E-Commerce in Saudi Arabia - ICT Report

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E-Commerce in Saudi Arabia - ICT Report
ICT Report

E-Commerce
in Saudi Arabia
E-Commerce in Saudi Arabia - ICT Report
E-Commerce in Saudi Arabia - ICT Report
Table of Contents

    Foreword7                                                     State of E-commerce in Saudi Arabia                25

    Acknowledgements9                                             Developing the E-commerce Sector in Saudi Arabia   47

    Executive Summary                                        11   Conclusion                                         53

    An Overview of Global Trends in E-Commerce               15   Appendix A                                         55
                                                                   Appendix B                                         57
                                                                   Appendix C                                         61
                                                                   Appendix D                                         63
    E-commerce in the Context of Saudi Arabia’s Vision 2030
    and the National Transformation Plan (NTP)	              21

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E-Commerce in Saudi Arabia - ICT Report
FOREWORD FROM THE GOVERNOR OF CITC

           The Communications and Information Technology Commission (CITC) thoroughly recognizes its pivotal role in the kingdom’s Vision 2030 and the
           National Transformation Program (NTP), and is working on performing its role and responsibilities in accomplishing the duties and objectives
           entrusted to it for achieving the major goals that the nation’s vision and the kingdom’s confident and wise leadership target. Communications and
           information technology is the essence, the foundation and center of the new world, and the backbone of all the aspects of modern life and all the new
           projects. Communications and information technology is now as vital as water and electricity are. The whole world has become bound by it, dependent
           on it and related to it in every moment. Most of today’s activities are based on communications and information technology, even work that was
           considered traditional in the past, has now adopted a new fascinating technological look. Since CITC closely monitors this expansion and observes
           the new changes in our world today, it persistently works to provide the ideal environment for technology adoption and use in line with the highest
           internationally competitive standards, particularly that the government of King Salman bin Abdul Aziz, the Custodian of the Two Holy Mosques – May
FOREWORD   Allah protect him – is interested in and supportive of the communications sector, and is keen to transform it into an advanced role-model on the
           global level and an important contributor to the kingdom’s economy.
           Building on CITC’s role in spreading awareness on subjects related to communications and information technology, particularly those that have a
           direct influence on citizens’ lives, or contribute to the growth of the different economic sectors in the kingdom, this issue of the annual report on the
           state of communications and information technology in the Kingdom of Saudi Arabia addresses the state of e-commerce in the Kingdom of Saudi
           Arabia; and the drivers and barriers affecting its adoption by consumers and businesses, and the ease of obtaining different products and services
           online. The report also discusses the efforts undertaken by different government bodies, especially the ministry of commerce and investment, and
           other stakeholders to develop e-commerce; as well as the optimal ways to develop the e-commerce ecosystem in the kingdom, to help achieve Vision
           2030 and the National Transformation Program’s objectives. CITC aspires to cooperate with all stakeholders, and discuss the outcomes of this report
           to further develop e-commerce in the kingdom and realize the desired economic and social benefits.
           The significance of this report, specifically at this time, comes from the fact that the National Transformation Program has made developing
           e-commerce one its strategic objectives that supports achieving the kingdom’s Vision 2030, through developing the information technology sector,
           creating an attractive environment for local and international investors, supporting small and medium enterprises and productive families in reaching
           their clients and entering new markets. These developments, in turn, will result in creating new jobs, increasing non-oil GDP, and more women
           empowerment by better utilizing their potential.
           Finally, I would like to thank all those who have shared their valuable thoughts and experience with CITC in its efforts to have this report issued.

                                                                                                                             Dr. Abdulaziz Salem AlRwais
                                                                                                                                         Governor of CITC

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E-Commerce in Saudi Arabia - ICT Report
ACKNOWLEDGEMENTS
                   CITC would like to acknowledge all the              Domino’s Pizza
                   organizations that participated in the study        E-commerce Sea
                   cited in this report. These organizations include   RQMNH e-Commerce Solutions
                   the following government entities, regulatory
                                                                       Haraj.com
                   agencies, and companies:
                                                                       Visa
                   Ministry of Communication and Information
                                                                       Payfort
                   Technology (MCIT)
                                                                       PayTabs
                   Ministry of Commerce and Investment (MCI)
                                                                       American Express
                   Saudi Arabian Monetary Authority (SAMA)
                                                                       Aramex
                   Saudi Arabia General Investment Authority
                   (SAGIA)                                             Middle East Council of Shopping Centers

                   Consumer Protection Association (CPA)               Panda
                                                                       Bin Dawood
                   Small and Medium Enterprises Authority
                   (SMEA)                                              Lulu

                   Saudi Post                                          SAP

                   Riyadh Chamber of Commerce                          Accenture

                   Thiqah                                              Arzan Venture Capital

                   Takamol                                             Future Tech Pioneers Consultants

                   e-Government Program (Yesser)                       Jamalon

                   Badir Program for Technology Incubators             Ounass

                   Souq.com                                            ClearTrip
                   Careem                                              Oishiisushi
                   Al Tayyar Group                                     Cards4Sell
                   Jarir                                               Nano eShop
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E-Commerce in Saudi Arabia - ICT Report
The Saudi Arabian economy has experienced
            unprecedented growth over the past several
            years. The National Transformation Program
            (NTP) and Vision 2030 together envisage a
            multifaceted development of the economy,
            with both laying out significant plans to
            help make this happen. Enabling economic
            diversification, driving growth of the small and
            medium-sized enterprise (SME) segment, and
            fostering innovation and entrepreneurship
            are at the core of these objectives, and
            developing the e-commerce sector as part of
            the NTP will add further fuel to these economic
            development plans.

EXECUTIVE   Underpinned by a steady shift from offline
            shopping to online and mobile shopping,

SUMMARY     the global e-commerce market has also
            experienced rapid growth in the recent past.
            Rapidly rising Internet penetration rates,
            increasing levels of smartphone usage,
            growing government and policymaker
            support, and improvements in payment and
            distribution systems have been some of the
            key contributors to this growth. 1
            It is notable that the rapidly growing
            e-commerce markets such as Middle East,
            North Africa, Central Europe, and India,
            though accounting for only 2.5% of the
            worldwide e-commerce spending,2 represent a
            tremendous potential for e-commerce growth.
            Investments in the e-commerce industry by
            international companies have also significantly
            contributed to the unprecedented growth of
            emerging e-commerce markets. A rapidly                         It is notable that the rapidly
            growing community of venture capital (VC)                      growing e-commerce markets
            funds and domestic entrepreneurs has further
            complemented the growth of e-commerce
                                                                           such as Middle East, North Africa,
            within these emerging e-commerce markets. In                   Central Europe, and India, though
            line with other emerging economies, the Saudi                  accounting for only 2.5% of the
            e-commerce market has been experiencing
                                                                           worldwide e-commerce spending,
            significant growth and development over
                                                                           represent a tremendous potential
                                                                           for e-commerce growth.
            1. Refer to Appendix B for e-commerce definition
            2. E-Commerce Insights and Best Practices in MENA, OMD, 2016

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E-Commerce in Saudi Arabia - ICT Report
B2C

