CommerCity: the Future of E-Commerce in Dubai

Dubai, a city known for setting world records from the tallest building to the largest shopping mall, has its sights on a lofty new goal: to become the smartest city in the world. After years of building skyscrapers above the clouds, Dubai is turning its attention to fueling growth of a different kind.

Enter CommerCity, the first free zone dedicated to e-commerce in the Middle East and North Africa (MENA), an idea set to disrupt the way business is done in the region. The innovative and dynamic project was first announced in late 2017 by Sheikh Ahmad Bin Saeed Al Maktoum, Chairman of the Dubai Airport Freezone Authority (Dafza), as a joint venture between Dafza and Wasl Asset Management Group. It is to be built in the Umm Ramool area, five minutes from bustling Dubai International Airport.

CommerCity is intended to be the place where major regional and international manufacturers and retailers store their goods in state-of-the-art, fully-equipped, technology-enabled warehouses for eventual shipment to local markets throughout the Middle East and Africa. And while the concept of storage doesn’t seem glamorous, a super-modern, regional e-commerce hub is absolutely vital for companies that want speed to market.

Other countries are trying to grow e-commerce hubs of their own. China is piloting cross-border e-commerce zones in major cities, and American metropolises are competing to serve as gateways and clusters for e-commerce. As a bold concept, though, CommerCity stands out and has distinct advantages and incentives: it will be a free zone with no corporate or income taxes.

CommerCity will use artificial intelligence (AI) to streamline logistics and will feature warehouse and delivery automation. It also promises to reduce bureaucratic red tape that snarls and delays cross-border e-commerce, helping e-tailers traverse the tricky “last mile” of delivery without being bogged down by costly, time-consuming regulation and paperwork. Manufacturers, distributors and retailers are excited by the prospect of a modern logistics and knowledge hub with tax advantages and answers for cumbersome customs and border bureaucracy.

“Dubai CommerCity is a new push for a non-traditional economy based on innovation and smart transformation,” Al Maktoum said at the unveiling of the project.

Dubai envisions CommerCity as the center of a new e-commerce eco-system, a place that will draw investment, innovation and knowledge-economy talent by combining state-of-the-art infrastructure, free-zone incentives, sustainable and green features, and fast-track business licensing and approvals. Another big attraction: it also will be a hub for e-commerce service support: payment gateways, marketing, call centers, web development and other services.

Expected to cost almost $750 million and encompass 2.1 million square feet, it will include office space and logistics units covering 207,000 sqm; a total leasable area of 176,000 sqm; and infrastructure and parking areas over 220,000 sqm with 4,000 parking spaces for visitors. Construction begins in the first half of 2019 and the target for completion is 2021, according to Abdulaziz Ahmed Al Hammadi, Senior Manager of Marketing and Corporate Communications. When fully completed, CommerCity will be consist of three clusters: business, logistics and social.

The business cluster will host 13 office buildings; the logistics cluster will be home to 84 logistics units with a total built-up area of 71,000 sqm; and the social cluster – a networking and talent acquisition and retention tool — will feature art galleries and a range of luxury restaurants and cafés. In a nod to sustainability, the free zone is also LEED-certified and will feature rooftop solar panels for generating clean energy.

Race to the Future

The year 2017 was a watershed for e-commerce in MENA, specifically the GCC. UAE e-commerce leader Souq.com was acquired by Amazon in a $580 million deal, and Noon, a $1 billion e-commerce venture, teamed up with U.S.-based e-commerce giant eBay.

PayFort estimates that the e-commerce market in the MENA region will grow to $69 billion by 2020. The UAE’s e-commerce industry alone is expected to hit $10 billion by 2018, a four-fold increase over the 2014 total of $2.5 billion according to Frost & Sullivan.

The figures are not surprising given the GCC’s digital savviness, consumption power and youthful demographics. Smartphone ownership in Dubai is among the world’s highest (74 percent), and over 90 percent of the population has internet access. A 2016 report concluded that as much as 80 percent of the UAE had made a purchase online using a mobile phone.

E-commerce is crucial to the UAE’s vision of the future. The government has been aggressive in its efforts to look for growth outside of the cyclical energy sector, which was in the midst of a years-long price slump until recently. Global businesses with a presence in Dubai have not forgotten its so-called “gilded age,” when strong energy prices and foreign investment fueled double-digit growth. The downturn in energy prices and new geopolitical realities have ushered in a more cautious era and a desire to find sustainable growth in a more diverse economy.

One way to do that is to be the global leader in making e-commerce fast, efficient and cost effective.