Will VAT encourage UAE residents to opt for pre-loved goods?

Surge reported in UAE’s second-hand online marketplaces

UAE residents are increasingly turning to e-commerce to buy and sell used goods, and the advent of VAT will further fuel that drive, according to the head of a Dubai-based e-commerce portal.

“The advent of the introduction of VAT [Value Added Tax] across the GCC region by January 1, 2018, is yet another reason for locally-based consumers and businesses to embrace money-saving options such as by making second-hand purchases,” says Adham Saleh, Managing Director of EZHeights.com.    

Second-hand doesn’t equate to second-best, he said, noting “a dramatic increase” in the number of bargain-hunters seeking to make their dirhams go that bit further.

A report by the portal suggests that a higher monthly outgo thanks to increasing levels of consumer debt in the form of credit cards, personal loans and mortgages are prompting a growing number of the UAE’s expats to re-think their lifestyle spending patterns and rein in their outgoings.

One way they’re achieving this is by opting to buy goods second-hand – as well make a little bit back by selling some of their own unwanted items, according to the portal.

“While the online community of second-hand buyers and sellers is well established in the likes of the UK and the US, for example, it’s still in its infancy here in the UAE where tax-free salaries mean expats may feel they can be more extravagant with their spending,” said Saleh.

“However in the last few months, we’ve seen a noticeable surge in the number of locally-based buyers who are using our popular classified section to purchase a wide variety of second-hand items – everything from cars, electronics, household appliances and toys to pre-loved designer name clothing and handbags,” he added.

Emirates 24|7 reported in December 2015 that instant deals and discounts thanks to a growing trend of online shopping is fast becoming all the rage among UAE residents.

Physical retailers, on the other hand, are fighting hard to pay high monthly rentals at the malls while keeping a lid on prices to compete with the undercutting online retailers.

Tech-savvy UAE residents are fast getting comfortable with paying online for their purchases.

Coupled with an improving internet penetration, rising smartphone ownership and declining cost of transaction and delivery, they are flocking to online sales platforms like never before.

It isn’t just cost-conscious consumers who are benefitting from the site’s classified section, claims Saleh of EZHeights.com.

Bargain-hunting businesses are also profiting with small start-up firms in particular able to source lower-priced, pre-used items such as office furniture and equipment.

Last year, a report by intelligence provider yStats.com said the e-commerce market in the Middle East and Africa has the potential to grow at small double-digit rates in the next five years, with the B2C segment forecasted to account for close to one-third of the total online sales in the region.

“Led by countries such as the UAE, Internet users in the Mena countries are slowly grasping the benefits of online shopping, while a number of local players compete for their rising online expenditure,” it notes.

“Driven by improving Internet penetration, rising ownership of mobile devices and payment cards, online retail in these countries is set to boom in the near future,” the report adds.

yStats.com says the UAE is leading the region in this domain. “This country has the highest Internet, mobile device and payment card penetration, which all contribute to making the UAE the market with the largest B2C E-Commerce sales,” it states.

“With more consumers shopping online every year, the share of B2C e-commerce on total retail sales of goods in the UAE is forecasted to triple between 2014 and 2019,” it adds.

The UAE continues to be at the vanguard of the Mena region’s e-commerce market and is currently valued at around $2.5 billion (Dh9.2bn).

Last year, market research by Euromonitor International identified the UAE as one of the top five emerging e-commerce markets based on retail growth, online connectivity and consumer demand, with Internet penetration topping 90 per cent of the country’s population.

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