                   29.7B

              2016

     the past few years. Business-to-consumer            rapidly gathering momentum. Spurred by            online stores is cash on delivery. However,        The Ministry of Communications and                 As various government entities undertake
     (B2C) e-commerce spending surpassed                 the convenience of home deliveries, the time-     certain challenges are inhibiting greater          Information Technology’s (MCIT) mandate to         initiatives to take Saudi Arabia to the next
     SAR 29.7 billion in 2016.3 Saudi Arabia’s           saving benefits of e-commerce, attractive         e-commerce usage in the country; these include     privatize Saudi Post will undoubtedly improve      stage of e-commerce evolution, it will be
     young population, increasing broadband              Internet offers, and the wide range of products   the trustworthiness of websites (in terms of       competitiveness and help streamline the            important for all stakeholders and allied
     and smartphone penetration rates, and the           from which to choose, the typical online          handling customers’ personal information),         domestic logistics ecosystem. The Saudi            industries in the e-commerce ecosystem to
     government’s growing focus on e-commerce            shopper in Saudi Arabia shops online at least     the low awareness about consumer protection        Arabian Monetary Authority (SAMA) is also          come together and contribute to the progress.
     are key factors that are driving this shift         once every three months, spending an average      rights, and logistics-related challenges           committed to supporting growth of the              Indeed, transforming Saudi Arabia into a
     toward online buying in the country. In addition    of close to SAR 4,000 on online shopping          related to delivery timelines, costs, and goods    e-commerce market by creating a robust and         vibrant and all-inclusive e-commerce market
     to local online sellers, start-ups, and home-       annually. 4                                       handling.                                          secure payments ecosystem that will improve        will necessitate change on multiple fronts.
     based businesses, a lot of larger regional and      In addition to digital entertainment and                                                             convenience by making multiple payment             Developing telecommunications infrastructure,
                                                                                                           Various government agencies have initiated
     international players are also investing and        subscriptions for music, movies, and gaming                                                          channels available to consumers. These             enhancing the efficiency of distribution
                                                                                                           programs to develop the local e-commerce
     expanding their physical presence in Saudi          content, online shoppers in Saudi Arabia are                                                         initiatives are expected to address some of the    systems, creating a robust digital payment
                                                                                                           industry in Saudi Arabia. For example, the
     Arabia. Furthermore, traditional businesses         increasingly buying gadgets, apparel and                                                             most pressing challenges currently inhibiting      ecosystem, supporting the local industry,
                                                                                                           Ministry of Commerce and Investment (MCI)
     ranging from FMCG companies to banks are            accessories, and other luxury goods online.                                                          the growth of e-commerce in Saudi Arabia,          and creating avenues to foster innovation
                                                                                                           and its associated agencies are at the forefront
     increasingly seeing e-commerce as a rapidly         They are increasingly shopping online using                                                          such as the absence of a collaborative forum       and entrepreneurship will all be vital in
                                                                                                           of efforts to create a conducive environment
     growing complementary channel for their             mobile applications, and their primary mode                                                          for all stakeholders, the limited availability     taking Saudi Arabia to the next stage of its
                                                                                                           for e-commerce as they work to develop
     products and services.                              of payment for purchases made from Saudi                                                             and reliability of payment options, and the lack   e-commerce journey.
                                                                                                           and streamline regulatory policies and
                                                                                                                                                              of high-quality and affordable services from
     Although Saudi shoppers’ preference to                                                                frameworks, improve consumer confidence
                                                                                                                                                              logistics providers.
     make purchases through traditional channels                                                           in e-commerce, and support SMEs through
     remains high, a shift to online buying is                                                             e-commerce enablement initiatives.
                                                        3, 4. CITC E-commerce Research, 2017

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E-Commerce in Saudi Arabia - ICT Report
With the proliferation of smartphones and           online spending growth as the total number
                   expansion of Internet connectivity in recent        of Internet-enabled mobile devices worldwide
                   years, people are increasingly buying a             is expected to grow from 4.4 billion in 2016 to
                   growing range of products and services from         reach 6.7 billion by 2020.7
                   online stores. This relentless shift from offline
                                                                       Increased Personalization of Services:
                   to online — and now to mobile — is driving the
                   rapid growth of online spending resulting in the    E-commerce companies are now able to
                   global B2C e-commerce spending surpassing           offer personalized goods and services much
                   $3.8 trillion in 2016.5                             more effectively. This capability, in turn, is
                                                                       helping to build greater loyalty and increase
                   In response to this growing demand
                                                                       usage of online services. As an example, the
                   and intensifying competition, the global
                                                                       rapid growth of subscription-based television
                   e-commerce industry is constantly reshaping
                                                                       content is being driven by the on-demand,
                   itself by creating new products and services,
AN OVERVIEW OF     engaging customers in innovative ways,
                   developing new business models, and
                                                                       curated content model offered by services
                                                                       like Amazon Prime video, Netflix, HBO Go, and
                                                                       others.
GLOBAL TRENDS IN   optimizing supply chains. These efforts, in
                   turn, have helped drive even more shoppers          Growth in E-Commerce Investment:

E-COMMERCE         online. The confidence of the online shopper
                   has also been boosted by «sharing economy»
                                                                       Investments in tech companies (including
                                                                       e-commerce firms) have grown considerably
                   services like those that have been popularized      in recent years. A significant portion of
                   by companies such as Uber and Airbnb.               these investments have flowed into Asia,
                                                                       where over $106 billion has been invested
                   Key Drivers of the Global E-Commerce                in tech and e-commerce companies since
                   Sector:                                             2012.8 In addition, the number of incubators,
                                                                       accelerators, and funding bodies within many
                   The rapid growth of the global e-commerce
                                                                       countries has grown significantly, leading to a
                   sector is underpinned by the following drivers:
                                                                       rapid increase in entrepreneurship.
                   Rapid Rise in Internet Penetration:
                                                                       Disruption in Payments:
                   Global Internet penetration has steadily
                                                                       Fintech companies (i.e., companies that bring
                   increased over the years. Advances in
                                                                       technological innovation to the financial
                   mobile Internet technologies, smartphones,
                                                                       services delivery) are disrupting the payments
                   and broadband have boosted the uptake of
                                                                       market. Innovations in consumer mobile
                   Internet-based services. With the current
                                                                       devices and merchant points of sale are
                   rate at which the global internet penetration
                                                                       effectively putting an end to traditional wallets
                   in growing, the number of Internet users
                                                                       as an increasing number of digital and mobile
                   worldwide is expected to increase from 3.2
                                                                       wallets are emerging onto the scene. In
                   billion (corresponding to a global Internet
                                                                       addition, alternative technologies are poised to
                   penetration of 43%) to 3.8 billion by 2020
                                                                       disrupt the payments ecosystem, as contactless
                   (translating to a penetration of 49%).6
                   Growth in Smartphone Usage:
                    The shift toward the use of mobile devices for
                   Internet access, and in particular, the rapid
                                                                       5, 6, 7. Worldwide new media market model Q2 2016, IDC
                   proliferation of smartphones, has boosted           8. Asia Tech Investment Report, Highlights, CBInsights, 2017

