How promising is Saudi E-commerce market? What opportunities and challenges lie ahead?
Since February 2021, Saudi's e-commerce sector has experienced rapid growth, with a significant surge in sales.According to data, the revenue of Saudi e-commerce market is projected to reach USD 11.98 billion by 2023, surpassing that of the United Arab Emirates. Moreover, the market is expected to grow at a compound annual growth rate (CAGR) of 13.9% from 2023 to 2027, reaching a total market size of approximately USD 20.16 billion by 2027.
These figures clearly indicate that Saudi's e-commerce market is expanding rapidly and holds tremendous potential for future development.
Opportunities
High Internet Penetration Rate
According to the International Trade Administration, smartphone penetration in Saudi is as high as 97%, making it one of the highest in the world. Moreover, the country ranks 10th globally in internet speed. This widespread internet access helps foster consumer awareness of online shopping, which in turn drives the growth of the e-commerce market.
Government Support for E-commerce Development
One of the core goals of Saudi's Vision 2030 is to accelerate the development of its digital economy, including increasing the share of cashless transactions to 70% by 2025.
To support this, the Saudi government has introduced a number of policies. In 2022, the Ministry of Commerce launched ten initiatives aimed at developing online stores in Saudi. One such initiative encourages online retailers to expand their delivery coverage to all regions in the country, not just major cities. If implemented effectively, these measures are expected to significantly enhance the growth of Saudi's e-commerce sector.
Rapid Development of Digital Payments
The COVID-19 pandemic greatly accelerated the adoption of digital payments. Between February 2019 and January 2020, bank card payments in Saudi surged by over 70%. According to a recent study by the Saudi Central Bank (SAMA), electronic payments overtook cash as the most common payment method by 2021. By 2023, the development of digital payments in Saudi had reached new heights.
E-commerce Market in a Golden Growth Phase
Saudi's e-commerce market is growing rapidly, and its platforms are still in a developing stage. There are relatively few sellers, which means lower competition for new entrants compared to more saturated markets.
Challenges
Limited Product Variety and Scale
Local e-commerce platforms like Noon offer over 5 million SKUs, and Namshi has about 100,000 SKUs. In contrast, global giants like Amazon (350 million) and Rakuten (250 million) offer a significantly broader range of products.
Rising Cybercrime
With the increase in online shopping activity in Saudi , the risk of electronic fraud has also been rising. Saudi is currently the second-largest market for malicious emails globally. According to Arabian Business, 93% of financial fraud cases occurred after the pandemic, highlighting the growing concern over cybersecurity.
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