E-Commerce - Research Paper Example

Abstract: E-commerce in the United Arab Emirates is growing rapidly especially over the last one decade. The dynamic young population comprised of technology savvy individuals implies that UAE has a significant online spending potential. With increased Internet trade penetration levels and high spending potential, the UAE has extremely high adaptation and penetration in terms of online business. E-commerce is the purchasing and sales of goods and services, or the conveying of funds or data, over an electronic network, primarily the internet. These business transactions occur as either business-to-business, business-to-consumer, consumer-to-consumer, or consumer-to-business. In this project we shall do research about how the e-commerce is having an impact on UAE’s residents, in return, this shall guide us in how the consumers behave accordingly. We shall use different resources such as the journals, reports, research papers, and surveys that shall enhance the productivity of the whole research. In return, we shall improve our knowledge and enhance the methods of conducting the research. Numerous studies and researchers themselves have projected significant changes due to various megatrends anticipated soon. Therefore, this study will identify and proactively explain individual shifts in UAE's e-commerce and the overall impact of business in the UAE market. Keywords: E-Commerce market, economic growth, B2B, B2C, innovation Introduction The E-commerce sector in the United Arab Emirates is growing rapidly. In particular, the E-commerce industry is expected to be the top growing business in the entire UAE region. The implication of this rapid growth is that UAE will experience accelerated and the establishment of new businesses as well as the creation of employment opportunities. [1] What the scope of that E-commerce has in the region is limited by the definition of E-commerce concept. E-commerce is the purchasing and sales of goods and services, or the conveying of funds or data, over an electronic network, primarily the internet. This research will, therefore, illustrate how broadly companies utilize e-Commerce by outlining some of the primary sectors, which trade through e-Commerce. The paper also seeks to identify some of the products and services that firms sell through e-Commerce, for example, by use of B2B online platforms. [3] In this research paper, we will also discuss the challenges facing electronic commerce in the region and the future of e-commerce. Recently, the e-Commerce sector in the United Arab Emirates has been valued at more than $2.5 billion. However, this value is projected to reach close to $10 billion come 2018. [2] The mobile commerce in the United Arab Emirates is expected to expand to reach $1.3 billion over a period of five years, with www.souq.com, the largely known website in UAE accounting to about 40 to 50 percent of sellers made through online platforms. [3] Economic analysts have linked this massive growth to the region's amplified connectivity, the swift proliferation of connected gadgets and services. Additionally, the UAE government has been on the forefront in promoting a digital lifestyle by establishing digital-based initiatives meant to encourage online sells activities. Therefore, the paper will discuss online-based business activities including business-to-consumer (B2C) and business-to-business (B2B) commerce activities utilized by shoppers and sellers or companies within the UAE. The impact of e-commerce will be discussed in terms of different dimensions such as political, economic, and technological areas. Explaining how e-commerce influences the region based on the above dimensions will make it easier to determine how e-commerce has changed business activities in each sector. For instance, B2C commerce has been affected vastly by various factors such as low acceptance of online retail methods by numerous companies based in the region. Furthermore, product categories that are purchased online differ, although computers, consumer electronic devices, and jewelry such as watches are the leading products that are bought more often through different online platforms across UAE and globally. Legal Impact of E-Commerce E-Commerce Laws/Regulatory Overview With the rapid growth of online commerce, there has been a dominant force requiring that all e-commerce transactions in the UAE be regulated. Policymakers in the region have emphasized the need to establish and implement particular laws to help govern online-based transactions that occur in the UAE. Considering the quantity of products being shipped into the domestic market by online sellers overseas, government officials and institutions such as Dubai Department of Economic development have to take the initiative aimed at getting the attention of legal authorities. [2] In support of implementing laws to govern online commerce, policymakers have held the argument that regulations are required to offer the economy necessary protection. Therefore, regulatory oversight has been applied in a few areas as discusses below to regulate Internet commerce. About the Federal Law No (1) of 2006 on e-Commerce Given the rapid increase in online shoppers, the UAE published this Act in January 2006, in Muharram through the UAE's Official Gazette. The Federal Law No (1) of 2006 on e-commerce applies to different business-related items including