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E-Commerce in Saudi Arabia - ICT Report
well as timely shipping and delivery systems.                      learning capabilities to respond directly to                          country has emerged as the fastest growing        in e-commerce, and is expected to double by           thereby enabling e-commerce development.
                                                                     The global shipping and delivery industry                          customer queries online or on the phone,                              e-commerce market in the world. In 2015,          2020.                                                 The ever-increasing volume and frequency
                                                                     has undergone significant changes over the                         or support and aid human agents. These                                e-commerce spending in the country grew                                                                 of orders placed over the Internet, as well as
                                                                                                                                                                                                                                                                Rise in Digital Payments:
payments through wearables9 are becoming                             years, offering e-commerce players access to                       assistants provide a highly scalable and more                         130% year on year.19                                                                                    the multitude of products offered by retailers,
increasingly popular. Ease of payment is a                           flexible and attractive global shipping options                    accurate response system that not only boosts                                                                           New models and services in the digital                have made logistics automation imperative.
                                                                                                                                                                                                              The acceleration in the growth of the             payments sector are also driving e-commerce
key consideration for online shoppers; as                            and fulfillment services. This enables them                        the customer experience but also improves                                                                                                                                     Logistical competitiveness has directly
                                                                                                                                                                                                              e-commerce sector in emerging economies is        spending. In South American countries such
such, the developments in this field are a                           to easily operate in markets beyond their                          efficiency and reduces back office costs.                                                                                                                                     increased e-commerce activity in countries
                                                                                                                                                                                                              underpinned by the following drivers:             as Argentina, financial services companies
definite boost to the market. Some of the                            domestic reach, while minimizing associated                                                                                                                                                                                                      such as China, which is ranked ninth in the
                                                                                                                                        New Customer Buying Experiences:
recent developments in the cashless payment                          infrastructure costs and operational risks.                                                                                              Growth in Internet Users:                         are offering e-vouchers, prepaid or stored-           World Bank’s Logistics Performance Index.23
space include MasterCard’s launch of ‘selfie                                                                                            As the digital retail landscape constantly                                                                              value cards, mobile wallets, and rechargeable         Meticulous stock control and purchasing
                                                                                                                                                                                                              Improvements in Internet and mobile
pay’, that enables payment authentication                                                                                               evolves, the need for innovative ways to                                                                                cards linked to mobile devices to curb the            management, efficient and low-cost shipping,
                                                                                                                                                                                                              penetration actively contributed to e-commerce
using a self-portrait (selfie) and biometric                         Continuous Innovation in E-Commerce                                engage online shoppers will remain essential.                                                                           use of cash-based payment methods. This               and advances in warehousing technology have
                                                                                                                                                                                                              growth in emerging economies. With 1.14
identification.10 Apple Pay can now be used                          Products, Services, and Business Models:                           For example, the e-commerce giant Alibaba,                                                                              tactic significantly boosted e-commerce sales         made logistics a key success factor in the
                                                                                                                                                                                                              billion people aged above 15 years, more than
to make quick and secure online payments                                                                                                through its Buy+17 service, is already offering                                                                         in the country and helped the e-commerce              Chinese e-commerce market. Crowdsourcing,
                                                                     New Business Models:                                                                                                                     583 million Internet users (translating to an
using fingerprint scans.11 In India, WhatsApp                                                                                           virtual    reality-based   online     shopping                                                                          market grow 51% year on year in 2016.21 In            where a network of verified, freelance
                                                                     New e-commerce business models such as                                                                                                   Internet penetration rate of 51%), and more
is collaborating with the Reserve Bank of                                                                                               experiences where customers can plug their                                                                              addition, due to the availability of interest-        commuters conduct deliveries has also
                                                                     online-to-offline (O2O)14 and group buying                                                                                               than 400 million e-shoppers, the Chinese
India to integrate with its Unified Payments                                                                                            phones to a VR headset and browse the                                                                                   free payments, ease of conversion to an               generated a lot of interest. 24
                                                                     leverage the strengths of online and offline                                                                                             e-commerce market grew 33% year on year
Interface, which will bring instant bank-to-                                                                                            complete range of products hosted by Alibaba,                                                                           installment plan, and ability to use debit cards
                                                                     channels to engage more widely with                                                                                                      in 2015 to total $766 billion.20 Additionally,                                                          Investments by Global E-Commerce Players:
bank transfers to the messaging application.12                                                                                          which feels like a stroll through a physical                                                                            to make online purchases has further pushed
                                                                     consumers and provide a better and more                                                                                                  Alibaba’s success in the domestic and global
Apple is also following suit and is expected to                                                                                         store. Such methods of enriching the customer                                                                           the usage of cashless forms of payments in            Global e-commerce giants such as Amazon and
                                                                     convenient shopping experience.15 Moreover,                                                                                              markets has directly contributed to China’s
offer mobile payments through their iMessage                                                                                            experience are continually emerging around                                                                              Brazil.22                                             Alibaba have recently made huge investments
                                                                     manufacturers are increasingly interacting                                                                                               e-commerce growth. Similarly, in India, rapidly
application.13                                                                                                                          the world.                                                                                                                                                                    in emerging economies, and these investments
                                                                                                                                                                                                              rising Internet penetration levels have also      Expansion of Logistics Capabilities:
                                                                     directly with consumers, giving rise to the                                                                                                                                                                                                      have already started to fuel the growth of
Improvements in Logistics and Distribution:                          direct-to-consumer (DTC) model.16 The DTC                                                                                                led to business model transformation. India’s
                                                                                                                                        The Rise of E-Commerce in Emerging                                                                                      Logistics capabilities in emerging economies          e-commerce in these markets. Southeast Asia
                                                                     model is expected to help manufacturers shift                                                                                            Internet penetration rate now stands at 34%
Logistics and distribution processes have                                                                                               Economies:                                                                                                              have improved significantly over the years,           has been of special interest to Alibaba, which
                                                                     from relying on retail channels to directly                                                                                              and has been contributing to the rapid growth
become increasingly more efficient and                                                                                                                                                                                                                                                                                acquired a controlling stake in the Singapore-
reliable. The transformation of the transport                        engaging with consumers — consequently,                            Emerging markets such as China and India
sectors in the United States and Europe                              manufacturers will become more responsive                          are experiencing unprecedented growth in
has significantly contributed to these                               to changes in market demand and able to                            e-commerce. China, which is the second-
improvements. The line between logistics                             manage production and inventory more                               largest economy in the world, is by far the
and technology has started to blur as                                effectively.                                                       largest e-commerce market globally. China’s
technologies such as artificial intelligence (for                                                                                       share of worldwide e-commerce spending
                                                                     Use of Artificial Intelligence (AI):
inventory management), warehouse robotics,                                                                                              exceeded 33% in 2015, a multiple-fold
drone-based delivery, and autonomous                                 Customer experience has evolved significantly                      increase over its miniscule share of 5.9% in
road transportation are generating a lot of                          in recent years. In addition to providing                          2014.18 India has also been at the forefront
interest. The e-commerce industry relies on                          customer care through traditional channels,                        of the e-commerce revolution in recent years;
an efficient supply chain comprising modern                          companies are increasingly using AI-based                          despite accounting for only 1.1% of worldwide                                                                                                                              A shift in societal values and
warehouse facilities and distribution hubs as                        virtual assistants or «chatbots» with deep                         e-commerce spending at present, the                                                                                                                                        technology advancements over
                                                                                                                                                                                                                                                                                                                   the past decade have given birth
9. “Once it was touch and go, now contactless is a new-wave          15. “O2O Leads Chinese Startups’ Boom And Bust Cycle”, Article,    21. Annual Survey of Electronic Commerce, Argentinian                                                                                                                      to a new way of doing business
    revolution”, Article, the guardian, 10/9/2017                         Forbes, 21/4/2016                                                  Chamber of Electronic Commerce, 2016
10. “Mastercard makes fingerprint and ‘selfie’ payment               16. “How Leading Brands Are Winning The ‘Direct-To-Customer’       22 “Online Payment for E-Commerce in Brazil”,                                                                                                                              that is generally referred to as the
    technology a reality”, Press Release, Mastercard, 4/10/2016          Conversation”, Article, Forbes, July 2016                          Article, TechinBrazil, 30/5/2014
11. “Use Apple Pay to buy things online”, Article, Cnet, 13/6/2016   17. “From Virtual Reality To Personalized Experiences: Alibaba     23. World Bank’s Logistics Performance Index, Global Rankings, 2016                                                                                                        sharing economy.
12. “WhatsApp to add payments in messaging app”, Article,                Is Bringing Us The Future Of Retail This Singles Day”, Blog,   24. “Delhi-based mShipper Is A Crowdsourced Delivery Platform
			 The Telegraph, 15/8/2017                                             Forbes, 6/11/2016                                                  Delivering Packages In Real Time”, Article, IndianWeb2,
13. “iOS 11 is available tomorrow”, Press Release, Apple, 18/9/17    18, 19, 20. Global B2C Ecommerce Report, E-commerce                    29/10/2015
14. Refer to Appendix B for O2O definition                           					       Foundation, 2016

