The Future of the AED 17 Bn Pharmacy Retail Industry of UAE. Can the UAE be able to achieve the target? : Ken Research

ByVijay Kumar
UAE CEP Industry

UAE Courier, Express & Parcel Market, which surged ahead with over 11.2% year-on-year growth in 2020, is expected to grow almost three times by 2025, as per findings released by Ken Research.  

Due to inherent advantages that make it ideal for becoming a hub for express delivery shipments, the UAE presents itself as an appealing destination for the CEP market. Its consumer demographic is made up of a young, internet-savvy population (91% internet penetration rate in 2020), geographical advantages, and developed infrastructure. This is supported by the presence of high consumer confidence, as well as increasing consumer preferences for online shopping, which has aided the growth of the CEP market. Furthermore, the pandemic’s surge in online shopping and E-Commerce products has boosted the CEP market landscape.

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1. COVID-19 Impacted Positively the Number of E-commerce Orders due to the shift in preference among UAE residents from Physical to Online Stores.

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With initial concerns regarding disruptions in supply chain, logistics industry of UAE displayed resilience and adapted to ‘new normal’ delivery techniques. Despite the impact of Covid-19 across businesses, UAE CEP market had registered healthy growth rates, with the number of shipments increasing at a rate of 23.5% over 2019. Covid-19 has pushed most of the retailers to move to offline to online (O2O) method of sale. In the year 2020, more than 1 in 3 digital service consumers started using a new online service due to Covid-19 and ~90% of these consumers intend to continue using the service beyond the pandemic.

2. Increased government support for digital penetration among Emiratis, combined with favorable demographics, has aided the growth of the UAE CEP market.

Government initiatives such as increasing mobile and internet penetration, promotion of innovation, cash less economy and entrepreneurship has led to financial inclusion which has accelerated the growth of courier, parcel and express market. Additionally, Ease of Doing Business and friendly taxation policies have aided to the growth. UAE has emerged as a transshipment hub which has improved logistics services of the economy. The advanced logistics serve as a backbone for the growth of courier, express and parcel market. Moreover, the internet penetration in UAE has reached 91% in 2020 owning to high share of young population and government initiatives such as Dubai Smart City 2021.  

3. Dubai or Abu Dhabi region dominate the domestic trade lane due to a Modern and Strong Physical Infrastructure along with an Able Workforce.

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Construction of various free zones such as Dubai Maritime City & Dubai Logistics City and expansion of existing ports and free zones such as JAFZA and Hamriyah Free Zone has acted as a catalyst to enhance Dubai as a major sourcing hub for international shipments. This has increased the trade between different parts, and is contributing towards the increasing market share of CEP industry in the country. Furthermore, expatriates contribute ~80% to the overall population in the country, which increases parcel and delivery services in the country. Also, most of the corporate hubs are based in Abu Dhabi, leading to a greater number of courier and parcel deliveries in the region.

4. Customers are willing  to pay a premium amount for faster deliveries in UAE.

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A growing group of customers lay emphasis on fast and reliable express delivery services. They are willing to pay a premium amount for getting the delivery on the same day. Moreover, increase of Emirati purchasing power has provided a boost to same day delivery services in UAE. More than 60% online shoppers are willing to pay premium for speedy delivery in UAE. Considering the fact that UAE is a small country, the standard delivery period is within 72 hours. Some of the international inbound shipments might take up to 7-10 days for reaching the customer’s doorstep in UAE.