Mohammed Al Zarooni, Director-General, Dubai Airport Freezone Authority (DAFZA): Interview

Interview: Mohammed Al Zarooni

As the market value of UAE e-commerce rose from $2.5bn to $10bn between 2014 and 2018, what impact has this had on the retail and logistics sector?

MOHAMMED AL ZAROONI: Customers in the region are expecting and welcoming faster deliveries and better services such as cash-on-delivery payment options. This is a direct result of greater internet and social media penetration, meaning that online transactions have become increasingly attractive for consumers and businesses alike. According to recent research by YouGov and Honeywell, 83% of surveyed retailers in the UAE believe that e-commerce will provide continuous improvements to the online retail experience for their customer base. As such, businesses in the retail and logistics sectors have had to elevate their services to meet the growing demand.

However, there are still challenges that the industry must overcome to reach its full potential. For example, 70% of consumer transactions in Saudi Arabia and the UAE are cash-based, and the region has to further develop its infrastructure and logistics offerings. In terms of distribution, most retailers have inadequate warehouse coverage across the region for the rapid delivery of products that customers are demanding.

What indications are there that the e-commerce market has reached critical mass, and how will Dubai CommerCity build on this market potential?

AL ZAROONI: E-commerce in the region will be worth $48.6bn in 2022, up from an estimated $26.9bn in 2018. The GCC is expected to contribute 43% of the Middle East and Africa e-commerce market by 2022, led by the UAE and Saudi Arabia. These two markets are expected to grow by 16.4% by 2022. To capitalise on this growth, Dubai CommerCity was created as a joint venture between DAFZA and the Wasl Asset Management Group. It is a strategic initiative that will position e-commerce as a driver for economic growth in Dubai by helping to attract foreign direct investment to the sector, which is already witnessing significant developments in the Middle East. The investment value of this new free zone grew by 18.5% in 2018 to Dh3.2bn ($871m), with the total leasable area increasing by 32.5% to 195,000 sq metres.

How are sector-specific free zones such as Dubai CommerCity tackling sector-wide challenges like digital risks and cybersecurity?

AL ZAROONI: There are concerns around cybersecurity and data protection, and according to a 2017 Norton study, 40% of mobile shoppers in the MENA region have been victims of a cybercrime. This is an area that is of utmost importance, and investing in the right technology to ensure the highest levels of security is paramount. It is critical that free zones supporting global and regional manufacturers, distributors, e-tailers, and other companies in the e-commerce industry, have the right digital safeguards in place. Dubai CommerCity is testing a registration and rapid licensing system for e-commerce companies with high automation and the provision of a centralised customer relationship management system powered by the internet of things. By investing in the best technology, free zones can provide high-quality services, as well as secure and safeguard operations.

What role is e-commerce playing in boosting the prevalence of intra-GCC trade?

AL ZAROONI: There is still a long way to go in creating the right infrastructure to continue to increase intraGCC trade. Less than half of the top GCC retailers offering e-commerce have a regional distribution centre, which results in more imports and higher air freight costs. A lack of postal codes compounds the problem, placing last-mile logistics companies in a difficult position when delivering products. The lack of scale in parcel delivery and the limited number of couriers results in higher costs for last-mile delivery.