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E-Commerce in Saudi Arabia - ICT Report
Sharing economy business platforms provide          about access instead of ownership, the need to
                                                 individuals with an opportunity to improve the      align with the changing dynamics of markets
                                                 utilization of unused or under-used assets          and economies will drive e-commerce
based e-commerce startup Lazada Group for        such as cars and apartments, thereby creating       ecosystem transformation in terms of supply-
$1 billion in June 2017.25 Amazon has already    additional income and self-employment               side operations, policy making, logistics,
made significant investments in developed        opportunities. Uber and Airbnb are two of           and finance. In fact, the companies that offer
markets and is aggressively targeting            the most prominent companies in this space.         sharing economy services do not own any
emerging economies. For example, Amazon          These business platforms have reduced the           assets but enable full transactions online.
has expanded to the Middle East via a deal       cost of utilizing assets and undercut traditional   The sharing economy will therefore boost and
to buy Souq.com for around $650 million.26       companies that offer such services.                 transform e-commerce in many ways.
Amazon has also laid the groundwork to           Consumer familiarity with the sharing economy
take its services to Southeast Asia. Amazon      is growing. Sharing economy models are already
considers India27 to be a primary investment     helping consumers access assets/services
destination and, in 2016, pledged to invest $3   more affordably, conveniently, and efficiently
billion in the Amazon India business.            while creating a positive environmental impact
                                                 through reuse. However, some challenges,
                                                 such as inconsistent experience and difficulty
The Sharing Economy Phenomenon:                  building trust with consumers, are hindering
                                                 this emerging economic model.
A shift in societal values and technology
advancements over the past decade have given     In the long term, collaborative consumption
birth to a new way of doing business that is     and temporary access to goods and services
generally referred to as the sharing economy.    will create a shift in societal values as
Broadly speaking, this is an economic model      millennials will start to place less emphasis       25. “Alibaba to Invest $1 Billion in Lazada to Speed Asian Drive”,
                                                                                                          Article, Bloomberg, 28/6/2017
in which individuals can rent or borrow assets   on owning items and more focus on sharing           26. “Amazon Buys Souq.com as Middle East Online Market Takes
                                                                                                          Off”, Article, Bloomberg, 28/3/2017
owned by someone else that are not fully         and trading spare resource capacity. With the
                                                                                                     27. “Amazon crosses $2-billion mark in India investments”,
utilized.                                        future of consumption becoming increasingly              Article, India Times, 6/7/2017

18                                                                                                                                                                        19
E-commerce development will help achieve            chains, distribution channels, and payment
                       the Vision 2030 goals of creating a diversified     systems will also create jobs in the logistics
                       economy and establishing an attractive              and financial services sectors, and the onset
                       environment for investment, entrepreneurship,       of the sharing economy model will similarly
                       and employment. Public sector stakeholders          create opportunities for self-employment.
                       aspire to improve Saudi Arabia’s ranking on         Developing the skills of the youth population,
                       the United Nations Conference on Trade and          increasing women’s participation in the
                       Development (UNCTAD) B2C E-commerce                 national workforce, and revitalizing the SME
                       Index from 63 to 35 by the end of 2020, and         sector are all central to overcoming existing
                       improve the country’s position on the UNCTAD        labor market shortcomings, and each will
                       Business-to-Business (B2B) E-commerce               be supported by the development of the
                       Index from 34 to 25 by the end of the same          e-commerce industry.

E-COMMERCE IN THE      year.28
                                                                           New Channels for the Local Industry:
                                                                           Maximizing and promoting local content is one
CONTEXT OF SAUDI       Impact of E-Commerce on Vision 2030
                       Objectives:
                                                                           of the key goals of the Vision 2030 and creating
                                                                           a vibrant e-commerce ecosystem will have a
ARABIA’S VISION 2030   The development of the e-commerce sector
                                                                           multiplier effect on the economy as it will create
                                                                           new business models and opportunities for

AND NTP                will support the objectives of Vision 2030 in the
                       following ways:
                                                                           local businesses (SMEs, home-based sellers,
                                                                           etc.) to sell to a wider domestic customer base
                       Economic Diversification:                           and help them take their products and services
                                                                           beyond the borders of Saudi Arabia.
                       By attracting more international businesses
                       to the Saudi market by creating a conducive
                                                                           NTP Objectives that Contribute to
                       regulatory and business environment,
                                                                           E-commerce Sector Growth:
                       supporting the startup ecosystem, and
                       encouraging more traditional businesses             A number of the NTP’s objectives will help
                       to trade online, e-commerce will create an          to drive the growth and development of the
                       opportunity for Saudi Arabia to diversify and —     e-commerce ecosystem. The growth drivers
                       to an extent — improve non-oil revenues.            that are directly associated with the various
                                                                           objectives of the NTP include the following:
                       Investment Influx:
                                                                           Telecommunications Infrastructure
                       E-commerce spending growth in Saudi Arabia
                                                                           Development:
                       will create growth potential in the private
                       sector, especially in the retail industry. In       Improving national connectivity infrastructure
                       turn, this growth will create an attractive         and enhancing broadband reach and
                       environment that is conducive to local and          penetration will directly contribute to the
                       international investors in the sector.              growth of e-commerce in Saudi Arabia.
                       Employment Creation:                                Logistics Sector Enhancement:
                       E-commerce will directly lead to the creation       Logistics, as one of the critical components
                       of more employment opportunities through            of the e-commerce value chain, has been
                       the entry of new e-commerce companies and           identified as a key focus area under the NTP.
                       the foray of traditional companies into the
                       e-commerce domain. Investments in supply            28,29,30. Saudi Arabia’s National Transformation Program 2020

                                                                                                                                      21
World Bank’s Doing Business Index from 82 to      rights are vital aspects of the NTP’s objectives.
                                                   20, and create a total of SAR 2,300 billion in    Indeed, the MCI is tasked with improving Saudi
                                                   investment opportunities.29 These initiatives     Arabia’s score on the Consumer Confidence
                                                   will attract more domestic and international      Index from 106 to 115 by 2020.30
Transforming Saudi Post into a commercial
                                                   investors to the Saudi economy.
company, enhancing its capabilities, and                                                             Fostering of Innovation and
establishing a unique logistics platform           Boosting Local Industries:                        Entrepreneurship:
across three continents are key objectives.
                                                   E-commerce will create new growth                 The NTP has placed a substantial emphasis on
Streamlining laws for licensing and company
                                                   opportunities for local producers and home-       enabling innovation and entrepreneurship, with
registration in the transportation and logistics
                                                   based sellers, both domestic and international.   a focus on the technology industry, including
sector will also boost e-commerce sector
                                                                                                     e-commerce. Encouraging investment funds
growth.                                            As local e-commerce sellers directly source
                                                                                                     and venture capitalist firms to invest in
                                                   their goods from the local market, the
Improving the Ease of Doing Business:                                                                start-ups, including e-commerce start-ups,
                                                   development of the industry will boost several
                                                                                                     could spur entrepreneurship in Saudi Arabia.
While actively promoting local e-commerce          local industries that are part of the supply
                                                                                                     Supporting educational institutions to develop
start-ups and encouraging traditional              chain.                                            entrepreneurial skills and nurture startups,
retailers and SMEs to adopt e-commerce,
                                                   Promotion of Fair Trade:                          which are key objectives for the government,
the government is also making it easier
                                                                                                     will also help build strong foundations for
for international companies to establish           Enhancing consumer confidence by promoting
                                                                                                     development of the e-commerce industry.
a footprint in Saudi Arabia. By 2020, the          fair trade, strengthening the policies and
government plans to increase foreign direct        frameworks that protect consumer rights,
investment from SAR 30 billion to SAR 70
                                                   and creating awareness about consumer
billion, improve the country’s ranking on the

                                                                                               A number of the NTP’s objectives
                                                                                               will help to drive the growth and
                                                                                               development of the e-commerce
                                                                                               ecosystem.

