After Southeast Asia, the next "gold mine" in the world may be the Middle East.
In 2023, the gaming industry is making a lot of money in the Middle East, targeting the "high net worth population" in the region. There is a story circulating in the industry: a game team of no more than 10 people specially created a game for Middle Eastern tycoons. There were not many people playing it, but the game team had strong financial power and made a considerable monthly income.
This "spendthrift" target customer has also attracted the attention of cross-border sellers, and Chinese sellers and cross-border platforms have shown abnormally high interest in the Middle East market.
Starting from February 2024, Amazon provided brand sellers who had just joined Amazon Middle East with measures such as a 50% commission reduction in their first year of entry. Recently (at the end of November 2023), Amazon Middle East launched the "Ten Thousand Store Launch Plan", which will support over ten thousand Chinese sellers to enter the Middle East site every year for the next three years.
Amazon has been lurking in the Middle East market for a long time. As early as March 2017, Amazon acquired Souq, the largest e-commerce platform in the Middle East, and continued to build logistics and operations. After the basic completion of supporting infrastructure, Amazon began to recruit sellers.
Song Xiaojun, Vice President of Amazon China and Head of Amazon Global Store Expansion for Chinese Sellers, mentioned in an interview that in early 2022, Amazon Global Store had already planned for this market and planned to see a significant increase in the proportion of Chinese sellers in the Chinese market in the next three years.
Among domestic cross-border e-commerce platforms, SheIn entered the Middle East in 2015. Last year, it was reported that the Chinese cross-border platform Tiktok Shop is actively preparing to enter the Israeli market and plans to officially launch in early 2024. But industry insider Chen Jie (pseudonym) told the Daily Economic News reporter that the Middle East is far from reaching the intense stage of "platform competition" because it is still a blue ocean, and the development of each platform is currently "relying on their own abilities".
The Three Year Plan for the Middle East
Amazon has been planning its layout in the Middle East for a long time and is gradually deepening:
In the same year as acquiring Souq, Amazon also acquired the local logistics service platform Wing;
Afterwards, Amazon began investing in logistics, last mile delivery, and warehousing operations.
In 2019, Amazon opened its UAE site, and in 2020, it opened its Saudi Arabian site.
In 2022, Amazon launched a logistics center located in Abu Dhabi.
In the same year, Amazon proposed a three-year plan for the Middle East internally, and Amazon began to attract Chinese sellers to enter the Middle East by opening stores worldwide.
In March and June 2023, Amazon opened new distribution centers in Dubai and Riyadh, respectively. The United Arab Emirates is an important site for Amazon's heavy holdings in the Middle East. The United Arab Emirates is a hub connecting the East and West in terms of geographical location. From a logistics perspective, there are both sea freight and air routes here, with well-developed transportation.
Back then, Amazon officially opened its largest operations center in the UAE, located in Abu Dhabi, with an area three times larger than its previous operations center, increasing Amazon's storage capacity in the UAE by 70%.
In November 2023, the "Wandian Sailing Plan" was launched.
At this point, Amazon has three sites in the Middle East and North Africa region - the United Arab Emirates, Saudi Arabia, and Egypt - targeting over 170 million users.
Starting from 2022, the number of sellers targeting the Middle East market, particularly those in consumer electronics, home furnishings, and beauty, has been increasing. Song Xiaojun, Vice President of Amazon China and Head of Amazon's Global Store Expansion for Chinese Sellers, stated that the overall growth rate of Chinese sellers on Amazon's Middle East site is very fast, with Anke, Green Alliance major brand sellers, well-known domestic brands such as Midea and Stone Technology, as well as some emerging brands as the main players.
Song Xiaojun described the Middle East market as "young and wealthy", and stated that the advantage categories of Chinese brand sellers such as consumer electronics, furniture products, and personal care are precisely the categories that are relatively lacking in local production. Therefore, Chinese sellers are facing a wave of opportunities in the Middle East market.
According to Amazon's official data, as of June 2023, the number of Chinese sellers who have launched the Middle East website has increased by over 40% compared to the same period last year; In the year from October 1, 2022 to September 30, 2023, the number of Chinese sellers with sales exceeding $1 million on Amazon increased by more than 25% year-on-year; The number of Chinese sellers with sales exceeding 10 million US dollars has increased by nearly 30% year-on-year.
