The Middle East and North Africa (MENA) region is predicted to see addition of 100 million new digital service users over the next five-six years, driven by a relatively younger and tech-savvy population in the region, a new research said.
The increasing trend of digital adoption is projected to lead to an over 15 percent spend on e-commerce in the next 12-month period.
“The MENA region has a relatively young population with a median age of 26, which is much lower than other markets globally. This would result in a strong demographic dividend which could drive sustained growth [in digital adoption] over the medium-to-long term,” said the report by Redseer Strategy Consultants, a leading consultancy specialised in online services.
The report also said the region’s population is extremely tech savvy with more than eight hours spent daily on digital channels for leisure, making it fertile ground for digitally enabled solutions.
“The demographic dividend and tech savvy population are expected to add a massive 100 million new users of digital services over the next 5-6 years,” the report said.
Redseer said its projection on new user addition did not factor in cross adoption from existing users, who currently use at least one service and will get introduced to additional services.
“Accounting for this, the figures [on new user additions] will be even more compelling,” the report pointed out.
“MENA digital adoption is higher compared to other emerging markets. Despite that, another 100 million completely new digital users are to be added in the region over the next 5-6 years,” Akshay Jayaprakash, engagement manger at the Dubai office of Redseer, told Arabian Business.
“Adding to this is the strong intent to increase online wallet share among existing users. This would mean that the region is set for sustained growth in the medium-term,” Jayaprakash said.
Continued customer acquisition coupled with cross adoption of digital services and increase in customer spend, enabled by improved supply side product quality and service experience will drive sustained growth for the digital economy in the region over the next 5-6 years, Redseer said.
“We expect the segment to power 15 percent of economic growth in the region during this perod,” the report said.
MENA’s digital economy, estimated at over $90 billion, is fast catching up or even rivals some of the emerging markets such as India and Indonesia, the report said.
India’s digital economy is pegged at $135 billion, while that of Indonesia is estimated to be about $70 billion.
Redseer pointed out that the market needed faster consolidation as it would enable players with existing consumer trust and active channels to either expand their vertical offerings or tap into adjacent market opportunities.
“This is an ideal process to improve unit economics and thereby luring more potential shoppers into their space,” the report said, adding that such a trend is already seen in markets like the UAE, which has witnessed several acquisitions in the recent months.
Careem’s recent acquisitions of Munch:ON and denarii – in fintech and foodtech sectors respectively, Kitopi’s acquisition of Under500 and Right Bite in the foodtech sector, Savola’s acquisition of Lyve and Foodics acquisition of POSRocket in the foodtech sector are among some of the consolidation moves in the UAE in the recent past.
The report said the MENA market, spread across 21 legal entities with tremendous fluctuations in the legal landscape, is highly fragmented, raising challenges for players to tap the growing new user segment, converting them to spend more online.
The top three players together is estimated to be accounting for about 40 percent of the market.
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