22                                                                                                                                                       23
Saudi Arabia’s B2C e-commerce spending was                        Saudi Arabia’s E-commerce Ecosystem:            is undergoing a dramatic shift as all
                estimated at SAR 29.7 billion in 2016 making                                                                      stakeholders are becoming increasingly active
                the country one of the largest e-commerce                         The Saudi e-commerce ecosystem has evolved      in making the e-commerce market growth
                markets in the Middle East and North African                      in line with the global model. It consists of   oriented and conducive to development. The
                (MENA) region.31                                                  demand side, both consumer and enterprise       market is steadily maturing and is marked by
                                                                                  buyers, supply side, including pure-play        several new announcements, acquisitions, and
                On the back of the ongoing transition from
                                                                                  e-commerce providers, traditional retailers,    government efforts in addition to the disruptive
                offline to online purchasing due to increasing
                                                                                  small and medium enterprises (SMEs) and         evolution of the traditional retail market in
                familiarity with technology and online
                                                                                  consumer-to-consumer (C2C) sellers, in          hybrid sellers that are significantly boosting
                payments, online retail spending in Saudi
                                                                                  addition to different enablers, including       their foothold by continuously adding new
                Arabia is set to grow faster than brick-and-
                                                                                  government and regulatory bodies, technology    capabilities. Each of the ecosystem players
                mortar spending.32
                                                                                  and connectivity providers, payment gateway     has its unique characteristics and a vital role
                This strong growth of B2C spending is driven by                   and services providers, and logistics           to play which will be discussed in subsequent
                high levels of Internet and mobile penetration.                   companies. Currently the Saudi e-commerce       sections.
STATE OF        In Q2 2017, Internet penetration in Saudi Arabia
                stood at 76%33 , which is well above the Middle

E-COMMERCE IN   East average of 59%34 and the global average
                of 51%.35 Mobile and broadband penetration

SAUDI ARABIA    stood at 137% and 79.6%, respectively36, mainly
                driven by improving telecommunication
                                                                                                                                  $
                infrastructure and services, increasing
                technology awareness, and a relatively young
                                                                                                                            Buyers
                population (more than 26% of the population
                is aged between 20 and 34 years).37
                The demand-side drivers have been supported                                                                                           Sellers
                by supply-side developments in the form
                                                                                               Logistics
                of delivery improvements, better quality of
                                                                                               Providers
                service, and the growing variety of products
                and services on offer. In addition, supply-side
                development is being boosted by significant                                                           E-commerce
                investments in the e-commerce industry.                                                                Ecosytem

                                                                                               Payment                                            Regulatory
                                                                                               Providers                                            Bodies

                                                                                                                         Technology
                31. CITC E-commerce Research, 2017                                                                        Providers
                32. Internet Retailing in Saudi Arabia, Euromonitor, Feb 2017
                33, 36. ICT Indicators in the Kingdom of Saudi Arabia, CITC, Q2
                   2017
                34, 35. Internet World Stats, June 2017
                37.Saudi Arabia’s Population Estimates, General Authority for
                   Statistics, 2017                                                                          Figure 1 – E-Commerce Ecosystem
                                                                                                                                                                               25
The services category currently dominates          Demand-Side Trends                                  Shoppers are generally using a combination of
                                                                                                                                                                                       the B2C e-commerce market, accounting for                                                              offline and online channels for their purchases.
                                                                                                                                                                                                                                          Buying Behavior of Individual Online
                                                                            0            20           40               60                 80                100                        more than two-thirds of total B2C e-commerce                                                           Only for games, consoles, and subscriptions
                                                                                                                                                                                                                                          Shoppers
Saudi Arabia’s B2C E-commerce Sector in                   Switzerland                                                                                                                  spending in 2016. Travel-related services                                                              do we see a majority preferring to buy purely
                                                                                                                                                                 96

                                                                                                                                                                      Most Prepared
the Global Context:                                                                                                                                                                    account for the largest share of the services      According to a survey conducted by CITC, 58%        through online channels. Among those who
                                                         South Korea                                                                                             96
In 2017, UNCTAD conducted a global study        38                                                                                                                                     category. Airline and hotel bookings will          of the addressable Saudi population have            buy books, CDs, and sports equipment, a
                                                      United Kingdom                                                                                           95                                                                         shopped online at least once in the past. Most
to understand and benchmark the readiness                                                                                                                                              continue to rapidly shift to online platforms,                                                         significant portion buy from both online and
of countries to engage in online commerce.                     Japan                                                                                        94                         and the average transactions in this space are     of these online shoppers (87%) have made            offline stores. For apparel and clothing, nearly
The study evaluated countries based on four                 Germany                                                                                         94                         larger than those typically made in the product    a transaction in the past 12 months, which          half of those surveyed use both online and
parameters to come up with an aggregated                                                                                                                                               category. However, as customer confidence          shows an increasing shift towards online            offline channels, and for luxury goods and
                                                              Canada                                                                                      92
score; these four parameters are Internet                                                                                                                                              in e-tailers grows and e-commerce providers        shopping.43                                         personal care products, approximately two
                                                             Australia                                                                                    92
usage penetration, secure servers per 1 million                                                                                                                                        improve their delivery times and enhance           While the vast majority of online shoppers          out of five buy online and offline. In the case of
                                                               France                                                                                  90
inhabitants, banking penetration, and postal                                                                                                                                           customer experience, the product category          have purchased goods and services from              higher-value products where «touch and feel»
reliability – all of which are crucial metrics for      United States                                                                                87                                is expected to grow faster than the services                                                           is more important, such as electronic items
                                                                                                                                                                                                                                          e-commerce companies located in Saudi
the growth of e-commerce within a country.                       Italy                                                                    74                                           category over the coming five years.               Arabia in the past 12 months, a significant         (mobile phones, appliances, computers, etc.)
                                                               Russia                                                                  71                                              Over the past year, we have witnessed              number have also made purchases from                and furniture, the use of online channels is
Saudi Arabia ranked 46th out of 144 countries,
                                                                                                                                                                                       several key developments in the Gulf region’s      companies based in other GCC countries and          relatively small— this is also the case with low-
and with an index score of 69, it is on par with         Saudi Arabia                                                                69
                                                                                                                                                                                       e-commerce space, such as the acquisition of       outside the region. This shows a significant        value, everyday items such as food, groceries,
countries such as Italy and Russia and higher                  Turkey                                                        62
                                                                                                                                                                                       Souq.com by Amazon41 and the planned launch        leakage of e-commerce revenues to companies         and beverages.
placed than some larger economies like India
                                                                Brazil                                                       62                                                        of Noon.com, a $1 billion venture between          outside the country. In fact, only a fraction of
and China.
                                                                China                                                       60                                                         Saudi Arabia’s Public Investment Fund and          users (7%) have purchased exclusively from
Comparing Saudi Arabia’s 2017 ranking                                                                                                                                                  Mohamed AlAbaar, chairman of Emaar                 Saudi-based companies.
                                                         South Africa                                                 54
and scores to those of 201639, shows good

