Businesses in Dubai have witnessed a raft of extraordinary events in 2020 that created a new normal in the industry. Among the changes brought about by the COVID-19 pandemic, the rise of online business as a sunrise sector deserves special mention. There are mainly two options for business setup in Dubai for investors interested in the e-commerce sector: e-trader and e-commerce licenses issued by the Department of Economic Development (DED).
Related: How to Setup an E-Commerce Business in the UAE Free Zones
Aspiring entrepreneurs need to distinguish the differences between the two forms of licenses before commencing the process of company formation in Dubai.
Also read: How to Obtain a Trade License in Dubai?
This article serves as a guide from business setup consultants in Dubai to help businessmen distinguish between E-trader & E-commerce licenses. Let’s analyse the two forms of licenses in detail:
What is an E-Trader License?
The DED introduced the E-trade license in Dubai exclusively for the UAE & GCC Nationals to regulate the businesses activities they conduct through social media platforms. DED issues the E-trade license electronically and provides the social media businesses activities with a legal framework to sell the products or services. In short, it is mandatory for any person to obtain an e-trader license in Dubai to conduct business activities through Facebook, Instagram, Snapchat or any other social media platforms. The applicants of the license must be residents in Dubai to become eligible to start a business.
Main Differences Between E-commerce Vs E-trader Licenses
E-commerce has evolved into a booming business sector in Dubai, especially with the customers’ preference for online buying. In tandem with the new energy seen in the sector, more people are applying for e-trader and e-commerce licenses in Dubai. Both licenses facilitate online trading but are different.
The following are some of the major differences between the two licenses:
- E-commerce License provides more number business activities compared to e-trader license
- E-trader license is issued only for residential sites (Makani must be provided)
- Foreign investors can also apply for e-commerce license; e-trader is only for UAE/GCC nationals
- E-trader license only for social media selling while e-commerce businesses can sell through their websites as well as other websites
- With an e-trader license, sale of products outside Dubai is not possible; An E-commerce License in Dubai mainland allows the sale of products anywhere in the UAE
- E-trader license is limited only to Sole Proprietorship legal structure; E-commerce license allows flexibility in selecting the legal structure (LLC can be set up)
E-commerce or E-trader: What License You Should Obtain?
Even though the e-trader and e-commerce licenses represent the e-commerce sector in general, the latter is bigger in scope. While the e-trader license facilitates small-time, home-based businesses, the e-commerce company structure is suitable to small businesses and big corporations if investors are planning to set up a company like Noon.com or the erstwhile souq.com (previously Amazon.ae)
For the UAE nationals, setting up an e-commerce business in Dubai can be achieved either through an e-trader or e-commerce license. However, for a foreign investor e-commerce license is the only option for setting up an online shopping business in Dubai. The e-commerce license is more appealing, given its broad scope and the ability to trade anywhere in the UAE. To tap into the current e-commerce boom, business setup consultants in Dubai recommend the foreign entrepreneurs obtain an e-commerce license.
Why Should you get an E-trade or E-commerce License in Dubai?
Both e-trader and e-commerce licence allow the businessmen to tap into the ongoing e-commerce boom in Dubai. Commencing the process of e-commerce business setup in Dubai is a profitable endeavour due to the following factors:
1. Burgeoning E-commerce Market
The E-commerce market in the UAE is growing at a faster pace and is poised for a brighter outlook. Compared to other countries, the UAE has still a lot to explore in the e-commerce field. The UAE’s e-commerce market value is estimated at a staggering AED 104 Billion, with a projected annual growth of 23%. The positive outlook asserts the profitability of e-commerce company formation in Dubai.
2. Increased Online Shopping Spending
There has been a drastic shift in consumer spending behaviour in the aftermath of the COVID-19 pandemic that catapulted the growth prospects of the e-commerce business in Dubai. A great number of consumers have ditched the traditional forms of buying and set e-commerce websites as their preferred marketplace for buying essential and non-essential items. A study by Visa states that the consumers in the UAE are the biggest spenders online in the Middle East. It says that the UAE represents the biggest annual spend per online shopper at $1,64813.
3. Robust Logistics Facilities
The strength of logistics is a factor that favours the growth of e-commerce in the UAE. UAE’s logistics sector adapted seamlessly to the pandemic shocks aided by a string of positive changes such as the shift to digital services, the transition from land to sea freight and the adoption of advanced technologies. The adaptive supply chains have provided a competitive edge for the e-commerce sector. Also, new Hyperloop technology is expected to change the dynamics of cargo transportation in the UAE.
Choose the Right License with the Help of Jitendra Business Consultants
Deciding which license is the best for starting an online business in Dubai depends upon the nationality of the entrepreneur as well as the range of his ambitions. To achieve bigger goals, an e-commerce license is recommended as entrepreneurs can sell their products anywhere in the UAE. UAE or GCC nationals residing in Dubai can obtain an e-trader license from DED to conduct relatively small business activities within the emirate. Since the process and requirements vary for each license, the investors require the assistance of business setup consultants in Dubai, such as Jitendra Business Consultants (JBC).
Foreign investors generally worry about their lack of knowledge about the laws that hold them back from initiating business setup in Dubai. However, JBC’s consultants are well-versed in UAE labour and immigration laws, which make the company formation process easier. JBC helps foreign investors get an e-commerce license without any hassle. JBC’s experience in dealing with the government authorities come in handy for both UAE nationals as well as foreign investors. Therefore getting an e-trader or e-commerce license in Dubai becomes hassle-free with JBC’s bespoke assistance.