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|21 March, 2019

Saudi online shopping rises to near 50% in 2018 - authority

Rate of people paying online for e-commerce purchases have almost doubled since 2016, a statement sent to Zawya showed

Image used for illustrative purpose. Hands typing on laptop computer.

Image used for illustrative purpose. Hands typing on laptop computer.

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Almost half of internet users in Saudi Arabia engaged in some form of online shopping last year, the country’s Communications and Information Technology Commission has said.

The government body’s annual study of around 10,000 internet users revealed the percentage who engaged in online shopping last year crept up to 49.9 percent, from 47.9 percent in 2017, and 37.3 percent in 2016.

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

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The most popular online payment method was via online banking, which accounted for 34.1 percent of transactions, followed by credit cards at 28.1 percent,  online payment services (such as PayPal) at 5.3 percent, and pre-paid gift cards or electronic coupons at 4.1 percent, according to the study conducted by CITC.

The consistent year-on-year increase in the number of Saudi e-commerce shoppers announced by the telecom authority comes as no surprise, according to Ibrahim Farah, a UAE- based e-commerce manager.

With more investors understanding the importance and feasibility of e-commerce in Saudi Arabia and the necessity for retailers to adopt an omni-channel strategy, a boom is expected to happen in the next 2-5 years, given the potential that the Saudi market possesses, he argued. (Read more here). 

“In fact, the increase announced is even less than what it can be if it weren’t for a number of reasons that constitute obstacles for e-commerce in Saudi. These include a weak logistical infrastructure, poor Arabic e-commerce content, and rigid cross-border commerce regulations,” he told Zawya in emailed comments.

The Middle East e-commerce market is predicted to be worth $48.8 billion by 2022, with Saudi Arabia occupying the largest share of that growth, according to Visa’s general manager for the kingdom, Ali Bailoun.

“Therefore, there is a significant economic opportunity for Saudi Arabia to be gained by modernising the e-commerce experience for Saudi consumers.” he said.

“Data we released at our recent MENA eCommerce Summit shows that e-commerce in the region recorded double-digit growth in 2018, led by a 27 percent increase in volume of transactions (i.e. value) and 44 percent increase in the number of online transactions over 2017," he added.

Streamlining deliveries within Saudi Arabia is challenging due to the lack of efficient courier delivery services, according to Farah, as the existing courier companies constantly experience delayed deliveries, with higher shipping costs as compared to their counterparts in the UAE.

“There aren’t many fulfillment centers that are capable of operating at a high level in Saudi. However, it is hoped that Noon’s launch in Saudi will stimulate the development of this sector. More investment is definitely needed in logistics,” he said.

With the largest part of Saudi Arabia’s population consisting of native Arabic speakers, the existence of Arabic e-commerce content on the internet is essential to drive more customers, he said.

“Most successful e-commerce platforms in the GCC were developed to serve the English-speaking residents of the region first. Efforts are being made to improve Arabic content on online stores owned by the largest companies,” he said. “However, the smaller players don’t usually have the means to operate a bilingual platform and provide customer support in both languages.”

Although shipping prices between GCC countries have decreased over the past few years, they are still much higher than one can expect for neighbouring countries, according to Farah.

“Customs duty is frequently imposed at the Saudi border for shipments coming from other GCC states, and inspection can take several days, thus delaying delivery,” he said.

According to CITC’s statement, online shopping rates varies among different age groups, with those aged between 20-24 accounting for the largest category of online shoppers.  Some 65.2 percent of internet users in this age range shopped online, as did 63.2 percent of 30-34 year olds and 61.8 percent of 25-29 year-olds.

On the gender trends in online shopping in the kingdom, females were more likely to shop online – 51.7 percent of women made online purchases, compared to 48.6 percent of men, the statement said.

“The growth and expansion of e-commerce is a priority of Saudi Vision 2030 cashless pillar, which aims to diversify the economy, boost investment and strengthen trade across different sectors,” Visa's Bailoun said.

“As part of its development blueprint, the government has undertaken several initiatives to digitise commerce in the Kingdom with the aim of increasing investment from regional and international e-commerce businesses,” he noted.

(Reporting by Nada Al Rifai; Editing by Michael Fahy)

( nada.rifai@refinitiv.com )

Our Standards: The Thomson Reuters Trust Principles

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© ZAWYA 2019

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