An Analysis On The Rise Of E-Commerce In Iraq
Recent years have seen an explosion in the e-commerce sector in Iraq. The industry has transformed from a niche, dominated by tech-savvy individuals, to becoming a mainstream service for the average Iraqi consumer. According to a survey done by Think Bank Iraq, 57% of Iraqi internet users have shopped at least once online.
This has resulted in more interest from Iraqi industry leaders and investors, with e-commerce platforms like Miswag securing millions in funding rounds and Orisdi securing funding and partnership deals with Iraq’s biggest private TV network Al Sharqiya. While Iraqi entrepreneurs and visionaries push the boundaries and bring new ideas and innovation to the country, we can expect a larger role for e-commerce services in the Iraqi retail and logistic sectors.
What Makes E-Commerce Unique?
While brick and mortar shops are still the primary method of shopping, e-commerce is quickly catching up and is projected to reach a market share of 25% of retail sales by 2024. E-commerce brings numerous advantages to both the retailer and consumer that aid in its wider adoption and use, especially in the SWANA region.
1. Overcoming Geographical Limitations.
E-commerce removes physical limitations for consumers. In the past, product purchasing was limited to the items offered from shops in the local area or the places you could afford to visit. E-commerce offers almost unlimited choices giving retailers and sellers access to a much larger market and customer base.
2. More Cost Effective.
An online business model is inherently more cost-effective as it removes many of the expensive physical requirements to run a business. Without having to worry about paying rent and maintenance, etc, operational costs are minimised which has many advantages when competing with traditional stores.
3. Automation and Data
E-commerce businesses are much easier to automate. From payments to customer service, everything can operate with minimal human intervention. This leads to higher productivity and efficiency. Consumer data analysis is also easier, giving deeper insight into customer trends and providing decision-makers with more information.
The Challenges to Overcome
Despite its meteoric rise, there are still many obstacles that faces e-commerce in Iraq and prevents its growth, such as:
1. High Level of Digital Illiteracy in Iraq
Iraq has one of the highest digital illiteracy rates in the SWANA region. This unfortunate fact denies e-commerce platforms access to a large portion of the Iraqi consumer base and lowering the total market value of such businesses. To tackle this issue, Iraqi e-commerce platforms are trying to create easier to use UI/UX designs and nearly all platforms publish educational tutorials on how to use their services.
2. Lack of Payment Systems
Iraq’s lack of a robust payment system and low financial inclusion is an obstacle for every e-commerce platform in the country. This forces businesses to rely on a cash-on-delivery payment model, resulting in some risks. For example, customers can avoid committing to orders by not paying upon delivery or make multiple fake orders. In addition, it puts pressure on cash flow as businesses will have to wait until the money from the sales is physically received. Many Iraqi enterprises are working to solve this payment issue by providing mobile payment systems.
3. Lack of Robust Logistics
The past two decades haven’t been kind to Iraq’s infrastructure with severe damage to the Iraqi road network that is yet to be fully rehabilitated. This creates severe logistical issues in addition to the non-existent national postal service – another service gap filled by the private sector.
Whilst e-commerce companies like Amazon can offer same-day delivery, Iraqi consumers will need to wait several days for their packages to arrive. Many startups are working on this issue, such as Sandoog, which offers order fulfilment services; meaning stock can be stored at its facilities and delivered to customers nationwide. With more light being shed on the importance of e-commerce for the economy, more initiatives and solutions are bound to come and mitigate Iraq’s logistic issues and boost the e-commerce sector to new heights.
Leading E-commerce Platforms
Many Iraqi businesses and startups have ventured into the e-commerce sector giving Iraqi consumers a good amount of choice and creating healthy competition in the emerging market. The following three are Iraq’s largest e-commerce startups that have had a big impact on the sector.
Established in 2014, Miswag is an e-commerce pioneer in Iraq. The platform is extremely popular among Iraqi consumers with over 700,000 users and 15,000 product offerings. The company has recently raised $1.6 million in the country’s first pre-series A round.
Another great e-commerce platform, Tamata has seen large popularity among Iraqi consumers with its wide selection of products and competitive pricing.
Since its founding in 2019, Orisdi has been a strong competitor in the e-commerce sector. The platform’s easy to use interface and responsive customer service ensures a satisfactory experience for customers. Orisdi has seen a lot of interest from Iraqi investors where they recently secured a six-figure deal with Al Sharqiya TV Group, one of the largest media groups in Iraq, giving the platform access to millions of Al sharqiya viewers.
What the Future Holds
The increasing financial literacy and internet penetration in Iraq, combined with advancement and innovation in logistics, are creating a suitable environment for e-commerce platforms to flourish.
We can expect to see more companies and startups getting into the e-commerce business and the share of online sales increasing, bringing a lot of opportunities to the pioneers in the sector. The average Iraqi consumer is becoming more comfortable with online purchases and that will reflect positively on the sector giving it more attention and importance both from consumers and investors.
We can also predict that many online sellers currently using Facebook and Instagram to sell their products may look into launching their own platforms to capitalise on this shift in consumer behaviour.