Cross-border business in the Middle East, how do Saudi's physical and online economies compare?
Saudi boasts a vast consumer market with a population of nearly 36 million and a relatively high per capita GDP. While the country's e-commerce sector is booming — with online transaction volume increasing by 44% year-on-year in February 2024 — brick-and-mortar commerce still holds significant ground. As the largest e-commerce market in the Middle East, 67% of Saudi internet users purchased goods online in 2023. From 2024 to 2029, the e-commerce market is expected to grow at a compound annual growth rate (CAGR) of 15%.
The comparison between Saudi's physical and digital economies is outlined below:
Online Economy:
Rapid E-commerce Growth: Saudi's e-commerce sector has seen rapid expansion, with over 32% growth in Q1 2023 alone. The market is expected to maintain an average annual growth rate of around 14% in the coming years.
Changing Consumer Preferences: As the demand for convenience grows, Saudi consumers increasingly prefer online shopping. Younger consumers are the primary drivers, showing strong demand for electronics, fashion, and similar categories. Many also rely on social media to discover and purchase products. Statistics show that over half of the population has already participated in online shopping.
Government Support: The Saudi government supports the development of the e-commerce sector through initiatives such as the "Vision 2030" national transformation plan, which positions e-commerce as a key avenue for economic diversification.
Opportunities and Challenges: Vision 2030 is also spurring urban infrastructure development, offering opportunities for physical retail. However, this is accompanied by challenges such as e-commerce disruption and shifting consumer behavior.
Physical Economy:
Continued Importance: Despite the growth of online commerce, the physical economy remains essential, particularly in retail, food and beverage, and services sectors.
Consumer Behavior: While online shopping is gaining popularity, many consumers still prefer physical stores, especially for experiencing products firsthand or for items that require immediacy, such as fresh food or high-value goods. This is especially true for products that require trying on, like clothing and shoes.
Challenges and Opportunities: The physical economy faces competition from online platforms, but also has opportunities to enhance competitiveness through digital transformation and market expansion.
Growth Drivers and Barriers: Government support, internet penetration, and the rise of a young consumer base offer strong growth potential. However, low logistics efficiency, last-mile delivery issues, and cultural factors remain significant hurdles.
Ontask Express has specialized in Saudi door to door one-stop services for 20 years. We are fully certified and ensure hassle-free customs clearance. With overseas warehouses and self-managed Chinese delivery teams based in Jeddah and Riyadh, we offer e-commerce-friendly logistics without appointment requirements. Our safe and reliable logistics solutions empower your business growth in Saudi Arabia.