documents, records, and signatures associated with electronic transactions and trade. [3] The Act applies to the above items while awarding legal acknowledgment to the utilization of electronic records and signatures and their safe corresponding items. The Act was established and enacted to fulfill several objectives including protecting the rights of individuals conducting trade electronically; encouraging and facilitating electronic transactions and communications using reliable electronic records; facilitating and removing impediments to e-commerce and other online transactions leading to uncertainties about writing and signature needs; and reducing the instances of counterfeit electronic communications; and allowing electronic filing of records with governmental and non-governmental organizations. Importantly, the need to regulate e-commerce through this Act was to enhance the public confidence in electronic commerce in terms of reliability, integrity, and validity, and promoting the growth and development of electronic commerce. Other laws that govern electronic commerce include the Telecommunications Regulatory Authority (TRA) of the UAE, which is given the mandate of licensing, approving, controlling and overseeing the actions of Certification Service Providers (CSP). [3] By establishing the Telecommunications Regulatory Authority (TRA), the UAE government intended to promote the ICT industry, protect competition, offer fair access to the local infrastructure, and ensure maximum utilization of natural resources. Evidently, the advent of e-commerce in different global markets has exclusively transformed the nature of UAE's business resulting in the passage of various laws for governing Internet commerce. E-commerce is thus synonymous to the laws implemented by the government to ensure and enhance the quality of services provided through electronic commerce. The laws have impacted different aspects of e-commerce including privacy, nature of the content, social media, online contracting, promotions and advertising, and technical areas of e-commerce transactions. Impact on economic growth Contemporary consumers based in the UAE region have exhibited a growing affinity with cellular phone shopping due to the increased rate of Smartphone and tablet penetration. The current valuation of the UAE's e-commerce market stands at $2.5 billion although the value is expected to rise to $10 billion by 2018. [2] E-commerce is, therefore, the leading dominant driver of economic growth, which is enhancing economic growth and development in the Arab Emirates region. Given the increasing online penetration, e-commerce remains UAE's swiftest growing industry that has been predicted to speed up in future, thus generating newer business and employment opportunities across the region. The increase in the overall connectivity through mobile technology and the Internet have resulted in accelerated economic activities, which have risen substantially in the recent years. The technology savvy population has continued to use the Internet for communications as well as shopping. Besides, most organizations and vendors are currently utilizing digital platforms to sell their commodities because of the rapidly growing number of Internet users. Thus, the rapid propagation of related services and electronic devices, as well as the push by the UAE government to encourage the citizens to adopt a digital lifestyle, has contributed to the expansion of e-commerce market. E-commerce has tremendously augmented economic growth in the United Arab Emirates, especially growth in domestic market. The Internet continues to provide or rather represent a fresh setting for the vast growth of e-commerce, which is promoting trade and facilitating sellers to access customers' accounts online. Specifically, e-commerce technologies such as B2B and B2C as well as the use of online shopping have resulted in the immense growth of domestic businesses and ultimately enhancing economic growth in the UAE region. [4] For instance, e-commerce has been a reliable source of revenue to the government, paid in through various ways such as corporate and income taxes, and returns on investments. The world B2C e-commerce sales were estimated to reach $1.5 billion the end of 2014 due to the rapid growth in the upcoming market. The UAE is a market with partially tapped potential in domestic and foreign trade, which has put the country on a positive growth gap. Hence, a large proportion of this expansion is because of the growing online and mobile user population in emerging markets such as the Middle East. With many online vendors and shoppers, electronic commerce practices including business-to-business (B2B) and business-to-consumer (B2C), are becoming increasingly popular. Businesses in the region can now post the features of a product on the Internet, engage with potential customers virtually in the web space, and complete the transaction online. Business-to-consumer (B2C), trade in UAE, contributes less than 1% of overall retail sales. [4] B2C has been facing several obstacles such as reduced espousal of online retail methods by domestic businesses, the preponderance of cash on delivery payment methods, and low consumer preference of Internet-based shopping. Accordingly, business-to-business (B2B) commerce is growing rapidly given a large number of websites being developed in the region to facilitate B2B transactions. Many