2021 Digital Economy Roundup - MENA

In this week’s special edition, we would like to thank you for your continuous support throughout the past year. 2021 was certainly an eventful year throughout the region and we were glad to have you with us in our journey to decode MENA’s digital economy. Today we take a relook at some of the themes that stood out during the past year.

Digital economy placed on a pedestal for stronger growth

Digital Economy – MENA,?$ Bn, 2018 – 2024(F)

Note: FinTech & EdTech not included here

The pandemic served as a wake up call to all businesses to up their game and set up an online presence. Except for the Travel and the Ride hailing segment, all other segments saw massive growth through the past 2 years.

As a result a strong foundation in terms of supply chain capabilities and infrastructure has been laid. Demand has always been strong for digitally enabled services and we expect the next 3-5 years hold robust growth potential with nascent sectors reaching critical scale.

Below we highlight some of the key themes that defined the year 2021.

1.?Covid Boomers: Digital Media reshapes our understanding of Entertainment

Note(s): 1. How are you currently spending time on your phone/laptop for the following activities? 2. Pre-Pandemic: Before March 2020; During Pandemic: April – May 2020?3. Social Media & Messaging have been classified as a single category as most of the social media platforms offer messaging service as well

Digital time spent has multiplied significantly over the past 2 years. Short Form content has captured audiences and is among the biggest winners this past 2021 marking a new digital media era in the region. Digital advertising has also been growing leaps and bounds with newer digital channels being actively explored as brands follow the customers footsteps.

2.??Q-com revolutionizes E-com: Online Grocery & FoodTech (incl. Cloud Kitchens) own the crown

MENA Q-commerce Sector Split,?USD Bn, % GMV Split, 2018 - 2024 (F)

A Business model that was largely flying under the radar up until 2021 is Q-Commerce. As instantaneous delivery became a primary need for online consumers across several product categories, many players shifted to Q-commerce. Instant delivery is now becoming the norm for urban regions and players that fail to set up sufficient capabilities for it, risk losing out.?

Multiple adjacent sector opportunities exist from the standpoint of Q-commerce that will open up further TAM and help balance out the logistics investments. Read our?recent newsletter?on adjacent opportunities if you missed it.

3.?Year for Omnichannels: Rivaling Marketplaces at their own game

MENA Online Business Model Split,?As % of GMV, 2018 - 2021

Note: Splits largely representative of UAE & KSA

Among the biggest 2021 winners are Omnichannel players, who saw their market share continue to grow as it crossed a third of the market size this year. Players benefited from the pent-up demand post covid restrictions and the existing synergies with their business channels.

4.?Social Commerce secures major breakthrough

Country Social Commerce Awareness vs Adoption,?% of Internet Population

Note(s): 1. Are you aware of social commerce??2. Have you used messaging platform to order products??3. With internet social commerce users, age groups: 18 to 64 years, top 80% income strata

Another 2021 triumphant model is Social Commerce. MENA nations are among the global leaders for social commerce awareness and adoption. The high importance laid on community and relationships for commerce in MENA makes it an ideal market for growth of social commerce. The social commerce model also helps bridge the gap between online and offline retail by bringing together the benefits of both channels.

5.?Enablers changing the digital economy landscape

Backend Enablers Offerings Across Value Chain

Note(s): 1. List of players mentioned above is not exhaustive

A common theme that played out throughout 2021 is the rise of the enablers that target specific market gaps within select sectors. These institutions utilize the digital space to develop creative solutions for age-old issues. These enablers not only grew in market share this year but, more importantly, helped grow their sector of operation as well.

I hope you found these insights useful. In our next week's edition, we will outline some of the emerging themes to watch out for in 2022.

From all of us at RedSeer, we wish you a happy and prosperous new year 2022!

Thanks,

Sandeep

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