E-Commerce in Saudi Arabia - ICT Report
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ICT Report E-Commerce in Saudi Arabia
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
4 5
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
7
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
9
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
11
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
12 13
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
15
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
16 17
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 19E-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
21World 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 23Saudi 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
25The 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 27When 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 29Once 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 31books 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 33Demand-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
34 35Online 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
36 37You can also read
