Saudi shoppers encouraged to support local e-commerce

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• Online shopping in Saudi set to be worth $92.5bn by 2026
• Shoppers in Saudi Arabia tend to use foreign e-commerce platforms
• E-commerce traders in Saudi need ‘more support’ to compete

The Saudi e-commerce industry must do more to encourage consumers to spend their riyals with local platforms, as the kingdom’s online shopping sector aims to hit SAR 347.2 billion ($92.57 billion) by 2026.

Saudi shoppers are mainly choosing cross-border platforms for their online purchases, according to the latest report from Kearney and Mukatafa.

They cited lower prices (72 percent), wider choice (47 percent), convenience (35 percent) and brand variety (31 percent) as the main attractions.

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Cross-border e-commerce, or foreign operators, made up 59 percent of the Saudi sector’s revenue in 2021.

Prince Waleed Bin Nasir Bin Fahad Al Saud, CEO of consultancy company Mukatafa, said that Saudi e-commerce platforms needed more support in order to be able to compete.

This could include a reduction in the minimum duty threshold and reviews of tax laws for foreign organisations and individuals, as seen in other international markets.

“As it stands, current regulations in the market favour cross-border players, and until that changes cross-border sales will continue to hold a major share of the e-commerce market compared to local players,” he said.

The report revealed that 74 percent of online shoppers in the kingdom expect to increase their purchases from Saudi e-commerce platforms compared with their purchases from China, GCC, Europe and the US.

“While the latest stats demonstrate the strength of progress that e-commerce is witnessing, we know that the sector is still not where it needs to be, nor where we have the power to take it,” Mohamad Mourad, managing director and CEO of Cenomi Group told AGBI.

Rapid growth

In the past three years e-commerce has grown faster in the Mena region than anywhere else in the world.

An estimated 209 million consumers transitioned to online shopping during the height of the pandemic, data from cloud-based payments platform Checkout.com shows.

Statistics from Checkout.com reveal that 91 percent of Saudi consumers now shop via e-commerce and 14 percent spend money online at least once a day.

Amazon Saudi this week announced it has doubled its storage capacity with the launch of a 2.7 million cubic foot fulfilment centre in Riyadh that can house over 9 million products.

Maya Azzi, chief brand officer at high-end resale platform The Luxury Closet, said: “The key is to foster local brands and local talents, especially in fashion. E-commerce players have to offer ‘exclusive to Saudi’ collections and pieces to encourage spending within the kingdom.”

One of the key levers to supporting local operators is expanding the digital payment options available. Saudi Arabia’s card payments market is expected to grow by 14.6 percent this year to reach SAR 532.1 billion, according to data and analytics company GlobalData. 

Ravi Sharma, a banking and payments analyst at GlobalData, said cash has traditionally been the preferred method of payment in Saudi Arabia, but its usage is on decline, in line with the rising consumer preference for electronic payments.

Nicolas Bruylants, chief vision officer and co-founder of ‘e-commerce accelerator’ CNNB Solutions, observed that localisation is key for Saudi operators, in terms of content, payment solutions and customer support.

“If you get that right, customers will turn to you instead of the external market,” he said.