                                                                                                                                                                      Least Prepared
                                                                                                                 45
                                                                                                                                                                                       Properties.42 These announcements have not
improvements especially in the areas related                Argentina
                                                                                                                                                                                       only created a buzz in the e-commerce space
to Internet penetration and postal reliability.                  India                                          44
                                                                                                                                                                                       but also significantly increased the sense of
Internet penetration score improved from 64                    Mexico                                      42                                                                          excitement among customers.
to 74, and postal reliability score improved                Indonesia                                 36                                                                               If these projects are rolled out as expected,
from 69 to 75.
                                                                                                                                                                                       they will give the Saudi e-commerce
Saudi Arabia could move higher up in the                                                                                                                                               market a significant boost, particularly the
ranking through boosting banking and credit                     Figure 2 – Comparison of UNCTAD E-commerce Readiness Score                                                             product category. These investments could
card penetration and optimizing the number of                                                                                                                                          significantly improve delivery standards,
secure Internet servers per 1 million people.                                                                                                                                          shorten order fulfillment times to either same-
                                                                                                                                                                                       day or next-day delivery, and make a wider
Saudi Arabia B2C E-Commerce Spending                                                                                                                                                   product assortment available online from
and Forecast                                         B2C e-commerce spending in Saudi Arabia                                                                                           Saudi-based fulfilment centers. Consequently,
                                                     totaled SAR 29.7 billion in 2016 and is                                                                                           the proportion of cross-border e-commerce
As has been the case in other emerging               expected to grow at around 20% over the                                                                                           products could reduce significantly.                     42%                 58%                       13%                         87%
economies, B2C e-commerce spending in                next few years.40 Given the size of the market    38 UNCTAD B2C E-Commerce Index, United Nations Conference
                                                                                                                                                                                       Due to the above factors, competitiveness in
                                                                                                          on Trade and Development (UNCTAD), 2017                                                                                         Never shopped Previously shopped                   Did not Shop Online   Shopped Online in
Saudi Arabia has grown strongly over the last        and the growing appetite of consumers for                                                                                         the e-commerce product market is expected             Online           Online
                                                                                                       39 UNCTAD B2C E-Commerce Index, United Nations Conference                                                                                                                             in the past 12 months the past 12 months
few years. This growth has been spurred by           online shopping, e-commerce companies are            on Trade and Development (UNCTAD), 2016
                                                                                                                                                                                       to increase and result in significant price
                                                                                                       40. CITC E-commerce Research, 2017
the broader shift from offline to online and         expected to invest more in the coming years.      41. “Amazon Buys Souq.com as Middle East Online Market Takes                    reductions. This will put additional pressure on
mobile shopping, together with supply-side           In turn, these investments will lead to both          Off”, Article, Bloomberg, 28/3/2017
                                                                                                       42. “Emaar Chairman announces billion-dollar eCommerce                          in-store retail spending in Saudi Arabia, as a     Figure 3 – Incidence of Online Shopping             Figure 4 – Incidence of Online Shopping
enhancements, delivery improvements, better          organic growth in the form of expansions of           platform – Noon.com”, Article, Tech View, 13/11/2016
                                                                                                       43. CITC E-commerce Research, 2017 – For addressable
                                                                                                                                                                                       growing number of consumers will opt to use          Amongst Survey Respondents. Base                   In the Past 12 Months. Base (All Who
quality of service, and the growing variety of       operations and inorganic growth in the form
                                                                                                           population, please refer to market sizing methodology section               e-commerce to meet their product purchasing                        (All): 783                                  Purchased Online): 454
products and services on offer.                      of acquisitions.                                      in Appendix A                                                               requirements.
26                                                                                                                                                                                                                                                                                                                                           27
When it comes to services, most shoppers                While the Saudi Arabian Monetary Authority
                                                                                                                                   of travel-related services such as airline              (SAMA) has detailed guidelines for the selling
                                                                                        7% are “KSA Only”                          bookings, hotel bookings, and tour packages             of insurance products online (as part of its
                                                                                                                                   make purchases through online channels. With            Online Insurance Activities44 regulation), only
                   Within KSA                                                                               86%                    the emergence of sharing economy players                a few insurance companies in Saudi Arabia
                                                                                                                                   such as Uber and Careem and the greater                 sell insurance through online channels.
                   From GCC
                                                                                                    65%                            convenience that they offer to consumers, an            Generally, vehicle and travel insurance are
                   From outside Saudi                                                                                              increasing number of consumers hail taxis               most commonly purchased online, while other
                   Arabia and GCC                                                             49%                                  through their mobile applications. In contrast,         insurance services are purchased offline.
                                                                                                                                   purchases of high-involvement financial
                                                                                                                                   services (such as insurance policies) are
                   Figure 5 – Sources of Online Purchase in the Past 12 Months. Base (Purchased online
                                                                                                                                   still done mostly offline; however, they are
                                                  in past 12 months): 397
                                                                                                                                   gradually shifting to online channels.                  44. Online Insurance Activities Regulation, SAMA

                                                   12%        20%         5%                        63%
     Games, consoles, and subscriptions
                                                    18%      5%     12%                          65%
                  Books, CDs/D VDs, etc.
                                                       22%      3% 12%                              63%                                                                                                        18%                        31%             6%      45%
                      Sports equipmen t                                                                                                                      Music, movies, TV series, etc.

                                                                  52%                 1%                  47%                                                                                              11%                   30%                3%          56%
      Apparel, clothing, and accessories                                                                                                                                     Events tickets

                                                                  56%                    1%               42%                 1%                                                                                         35%                             31%    14%         20%
                           Luxury goods                                                                                                     Travel (Air tickets, tour packages, hotels, etc.)

                                                                    58%                    1%               41%                                                                                                20%              8%            17%               55%
                 Personal c are products                                                                                                                  Taxi services/ground transport*
                                                                          68%                       1%5%          26%                                                                                                        40%                    6%    14%         40%
                                 Tablets                                                                                                                    Insurance schemes/policies**
                                                                                87%                                     13%
         Food, groceries, and bever ages                                                                                                                                                                    From shops                   Online
                                                                                                                                          * From shops means from the streets
                                                          30%             12%                         58%                                 ** From shops means from the company’s branches                   Both                         Don’t purchase
      Automobile parts and accessories
                                                                    56%                     9%               35%
         Furniture and home furnishing                                                                                                                              Figure 7 – Modes (offline versus online) of Purchase for Services. Base (All): 783
                                                                     62%                         7%             31%
                  Electronics appliances
                                                                                 94%                                      6%
                          Mobile phones
                                                                     60%                      5%             35%
                PCs (Desktops, Laptops)

                                                   From shops        Online      Both         Don’t purchase
                           Figure 6 – Modes (offline vs. online) of Purchase for Products. Base (All): 783