Meanwhile, Amazon will also increase its focus on the Middle East market in the next two years. The Daily Economic News reporter learned that in 2024, Amazon plans to more than double its warehouse capacity in the United Arab Emirates through new distribution centers and continue to invest in connecting these warehouses between countries. Ultimately, this UAE will be transformed into a major entry hub for the Middle East, meeting the needs of the entire region. And plans to support 100000 merchants worldwide to join its UAE website by 2026.
Middle East market: Blue ocean is also tricky
Compared to the previous Southeast Asian market, the Middle East market is unique in two aspects.
Firstly, this is a blue ocean market.
From a global market perspective, the development of e-commerce in the Middle East is beginning to enter the fast lane. The World Economic Outlook report released by the International Monetary Fund (IMF) in 2023 shows that the economy of the Middle East continues to grow, with an expected growth rate of 3.2% in 2023 and expected to rise to 3.5% in 2024.
For cross-border merchants and platforms, the Middle East market is mainly dominated by countries such as the United Arab Emirates, Saudi Arabia, Egypt, and Israel. According to Amazon's data on the economic development level of these countries, it is expected that the retail scale of the United Arab Emirates, Saudi Arabia, and Egypt will increase to $350 billion by 2030. In addition, the penetration rate of Internet and mobile phones in the United Arab Emirates and Saudi Arabia is high, making more than 70% of retail transactions in both places completed online.
More importantly, there are fewer local manufacturers in the United Arab Emirates. Ronaldo Mouchawar, Global Vice President and Head of Middle East and North Africa at Amazon, said that over 50% of retail purchases in the country come from foreign sellers, which is a huge opportunity for Chinese sellers.
As a blue ocean market, it means that there is a high probability that the business growth curve that was originally in the mature e-commerce market can be replicated in this market.
Of course, the prerequisite for all of this is to adapt to the second characteristic of this market: consumer habits. Firstly, the local population is different from other markets in terms of religious beliefs, holidays, and consumer groups. More importantly, local consumers have not yet developed the habit of pre payment.
"A very obvious point in the Middle East market is that it does not support early payment and is only limited to cash on delivery. This means that the signing rate is the most core first demand for merchants," a logistics service provider who has been deeply involved in the Middle East for many years told a reporter from the Daily Economic News. Therefore, the delivery rate of the Middle East market has attracted considerable attention from logistics service providers and platforms.
To reduce rejection rates, efforts need to be made in logistics and distribution. The purpose of Amazon's construction of operation and warehousing centers in the Middle East is to achieve this.
It is understood that currently Amazon has a considerable proportion of goods in the Middle East that can be delivered the next day. This delivery time can be considered a good shopping experience for the Middle East region, which often takes 10-15 days for logistics. Industry insider Chen Jie also told the Daily Economic News that Amazon has accumulated experience in the Middle East, which is its differentiation advantage in going global compared to other domestic cross-border platforms.
In fact, the competition for "roll" logistics has already begun on cross-border e-commerce platforms entering the Middle East. Temu launched its Israel site at the end of August last year and adopted a strategy of continuing its low price promotion. In addition, in order to further enhance the user experience, Temu has launched a compensation measure, promising that if delivery is not completed after 15 days, consumers will receive compensation of 20 new Sikh points.
AliExpress launched its "worry free consolidation" service in Saudi Arabia in July 2023, upgrading its logistics services to focus on "5-day delivery" and "full free shipping", and expanding its service scope to countries such as the United Arab Emirates, Oman, Qatar, and Bahrain.
TikTok Shop launched a fully hosted trial operation of its Saudi site in 2022, followed by the launch of the "People Find Goods" shelf e-commerce platform. Industry insiders believe that TikTok Shop hopes to attract more merchants to settle in by expanding across all categories.
In the current situation where global cross-border e-commerce is becoming increasingly competitive, the "young and wealthy" Middle East market has unlimited potential. For merchants, especially brand merchants, settling in the Middle East may be on the agenda; For cross-border platforms, they will quietly start a new competition while accelerating their own construction.
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