Business online is booming in Dubai. According to the Dubai Chamber of Commerce, the UAE e-commerce market is forecast to reach USD 9.2bn by 2026. But while this lucrative industry is relatively easy to get into, it’s important to ensure you have the right license for legal trading. The Federal Decree-Law No. 14 of 2023 Concerning the Modern Technology-based Trade regulates the sale and purchase of goods, services and data on online platforms. It stipulates that business owners need to hold either an e-trader or e-commerce license to legally operate an e-commerce business.
So, which of the two is best for you? By the end of this article, you will have a clearer understanding of the best license type for your business.
What is an e-trader license?
The e-trader license allows UAE and GCC nationals residing in Dubai to sell goods through social media platforms without a physical storefront. It is issued by the Department of Economic Development (DED) and can be registered under the name of a single owner only.
What is an e-commerce license in the UAE?
The e-commerce license allows businesses and individuals to sell online through websites, e-platforms, social media and mobile applications. This license applies to all digital and physical products and services sold and purchased through “modern technological means”.
What is the difference between e-trader and e-commerce in the UAE?
There are several differences between e-trader and e-commerce licenses regarding the scope of activities, eligibility criteria, and how to obtain them. The most significant differences include the following:
- E-trader licenses are only available to UAE and GCC nationals, while e-commerce licenses are also available to foreign investors.
- E-trader licenses are designed for individuals or single-owner businesses selling goods and products on social media platforms. E-commerce licenses encompass more extensive business operations and allow companies to sell products through dedicated e-commerce websites and online marketplaces.
- E-commerce licenses allow businesses to establish a physical office or store and hire staff. This is prohibited with an e-trader license, which restricts owners to operating out of residential sites.
- An e-trader license limits the scope of business to within the borders of the UAE. E-commerce licenses, depending on the jurisdiction, allow the sale and purchase of products outside the country too.
Advantages of an e-commerce license in the UAE
The e-commerce license is one of the most popular licenses in Dubai and offers numerous advantages to local and foreign business owners and investors:
Operational flexibility
Businesses holding an e-commerce license can set up physical offices and stores. They can also run their businesses across a greater variety of online platforms, including social media channels, dedicated e-commerce websites and regional or global marketplaces like Amazon and Noon. This multi-channel approach provides businesses with the flexibility to scale operations, explore new markets and adapt to customer preferences. The ability to hire staff makes it easier to scale, too.
Wider market reach
An e-commerce license allows businesses to establish an online presence and engage with wider customer bases locally and internationally. This can open doors to untapped markets across the GCC region and beyond. Businesses can also leverage digital marketing tools like search engine optimisation (SEO) and social media advertising to reach highly specific customer demographics, increasing their visibility and competitiveness.
Leverage the UAE digital infrastructure
The UAE offers a cutting-edge digital infrastructure, with fast internet speeds, high smartphone penetration rates and advanced logistics networks. The government’s support for digitalisation, strong cyber laws and secure payment gateways make it easier to do business on a wide variety of platforms that can only be leveraged with an e-commerce license.
Advantages of an e-trader license in the UAE
An e-trader license is a relatively new addition to the UAE’s suite of licenses and offers several benefits for those starting out.
Simplified licensing process
Getting an e-trader license approved is a straightforward and hassle-free online application process that allows entrepreneurs to quickly and easily start an online business from their homes without extensive paperwork or lengthy approval times.
Cost-effective start up
E-trader licenses require minimal investments since they don’t require physical office space, staff or complex infrastructure. Entrepreneurs can run their businesses entirely from home, significantly reducing overhead costs. This low-cost entry point makes the e-trader license an attractive option for small-scale entrepreneurs, freelancers and those testing new business ideas with limited initial capital.
Direct consumer engagement
While e-trader licenses prohibit the sale of goods on dedicated e-commerce websites, they enable businesses to operate through social media platforms such as Instagram, Facebook and WhatsApp. This creates opportunities for direct interaction with customers, fosters personalised relationships and offers immediate feedback. Businesses with an existing social media following can also leverage these platforms to build brand loyalty and trust.
How to choose the right license for your business
Both types of licenses offer significant advantages, but choosing the right one is essential – not only for business growth but also to ensure you are operating your business legally. Choosing the best option depends on the target audience, legal requirements and scale. Here are three key considerations before you begin the application process.
Business objectives
Are you planning to create a small, home-based business for the foreseeable future or do you intend building a larger business with the potential for physical offices, dedicated websites and an option to hire employees? If the former, an e-trader is your best option. If you plan to scale, it’s best to choose an e-commerce license.
Eligibility
Only UAE and GCC nationals residing in the respective emirate are eligible for the e-trader license, so if you are a foreign investor this license is not for you. The e-commerce license is available for nationals and expatriates, accommodating a broader range of entrepreneurs.
Products and services
Certain types of products and services require specific approvals, while others are prohibited on certain licenses. For instance, most food products are not allowed under the e-trader license, though it’s best to check directly with the DED for the latest information.
Remember, if you are unsure about which license would be best for your business, you can reach out to our expert team of advisors at Set Hub for advice.
About Set Hub
Set Hub is a leading business setup consultancy in the UAE. Through transparency, expertise, and unwavering commitment, we have helped more than 25,000 clients turn their business ideas into reality. Whether you need help applying for an e-commerce license or simply want to know more about the differences between the two, our expert advisors are on hand to help.
Based in the UAE, we offer local knowledge and on-the-ground expertise to ensure that setting up a business in this region is easy and efficient. From licensing issues to visas, you can trust us to help. For more information on business setup in Dubai with Set Hub, visit our website and get in touch today.