28                                                                                                                                                                                                                                                                                29
Once a week or more                                   14%                                                                        Heavy                          Medium                         Light
                                                                                                                   Heavy                                                            Buyers                         Buyers                         Buyers
                                                                                                                   Buyers
                                                   Once every two weeks                          9%
                                                                                                                                                                                       34%   14%                            41% 9%                           44% 7%
Online Shopper Personas:                                                                                                                               Games, consoles,
                                                   Once a month                                              16%                                       and subscriptions
Based on the frequency of purchasing, it is
possible to classify online shoppers as follows:                                                                                   Medium                                         2%         37%                    15%     20%                    8% 17%
                                                   Once every two months                                               21%         Buyers          Books, CDs/DVDs, etc.
 Heavy Buyers: Individuals who shop online
  at least once every 2 weeks.                     Once every three months                                                   25%
                                                                                                                                                                                       14%     38%                 4%     19%                    3% 15%
 Medium Buyers: Individuals who shop online
                                                   Once every 4-6 months                               12%                                             Sports equipment
  at least once every 3 months.
                                                                                                              Light
 Light Buyers: Individuals who shop online at                                                                 Buyers                                                              1%                       95%    1%                       95%
                                                   Less often                        3%                                                                                                                                                                                 92%
   least once every 4 months or less often.
                                                                                                                                                        Apparel, clothing,
On average, three out of five shoppers in Saudi                                                                                                          and accessories
Arabia are medium buyers, while one in five        Figure 8 – Profiling Online Shoppers. Base (Who purchased                                                                      2%                 88%           4%                82%                              76%
is a heavy buyer. The average annual online        any products or services online in past 12 months): 397-Heavy                                           Luxury goods
spending of heavy buyers is 1.5 times that of      Buyers=91, Medium Buyers=247, Light Buyers=59
medium buyers and over twice that of light
                                                                                                                                                                                   2%                    92%       2%             77%                                 78%
buyers.                                                                                                                                           Personal care products
Over a quarter of female online shoppers are
heavy buyers compared with less than 20% of                         19%                     64%                         17%                                                       4%         31%                   3%                             3%
male online shoppers. Younger shoppers tend           Male                                                                                                        Tablets
                                                                      27%                        61%                        12%
to be heavy buyers: more shoppers below the                                                                                                                                                        71%
                                                      Female                                                                                                                                                         13%                               14%
age of 30 (over a quarter) are heavy buyers                                                                                                              Food, groceries,
                                                                                                                                                          and beverages
than shoppers over the age of 30. In addition,                           29%                      59%                       12%
a larger proportion of Saudi Nationals (over a        Below 30                                                                                                                    2%     20%                      1%       26%                   2%      24%
quarter) are heavy buyers than expatriates.                        18%                     67%                          15%                             Automobile parts
                                                      30-44                                                                                              and accessories
When it comes to purchasing products, heavy                        18%                     56%                          26%
buyers are more inclined toward purchasing                                                                                                                                                   34%                     15%                           10%
                                                      Above 45                                                                                            Furniture and
high-value items such as furniture, sporting                                                                                                            home furnishing
goods, appliances, and gadgets online                                 26%                        61%                    13%
compared with medium and light buyers.                Saudi                                                                                                                                  37%                     9%                            5%
Heavy users also rely on e-commerce to make                       12%                     66%                          22%                         Electronics appliances
mundane, high frequency purchases such as             Non-Saudi
groceries, food items, and beverages. Medium                                                                                                                                                 35%                   4%                            3%
and light buyers display similar preferences                        Heavy      Medium       Light                                                         Mobile phones
for modes of buying (online vs. offline) across
product categories.                                Figure 9 – Profiling Online Shoppers by Demographics. Base (Who                                                                           32%                   4%                            2%
                                                                                                                                                 PCs (Desktops, Laptops)
Aside from a few areas, male and female            purchased any products or services online in past 12 months):
buyers also display similar preferences for        397-Heavy Buyers=91, Medium Buyers=247, Light Buyers=59
modes of buying (online vs. offline) across                                                                                                                                         Purchase online only         Purchase both from shops and online
product categories. A larger proportion of
male shoppers buy games, subscriptions,                                                                                                     Figure 10 – Shopping Preferences When Buying Products Online: Online Shoppers. Base (Who purchased any products or services
                                                                                                                                            online in past 12 months): 397-Heavy Buyers=91, Medium Buyers=247, Light Buyers=59
30                                                                                                                                                                                                                                                                      31
books and CDs, and automobile parts and            Figure 12 – Shopping                                                     Heavy                         Medium                   Light
                                           Female                   Male                  accessories online, while female shoppers are      Preferences When Buying                                                  Buyers                        Buyers                   Buyers
                                                                                          slightly more active in buying furniture and       Services Online: Online Shoppers.
                                            13%2%                   27% 7%
              Games, consoles,                                                            home furnishings online.                           Base (Who purchased any                                                    42%           23%                    71%7%                  51% 8%
              and subscriptions                                                           More medium and light buyers buy                   products or services online in            Music, movies, TV
                                                                                                                                                                                              series, etc.
                                                                                          entertainment, event tickets, and travel-          past 12 months): 397-Heavy
                                           4% 12%              7% 12%                                                                        Buyers=91, Medium Buyers=247,
          Books, CDs/DVDs, etc.                                                           related services online than heavy buyers.
                                                                                                                                             Light Buyers=59                                                                   40% 16%                       66%4%                  63% 2%
                                                                                          However, a larger proportion of heavy buyers
                                                                                          purchase taxi and transport services and                                                          Event Tickets
                                           3% 11%             3% 12%
              Sports equipment                                                            insurance policies online than medium and
                                                                                          light buyers.
                                                                                                                                                                                                                               41%      51%                  67% 20%                    75%22%
                                           1%        47%                    48%           More males purchase travel and event services                                          Travel (e.g., air tickets,
              Apparel, clothing,                                                                                                                                                 tour packages, hotels)
               and accessories                                                            and high-value insurance services online than
                                                                                          females, while a significantly higher proportion
                                           1%       43%        2%          41%            of female shoppers purchase entertainment                                                                                      27% 27%                     13%   34%               12%        47%
                                                                                                                                                                                  Taxi services/ground
                  Luxury goods                                                            and taxi services online than male shoppers.                                                        transport

                                           1%       44%        1%      38%
         Personal care products                                                                                                                                                                                         18%       37%                9% 22%                  14%        37%
                                                                                                                                                                                            Insurance
                                                                                                                                                                                      schemes/policies
                                           1% 4%               5%
                        Tablets
                                                                                                                                                                                                              Purchase online only                 Purchase both from shops and online
                                             15%                 12%
                Food, groceries,
                 and beverages
                                                                                                                                                                                 Figure 13 – Shopping                                                        Female            Male
                                       1%                      1%    22%                                                                                                         Preferences When Buying                                                     Buyers            Buyers
              Automobile parts
               and accessories                                                                                                                                                   Services Online: Females                                                        28% 6%        12%
                                                                                                                                                                                                                             Music, movies, TV
                                            12%
                                                                                                                                                                                 versus Males. Base (All): 783                      series, etc.
                                                                8%
                 Furniture and
               home furnishing
                                                                                                                                                                                                                                                               17% 2%                 41% 4%
                                            8%                  7%                                                                                                                                                               Event Tickets
         Electronics appliances

                                           5%                   6%                                                                                                                                                                                               30% 12%              33% 15%
                                                                                                                                                                                                                        Travel (eg, air tickets,
                 Mobile phones                                                                                                                                                                                         tour packages, hotels)

                                           5%                   6%
                                                                                                                                                                                                                                                               15%     22%         2%    14%
        PCs (Desktops, Laptops)                                                                                                                                                                                         Taxi services/ground
                                                                                                                                                                                                                                   transport

                    Purchase online only            Purchase both from shops and online
                                                                                                                                                                                                                                                              6%     12%           6%     15%
Figure 11 – Shopping Preferences When Buying Products Online: Females versus                                                                                                                                                        Insurance
Males. Base (All): 783                                                                                                                                                                                                     schemes/policies