businesses are recognizing and adopting B2B commerce channels, in return, they influence the level of economic activities in the region. Furthermore, e-commerce has resulted in the development of smart payment methods to take advantage of the increasing demand for mobile payment methods. The increased level of economic activity and hence economic growth has been as a result of augmented confidence in the use of digital payment solutions including MasterPass, which is accepted by several retailers like Ski Dubai and Novo Cinemas among others. Given these powerful economic changes, the UAE economy is set to expand considerably in the next few years. Challenges The UAE is experiencing rapid growth, which has attracted economic players from different parts of the world. The region's swift growth can be attributed to a rising middle class, fast access to digital platforms, and high penetration rates of mobile phone technology. Overall, UAE is attractive for business; however, there are potential challenges that are or might be affecting e-commerce in the region. a. High preference for cash on delivery methods Whereas UAE currently has a high penetration of credit card and digital payment channels, a considerable number of shoppers still prefer the use of the traditional cash on delivery payment options. [5] The manual cash collection option has serious drawbacks such as high costs, risky when a lot of money is involved and is laborious. b. Trust fraud problem Building trust in virtual space is the biggest challenge that sellers and consumers face as far as e-commerce is concerned. Trust fraud has been found to be the greatest problem hindering the success of e-commerce market. Manipulating trust by buying or exchanging positive rating can make shoppers or sellers give their money or goods to online fraudsters. Considering the case of Taobao, which has recorded high fraud activities, the highest proportion of discovered deception was about 47 percent of the total rated transactions. [1] In other cases, scandalous sellers tend to commit fraud to promote the businesses and lure more clients. c. Logistics issues Inaccessibility of some areas in the regions makes it difficult for using e-commerce across the country. Additionally, the high preference for cash on delivery method makes it difficult for merchants and the government to develop structures in the region. The Future of E-Commerce in UAE The e-commerce market is expected to transform nature of businesses in the region given the success potential of UAE market. First, online retailers are yet to make optimal use of technology; hence, e-commerce is set to prosper as the retailers purpose to develop strategies to enlarge brand loyalty and engage customers. [6] Second, the increased adoption and penetration of handheld smart devices will help producers to collect substantial data about consumers to help them implement target-based promotions and marketing. Third, the high cash on delivery option is likely to give electronic payment options such as the use of credit card, which will promote e-commerce across the region. Lastly, e-commerce is likely to become the lifestyle of citizens in the region. These will ensure the success of e-commerce amid increased of digital media. Conclusion We have established in this research that e-commerce has gained massive popularity in the UAE region in the recent few years. Many businesses are embracing e-commerce by engaging in electronic transactions. The rapid growth in the use of e-commerce is attributed to the increased penetration of Smartphone technology and connectivity through digital media. Given the rising use of electronic transactions such as B2B, B2C, and C2C, e-commerce has caused considerable changes such as encouraging economic growth, creating jobs, improving technology, and promoting business in the region. Hence, e-commerce is the powerful force set to transform the UAE economic market shortly. Acknowledgement This successful completion of this research project was due to the effort committed by ourselves. However, we would like to appreciate the guidance and support given to use by our course instructor to ensure efficient completion of the paper. References [1] Bredzel-Skowera, Katarzyna, and Turek, Tomasz, "The Prospects of E-commerce in Poland," International Conference on Communication, Management and Information Technology, 2015, pp.1114-1123, [2] Zhang, Yu, Bian, Jing, and Zhu, Weixiang, "Trust Fraud: A Crucial Challenge for China's E-commerce Market," Electronic Commerce Research and Applications, 2013, pp.299-308. [3] Blithe, Stephen E, "Fine-Tuning the E-commerce Law f the United Arab Emirates: Achieving the Most Secure Cyber Transactions in the Middle East," International Journal of Business and Social Science, 1(1), October 2010, pp.163-172. [4] Debbarma, Sonnet, and Nandi, Gypsy, "Promoting E-Commerce in India: Main Issues and Challenges," International Journal of Computer Science and Information Technologies, 5(6), 2014, pp.7371-7375. [5] Simsim, Mohammed T, "Internet Usage and User Preferences in Saudi Arabia," Journal of King Saud University-Engineering Sciences, 23(2), pp.101-107 [6] Zandi, Mark, Singh, Virendra, Irving, Justin, "The Impact of Electronic Payments on Economic Growth," Economic & Consumer Credit Analytics, February 2013, from https://usa.visa.com/dam/VCOM/download/corporate/media/moodys-economy-white-paper-feb-2013.pdf Read More