The Expansion of E-commerce: Opportunities and Challenges

The global rise of e-commerce, spurred by rapid technological advances in the sector, reached new levels during the coronavirus crisis, as lockdown measures saw the vast majority of consumers move online.

According to Al-Bayan, data shows the COVID-19 crisis led to a significant increase in the volume of e-commerce in the UAE. The number of retailers seeking to develop their online trade potential increased to more than 3,000 from February to May. Meanwhile, the first five months of the year saw a 300 percent increase in consumer demand for online shopping in the UAE, saving time and effort.

In December, according to a report by the United Nations Conference on Trade and Development (UNCTAD), the UAE ranked first regionally, and 28th globally, in the Business-to-Consumer E-commerce Index. The report also found that in 2018, the proportion of internet users to the total UAE population was approximately 98 percent, up 10 percent from 2017. The UAE also ranked fourth globally among the most developed emerging economies in business-to-consumer e-commerce activity.

This data, which indicates the extent and quality of technological development taking place across the UAE, and the growth of its e-commerce sector, does not necessarily apply to all countries regionally and globally. While it is important to boost e-commerce, given its growing impact on individuals and businesses, the sector faces a series of challenges. The most pressing issues include; the need for a robust legislative structure to regulate businesses online; taxation dilemmas related to online sales and services; and, limited consumer capacity to verify retailers and protect against fraudulent sites and products.

Consumers are at risk of receiving counterfeit products, as it is not always possible to safeguard intellectual property and legitimate marketing rights online. Additional challenges within the sector relate to the commitment from retailers to supply quality services and products, at an agreed price, within a reasonable time frame. Often, deliveries are late, products do not match specifications shown online, or consumers find that prices have increased.

Another serious challenge for online shoppers is the security of payment methods, where credit cards can be vulnerable to hacking activities. Whether through ignorance or fear, consumers are concerned about making online payments. On the other hand, some retailers are unaware of the importance of having an online platform to promote goods and services. They believe their physical stores eliminate the need for an online outlet, even though this area of business is expanding amid surging demand from younger customers.

To overcome the legal and commercial challenges associated with e-commerce, further legislation is required to regulate purchases and payments, and to protect consumers against deception and fraud. This would provide a safe and effective environment for business transactions, allowing retailers to run e-stores smoothly. Taxation, where applicable, should not stifle online businesses. It is also important to find technical solutions to reassure consumers, helping them verify websites and products to ensure they conform to international standards. In this way, we can protect consumers from fraud and the potential risks that arise from financial transactions online.