32                                                                                                                                                                                                                                                                                            33
Demand-Side Drivers and Inhibitors:                 be important in Saudi Arabia. Many shoppers       Logistics:                                       Kingdom coverage, shipment tracking (using        and lengthy delivery cycles. There is also
                                                                                                                       like to touch and feel products such as apparel                                                    the shipper’s online system or via email), and    dissatisfaction with re-arranging deliveries
                                                                   The convenience of home delivery and the ease
                                                                                                                       before buying. A sizeable 47% of those who        Consumer satisfaction is relatively high         customs clearance assistance. However, there      (e.g., when a first-time delivery fails because the
                                                                   of making purchases have been highlighted
Buying through Social Media Sites:                                                                                     stopped buying online said that stores offer      for some features of shipping and logistics      is also significant dissatisfaction due to high   logistic provider could not locate the customer
                                                                   by shoppers as the top drivers propelling the
Purchasing through social media platforms is                                                                           better prices than their online counterparts.     services such as SMS notifications, pan-         delivery charges, delivery of damaged goods,      accurately or deliver at the right time).
                                                                   use of e-commerce. Additionally, the offers
quite widespread in Saudi Arabia. Instagram,                       and discounts available on online sites are
Twitter, and Facebook are the most widely                          often more attractive than those offered            Payments:
used social media platforms for online                             offline. The increasing availability of multiple
                                                                                                                       Shoppers have by large used credit cards to                                                 Mean
shopping. 42% of the respondents who have                          modes of payment is another driver, while the                                                                                                   Score:
                                                                                                                       pay for their online purchases. However, cash-                                                              16%                 34%                         39%                10% 1%
shopped online during the last year have made                      unavailability of products at offline stores also
                                                                                                                       on-delivery is also very popular, probably                                                      3.56
their purchases on social media websites and                       drives shoppers to procure them online.
                                                                                                                       due to apprehensions about using credit
applications. Women shop relatively more
                                                                   A few barriers to increased e-commerce              cards online. From a seller’s perspective,
on social media than men.45 When analyzed
                                                                   adoption remain. For example, some shoppers         this preference is challenging due to high
by nationality, the social media purchasing
                                                                   still find the process of buying online complex.    cost of moving stock as well as low delivery                                                                   24%                    32%                      35%               8% 1%
behavior of Saudi nationals and non-Saudi                                                                                                                                                Geographical coverage
                                                                   Shoppers are also apprehensive that the quality     acceptance rates. There is also healthy use                             in Saudi Arabia         3.72
expatriates is quite similar. The use of social
                                                                   of the products delivered may not be the same       of bank transfers as a means of payment —
media for online shopping is quickly picking
                                                                   as that advertised; therefore, the consumer         such transfers are widely used by buyers who
up as consumers find it easier to check
                                                                   rights protection is a concern. Shoppers are        may not have credit cards or simply prefer to                                                               22%                       35%                     33%                9% 1%
recommendations and opinions from other                                                                                                                                          Customs clearance assistance
                                                                   also concerned about the security of personal       transact through a bank. The use of SADAD is                                                    3.70
shoppers before buying a product or service.                                                                                                                                           if shipping from abroad
                                                                   and credit card information shared online.          quite low because of low levels of awareness
Consumers also get an increased sense of
                                                                   Consequently, offline buying will continue to       and perceptions of poor usability.
transparency if the seller is active on social
media.                                                                                                                                                                                                                          7%         24%                      39%                       29%           1%
                                                                                                                                                                                                Goods handling         3.07
                                                                                 Credit/Debit card                                                      87%                                   (damaged goods)
Smartphone and Applications Usage:
                                                                                  Cash on delivery
Technological savviness is rapidly growing                                                                                                   66%
                                                                                                                                                                                                                                     22%                     37%                      31%               9% 1%
due to the high mobile and Internet penetration
                                                                                                                                                                                      Online shipment tracking         3.72
rates in Saudi Arabia,46 resulting in a gradual
                                                                                     Bank transfer                               45%
decline in shopping via desktop and traditional
websites. Only 21% of online shoppers rely
on desktops and laptops to make purchases,                              eWallet (PayPal, Amazon
                                                                                                                       24%                                                                                                             26%                      38%                      27%            8% 1%
                                                                    Payments, Google Wallet, etc.)                                                                                                                     3.80
compared to 93% who use smartphones.
Mobile apps are more popular among those
who use mobile devices to shop online. 47%                                                  SADAD                  17%
of these shoppers shop purely using mobile
                                                                   Direct carrier billing (amount is
                                                                                                                                                                                                                                     19%              28%                    33%                  17%       3%
applications, 52% use both web browsers and
                                                                   charged to monthly mobile bill)            8%                                                                           Timelines of delivery       3.43
the mobile apps, while only 1% rely solely on
the web browser to shop online.
                                                                           Prepaid card or coupon               13%

                                                                                                                                       .

45. CITC E-commerce Research, 2017                                 Figure 14 – Payments Methods Used for Online Purchases. Base (Those who have                                                          Figure 15 – Satisfaction Levels with Logistics Services. Base (All): 783
46. ICT Indicators in the Kingdom of Saudi Arabia, CITC, Q2 2017   purchased online in past 12 months): 397
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Online Buying Behavior of SMEs                         SMEs depend on the same logistics systems as
                                                                                                         individual buyers and face similar challenges
                                                  Most of the SMEs surveyed (94%) utilize online
                                                                                                         (such as those related to delivery and
                                                  channels to make purchases, but only a few
                                                                                                         fulfilment). For example, SMEs are somewhat
Consumer Protection:                              (5%) are e-commerce sellers (i.e., SMEs that
                                                                                                         dissatisfied with logistics services providers
                                                  use e-commerce in addition to their traditional
There is a lack of a comprehensive framework                                                             due to challenges related to delivery timelines,
                                                  sales channels).
for protecting consumer rights with respect to                                                           costs, and goods handling.
online buying. Currently, consumer protection     Airline tickets, travel insurance and hotel
regulations only cover in-store purchases and     bookings, and IT supplies and services are
do not protect buyers when purchasing from        the items most frequently purchased by SMEs            Supply-Side Trends
international sellers. Although consumers are     online, followed by pantry and office supplies
                                                                                                         State of the Pure-Play E-commerce Industry
aware of these general consumer protection        (which are bought at least once every one to
regulations, there is a strong perception that    three months). The average amount SMEs                 Saudi Arabia’s pure-play e-commerce
the rules and regulations in place are not        spend on online purchases each month is SAR            industry comprises a mix of local, regional,
adequately enforced. There is also a lack of      22,450.47 Credit cards are the most widely             and international sellers. The market also
provisions to address violations and no clarity   used payment method because they facilitate            consists of niche and broad-based products
on the boundaries of jurisdiction in the event    easier tracking of expenses.                           and services sellers. While regional and
of a complaint.                                                                                          international sellers can capture a significant
                                                                                                         portion of the market due to the sheer variety
                                                                                                         of products and services they provide, local
         Mean      Online Purchasers in Past 12 Months (Base: 397)                                       sellers have the unique advantage of offering
         Score:                                                                                          products and services that may not be available
                                41%                                 53%                       4% 2%
          4.32                                                                                           from regional/international sellers.

                  1%1%      28%                        45%                            25%
          2.08                                                                                           Priorities of E-commerce Sellers:

         Mean      Never Purchased Online (Base: 329)                                                    Becoming a «best fit» for local markets (by
         Score:                                                                                          leveraging global expertise) and attaining a
                                  Extremely Secure             Secure              Neutral               deeper understanding of market dynamics
                                  Not Secure         Not Secure At All                                   (by establishing a local presence) are the key
                                                                                                         success factors and competitive differentiators
Figure 16 - Security Level and Concerns around E-Commerce Websites                                       for e-commerce and sharing-economy players
                                                                                                         in Saudi Arabia. E-commerce players operating
                                                                                                         in the country have strong geographic
Security and Privacy:                             Drivers and Inhibitors:
                                                                                                         expansion and financial growth plans; for
As per the survey, more than two-thirds of the    Generally, SMEs find online shopping very quick        instance, they are considering expanding their
respondents are apprehensive about entering       and efficient. SMEs are also of the opinion that       digital operations teams and complementing
their credit cards and personal details on        e-commerce sites give them the flexibility to use      their capabilities by establishing partnerships
e-commerce websites.                              various payment options (such as credit cards,         with local distributors and logistics providers
                                                  bank transfers, or cash on delivery). The other        to ensure their products can be delivered
Individuals who have shopped online are
                                                  main drivers that encourage SMEs to buy online         efficiently.
understandably more confident about the
                                                  include the wide range and variety of products and
security of their data and payments than
                                                  services that are otherwise not available through
those who have not purchased online. Low
                                                  traditional channels, the competitive online prices,
confidence levels often prevent non-shoppers
                                                  and the access to lucrative offers and discounts.
from trying online buying.                                                                               47. CITC E-commerce Research, 2017

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