e-payments.
  • Partnership opportunities within the digital payment sectors like payit for homegrown entities.
  • High standards in logistics infrastructure along with growth potential.
  • Pro legislative directives that encourage entrepreneurial ventures, incubator development programs like FinTech, which gives you access to mentorship boot camps and regulatory support.
  • The 2002 eCommerce Law decree with 39 articles helps regulate the different eCommerce practices, including electronic transactions and data protection.
  • Introduction of new licenses to represent the diverse online business activities like home-based business, trade license and even virtual license.
  • The corporate tax rate stands at 9% with a 0% rate for SMEs and startups earning up to Dhs. 375,000.
  • No personal income tax

The UAE has a mix-pot of influences on consumer mindset and buying behavior. This stems from the myriad of expats living and working in the region as well as the local Emirati populace who have a penchant for buying things online. Most consumers comprise of the Gen Z, but millennials are said to catch up with most starting to trust the layers of protection for online transactions that eCommerce sites must enforce as per UAE directives.

Other stats that may interest you as a potential online business owner are:

  • 88.5% of the UAE population are expats possessing 200 nationalities.
  • 34% of consumers say they don’t mind paying more for their favorite brands.
  • 75% of customers prefer shopping on a single site rather than looking at multiple stores.
  • 65% do expect personalized shopping experiences.
  • 69% of Emirati shoppers love getting exclusive rewards and benefits.
  • 43% of customers who get incentives are likely to spend more and shop more.
  • 30% of customers spend their monthly salaries shopping for luxury goods.

Read also: How to start a business in UAE

Steps to Opening Your Online Store in the UAE

Selling online is easy somehow once you have designed and developed your eCommerce store. You just need to get a host, think of a name and install your CRM program of choices like WooCommerce or Magento. This may help you sell your wares, but it definitely doesn’t give you the legal right to sell in the UAE. For this, you need to get an eCommerce license for your store.

Top advantages to getting your eCommerce store registered with the UAE governance are:

  • You don’t end up paying the hefty Dhs. 500,000 fine.
  • You can officially brand your store.
  • You can advertise your products on various media platforms, as opposed to before when word of mouth and flyers were the only options.
  • Your eCommerce license allows you the right to open a bank account and even apply for a bank loan for your business.
  • Your customers feel safe and assured by your license.
  • Your quality products get an opportunity to reach a wide variety of customers without issues.
  • You can officially partner with other businesses like delivery services or a warehouse to expand your business operations.
  • You can offer diverse digital payments schemes like payit, the smart full-featured e-wallet that is easy and safe to use on eCommerce platforms.

Research Your eCommerce Activity

The first step is always deciding on the type of activity your eCommerce store will conduct. You can build a store selling pets products, food products, skincare and beauty, fitness, furniture, electronics, and so on. Just make sure the products you sell are deemed legal in the UAE.

To better understand the type of merchandise that sells in the UAE, look at some of the popular eCommerce stores like:

  • Amazon
  • Noon
  • Namshi
  • Mumzworld
  • Deliveroo
  • Carrefour
  • Lulu Hypermarket

You may even want to look at how these eCommerce sites are marketing the products as well as the payment options. While cash on delivery is available for most stores, some like Lulu Hypermarket take it a step further for their customers as you can avail their cashback offer when you use payit mobile wallet for payment in LuLu hypermarkets or even through their app. Payit even boasts its own marketplace, which gives you another opportunity for research.

Choosing Your eCommerce License

If you plan on establishing a mainland or local company in the UAE, you need to contact the Department of Economic Development (DED) in the Emirate of your choice. This is because even though each Emirate offers some form of eCommerce license, documentation and approvals may differ. Also, if you plan on selling locally as well as online, you may need to register as a limited liability company (LLC) that requires a partnership with a local Emirati who owns 51% of your company’s shares.

Now let’s look at what some of the Emirates offer in terms of the license to sell online in the UAE:

Abu Dhabi

The eCommerce license by the Abu Dhabi Department of Economic Development (ADDED) offers two licenses to setup an online business in the UAE. The first license is like an add-on to your already existing trading license. The other license is new that allows you to sell via websites and social media accounts.

The cost of the license varies depending on the type of product you plan on selling. As an example, computers and accessories cost around Dhs. 2,500. While mobile phones, women’s clothes and children’s toys all are pegged at Dhs. 1,000.

The license also boasts some 1057 eligible activities and is open to Emiratis, GCC nationals and UAE residents under the following legal formation terms like:

  • Establishment for Emiratis and GCC nationals
  • Single ownership companies for Emiratis and GCC nationals
  • Limited liability company (LLC) for expats with a partnership with Emiratis

Dubai

The eTrader license offered by the Dubai Economy Development (DED) is open to Emiratis, expats and GCC nationals. You can open an eCommerce store or sell on various social media networks. You can’t however open a physical store or issue visas as it is a single ownership license. The cost of the license is Dhs. 1,070 plus Dhs. 300 for the Dubai Chamber membership.

Some of the businesses you can start with this license are:

  • Startups that either don’t have the required funds for a physical location or don’t need one.
  • Entrepreneurs who trade in online business activities.
  • Freelancers and remote workers.

The other license expats and Emiratis can obtain is the intelaq license. Specially designed for home-based business owners, it gives you a trading name that you can use for various marketing activities. The license takes only an hour to be issued but needs to be renewed every year. The cost for this type of license is Dhs. 1070.

You may also like:
How to setup a business in Dubai

Best Online Business Ideas

Many expats have taken advantage of the new licenses that the UAE is offering. Home-based businesses are sprouting up at every corner. The license, in a way, has given them wings to dream big.

Some of the best online business ideas trending in the UAE are:

  • Catering Business
  • Baking Business
  • Accountancy and Taxation
  • Legal Consultancy
  • Tailoring Business
  • Online Trainer
  • Digital Marketing Agency
  • Online Booking Platform
  • Social Media Influencer – Instagram, TikTok or YouTube
  • Online Gaming Services
  • Real Estate Business
  • Handyman Business
  • Artist Studio

The New Virtual Licenses of the UAE

A special form of license has recently been introduced in the UAE. The virtual license gives you the opportunity to create virtual companies. Both Abu Dhabi and Dubai offer these special licenses where you don’t need to be physically present in the UAE to conduct business.

Some of the business activities you can do with this license are:

  • Web Designing
  • Cyber Security
  • Fashion Design
  • Interior Decorating
  • Product Design

Apply for a virtual license in Dubai
Apply for a virtual license in Abu Dhabi

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