E-Commerce In Kingdom Of Saudi Arabia: Why Retailers Need To Adapt To E-Commerce?
Internet – a technology so vast and dynamic that it’s invention cannot be credited to one single person nor its origin traced back to a single date. Even though visionary thinkers like Vannevar Bush and Paul Otlet played around the idea of automated, searchable storage systems in the 1930s and 1940s, the world did not get a taste of the internet until Tim Berners-Lee invented and made public the World Wide Web in 1991.
In the Kingdom of Saudi Arabia (KSA), the internet was introduced in 1994 and made publically available in 1999. The country has since then witnessed a dramatic increase in the number of internet users. From 200,000 users in 2000 to more than 20 million users in 2016, the Kingdom boasts of a whopping 1170% growth in the number of internet users – the fastest in the Internet market. Today, Saudi Arabia has more than 30 million internet users, making the country an untapped resource for e-retailers.
Internet Growth and Population Statistics (https://www.internetworldstats.com/me/sa.htm)
What favors the growth of e-commerce in KSA?
Saudi Arabia has experienced a steady shift from offline shopping to online shopping in the recent past. There’s no doubt about the fact that its internet-savvy citizens have played a pivotal role in bringing about this shift, however, there are various other factors that have underpinned the growth of the e-commerce market in Saudi Arabia. But before taking a look at the key contributors to this growth, here’s how well the Saudi e-commerce market is faring currently (as shown by a Statista research)
- Revenue in the e-Commerce market amounts to US$6,360m in 2018
- Revenue is expected to show an annual growth rate (CAGR 2018-2023) of 9.8%
- Average revenue per user (ARPU) currently amounts to US$294.21
Key Contributors to E-Commerce Growth in Saudi Arabia
1. Population size
Being the largest among the GCC countries, the Kingdom of Saudi Arabia has a population of 31 million – 3 times that of its neighboring country UAE. Saudi nationals constitute the majority of the population. With such an affluent population, Saudi Arabia is poised as an attractive market for e-tailers offering huge potential for industry players.
2. Young population
Saudi Arabia has an overwhelmingly young population and it thrives because of its young inhabitants. The country’s unprecedented youth bulge offers an untapped market potential for retailers who can easily target and win this tech-savvy and brands conscious young generation. Cited as one of the most youthful regions of the world, it surely is the right place for e-tailers to put in their money.
3. High spending power
Saudi Arabia is characterized by affluence and high spending power of its citizens. Shopping is more of a leisure activity and with the level of internet penetration now prevalent, online shopping has become a favorite pastime for many Saudi citizens. Ranked among the top 20 richest countries by spending power, the high-spending power of the country’s citizens is a driving factor in the growth of e-commerce.
4. Affinity towards technology
The Kingdom of Saudi Arabia is not only home to the highest number of internet using citizens but it also home to a cohort technologically advanced individuals. In fact, Saudis are often the driving factors behind the advancement of technological trends in the region thereby assisting the acceptance of e-commerce within the country.
Saudi Arabia ranked third in the world, with 72.8 percent of the population using smartphones, as opposed to 23 million mobile phone users worldwide. Mobile phones have not only made it easier for customers to communicate and access the web but they have also opened a big door of opportunities for e-commerce business owners.
6. Social Media Users
Just like the internet and smartphone usage, Saudis fare better than most other nations in terms of social media usage as well. Despite the high-level of content restrictions, the country is well connected. The most popular social network used in the region is WhatsApp, with a 71 percent penetration rate. Popularly used social media sites include Facebook, Instagram, Twitter, Google+ and LinkedIn. With such strong social media users, e-tailers can not only direct shoppers toward new products or attractive deals but also engage with them effectively.
7. Support from Authorities
With the country’s focus now shifting towards economic diversification to reduce its financial dependency on the oil industry, the future is bright for investors looking to tap into retail’s growth potential. Investments in tech companies have grown considerably in recent years and the number of funding bodies and investors within the Kingdom is also growing significantly. Added to that, the change in policies to facilitate investing and starting a business in KSA is also driving the growth of e-commerce in the country.
8. Improved payment options
The biggest challenge to the Saudi e-commerce space was the lack of payment options. But with the introduction of innovative options to pay for goods and services, the e-commerce business is booming. Innovations in consumer mobile devices and merchant points of sale are contributing heavily to the growth of online shopping in the country with an increasing number of digital and mobile wallets are emerging onto the scene.
These are some of the factors that are aiding e-commerce growth in the Kingdom of Saudi Arabia. A thriving economy, high rates of internet usage, and a fast-growing young population – all come together to offer a great opportunity for companies to marketing and sell their product in KSA. Its high time retailers should shift their focus towards e-commerce.