Analysis of Iraq’s e-commerce market: potential and challenges

Iraq’s economic structure relies heavily on oil exports, so it lags behind in light industry and manufacturing. As Iraq seeks post-war reconstruction, it not only needs infrastructure materials, but the shortage of daily necessities and fashion goods has also made it almost completely dependent on imports, with China becoming Iraq’s largest importer.

Market status

As of now, Iraq’s population is close to 40 million, and the penetration rate of smartphones is 19.9%. Google is the most widely used local search engine. Although in 2019, there is still little information about commonly used applications in Iraq, the potential of the market is obvious. Despite the rapid growth of the market, the Iraqi e-commerce market still faces many challenges, such as restrictions on mobile payments and weak logistics infrastructure. In fact, local consumers almost entirely rely on cash on delivery payment methods, which has also caused the problem of low credit card penetration.

Consumer behavior and market characteristics

The shopping preferences of Iraqi consumers are similar to those in other Gulf countries, with fashion categories being the most popular type of goods there. In addition, the market is growing at an impressive rate and has become a rapidly developing e-commerce market in the Middle East. However, the number of active e-commerce platforms is small, there are many unknown platforms, and the product selection is limited, causing consumers to face greater difficulties when shopping.

Although the logistics infrastructure is not perfect and it usually takes 7 to 10 days from placing an order to receiving the goods, this has not hindered cross-border e-commerce sellers from exploring the Iraqi market. In fact, the well-known e-commerce platform Alibaba is the most searched e-commerce website in Iraq, and its B2B model provides more companies with opportunities to enter the market. Rebubble, another active e-commerce platform, is famous for selling personalized art and ranks third in terms of traffic.

Payment and tax status

The policy of the Central Bank of Iraq has resulted in a low credit card ownership rate, and consumers can basically only choose cash on delivery transactions. Despite this, the American payment platform Payoneer still occupies a large market share in the local market, with visits reaching 9.55 million times in 2019. This undoubtedly provides convenience for sellers entering the Iraqi market for the first time.

In terms of taxation, the Iraqi government has not yet implemented a VAT policy, which is in sharp contrast to countries such as the United Arab Emirates and Saudi Arabia, which impose a 5% VAT on goods. The lack of this policy may promote the influx of more cross-border e-commerce players into this emerging market.

To sum up, the Iraqi e-commerce market, with both potential and challenges, is gradually attracting the attention of more and more cross-border e-commerce companies, laying the foundation for future market competition.