Complex Made Simple

E-commerce continues to grow in Saudi Arabia, if only incrementally

Almost half the population now partakes in online shopping, up a few percentiles from previous years. Still, numerous hurdles stand in the way of the country's e-commerce sector.

49.9% of those surveyed partook in online shopping at least once in 2018 41.1% of online shoppers used online payment methods in 2018 "There are currently 12.94 million eCommerce users in Saudi Arabia, with an additional 6.34 million users expected to be shopping online by 2022" - eshopworld

While Saudi and the GCC in general are known for their very active shopping scenes, said shopping has more often than not taken place at malls. Online shopping, on the other hand, has always taken a back seat.

According to eshopworld, citing data by Statista, “there are currently 12.94 million eCommerce users in Saudi Arabia, with an additional 6.34 million users expected to be shopping online by 2022. Four years from now, these 19.28 million eCommerce users will spend an average of $487.70 online.”

Newly released data revealed that 2018 showed an incremental improvement for the Kingdom. Things are improving, but are not quite there just yet.

More people in the Kingdom are buying online


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(Graph by eshopworld)

The Saudi Communications and Information Technology Commission (CITC) shared with news site Zawya a statement concerning the e-commerce sector in Saudi.

The Commission conducted an annual study of around 10,000 internet users in the Kingdom, discovering that 49.9% of those surveyed partook in online shopping at least once in 2018. This figure rose from 47.9% in 2017, and 37.3% in 2016, marking a significant leap during 2016-2017, which slowed down in the following year.

“The study also found that the number of people using online payment for goods, as opposed to cash on delivery, has increased,” CITC’s statement to Zawya said. “Some 41.1% of online shoppers used online payment methods in 2018, up from 37.7% in 2017, and 21.4% in 2016.”

This is a notable improvement, as general consumer sentiment in the GCC has often favoured cash on delivery over online payment, due to mistrust in the integrity of online transactions. This trend shows that customers have become more accepting of the concept of online payment.

As for the most popular form of online payment, online banking came first, accounting for 34.1% of transactions. In second place was credit cards at 28.1%, followed at 3rd place by online payment services (such as PayPal) at 5.3%. Finally, at 4.1%, came pre-paid gift cards/electronic coupons.

An improvement, but is it enough?

The Kingdom has come far in these past years, but is still lagging behind the performance of other regions in the world. According to Euromonitor, 69 % of internet users in the EU shopped online in 2018. Compare this to Saudi’s 49.9%, and you can see that progress is being made.

Not long ago, while Amazon was raking in the billions in the US and elsewhere, the GCC was left with basic forms of the big e-commerce names we know today (Souq.com, etc.). Also, and as mentioned before, consumer sentiment regarding online payment was hesitant at best, and completely mistrusting at worst. Payment enablers like PayPal were never that big in this part of the world, and CITC’s 2018 data reflects this.

A major obstacle that exists in Saudi and the GCC as a whole is the lack of a standardized addressing system. Postcodes, such as in the UK, don’t exist in the Kingdom, and make it harder to streamline the entire delivery process.

Ibrahim Farah, a UAE- based e-commerce manager, told Zawya: “The increase announced [by CITC] is even less than what it can be if it weren’t for a number of reasons that constitute obstacles for e-commerce in Saudi. These include a weak logistical infrastructure, poor Arabic e-commerce content, and rigid cross-border commerce regulations.”

According to PayFort.com: “In 2016, the Arab Federation of E-commerce, which represents 14 governments across the broader MENA region, was established to develop the region’s e-commerce sector.  [In 2018], the federation released a five-year strategy focused on growing the region’s e-commerce sector from $20 billion in 2017 to over $200 billion by the early 2020’s.”

Saudi will surely play a role in this, but it will need to pour more capital into the sector and its infrastructure before it can see results.

After all, the Vision 2030 site reads that the country aims to “increase the contribution of modern trade and e-commerce to 80% of the retail sector by 2020.”