Suha-Haddad - Director - Agencies - Ecosystem-Development - MENA - Meta - Saudi e-commerce market - SAR 50 Billion - 2025 - techxmedia

Saudi e-commerce market value predicted to exceed SAR 50 Billion by 2025

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The Kingdom of Saudi Arabia’s (KSA) e-commerce business has grown rapidly in recent years as the Kingdom makes steady progress toward its 2030 Vision. E-commerce sales have surged by more than 30% on average annually, driven primarily by fashion, electronics, and appliances, with growth seen across all categories. The SAR 50 Billion E-commerce Opportunity in Saudi Arabia, according to a new analysis from Boston Consulting Group (BCG), showed that the sector’s market value surged by about 60% between 2019 and 2020, and is now expected to exceed SAR 50 Billion by 2025.

Pablo-Martinez-Managing-Director-&-Senior-Partner-BCG- Saudi e-commerce market - SAR 50 Billion - 2025 - techxmedia

“The e-commerce market in Saudi Arabia is smaller in comparison to some of the bigger e-commerce markets, such as China, US, and the UK, however, its tremendous potential is already apparent despite its infancy, and the advancement of a robust e-commerce ecosystem in the years ahead will present a multitude of economic and social benefits,” said Pablo Martinez, Managing Director and Senior Partner, BCG.

He also said, “From an economic standpoint, increased retail spending nationwide is primed to be among the most prominent, a trend that is a near certainty due to more products becoming accessible to large audiences and foreign retail expenditure being captured. Together, these factors will yield several positive outcomes, all of which will come to fruition in due course.”

“Consumers are increasingly shifting their purchasing online, with e-commerce sales soaring across all industries. The Kingdom is now more connected to the rest of the world than ever before and Saudi consumers are also demanding a new kind of relationship with brands. We are seeing users in the Kingdom engage with each other in creative ways, and businesses of all sizes leveraging our family of apps to drive growth domestically and across the world.” Suha Haddad, Director of Agencies and Ecosystem Development for MENA, Meta.

“The growth of the Saudi e-commerce market and the projections through 2025 illustrate enormous possibilities and potential for consumers, businesses, and the country. The sooner these imperatives are pursued and solidified, the substantial pace at which the sector is developing will accelerate further,” said James Brindley, Managing Director and Partner, BCG.

He added, “It is important to appreciate that a proactive collection of government policies will lay the foundations for infrastructure enhancement, business progression, and the Kingdom’s retail sector becoming a renowned digital influencer regionally and globally. As such, meeting these imperatives should be a topmost priority.”

“Looking ahead, job creation, entrepreneurship, and further technological adoption and progression will be driven by the evolving e-commerce sector, collectively making invaluable contributions to the Kingdom’s economy and society,” said, Chris Biggs, Managing Director and Senior Partner, and Global Leader of BCG’s Retail Sector.

He also said, “As such, the coming period represents an opportunity to move the industry forward and ensure every concerned party can capitalize fully on these awaiting benefits. To achieve success in this direction, a sustainable business environment is essential, as are key enablers that will drastically improve the e-commerce business environment, namely last-mile logistics, cross-border training, e-payment adoption, incubators, and internet connectivity.”

The analysis, co-authored by BCG and Meta, outlines how e-commerce growth is outpacing traditional retail and shows no indications of slowing down. Despite its rapid expansion, the segment is still in its early stages. In 2020, online sales in Saudi Arabia will account for only 8.0 percent of total retail sales, compared to 18 percent globally, and this figure is far lower than that of major e-commerce economies, where penetration easily surpasses 30 or 40%.

The expansion of the Kingdom’s e-commerce business will result in a large number of jobs requiring a variety of qualifications, including skilled positions in management and technical work functions, many of which will be both enticing and provide sustainable employment opportunities for locals. At the same time, due to low entry barriers for specialised players, a vibrant e-commerce sector will boost entrepreneurial activities.

E-commerce can support entrepreneurship by providing efficient market access to new consumer products, in addition to players exploiting the current ecosystem to start their activities with little investment. Furthermore, the emergence of a diverse landscape of technological service providers will spur widespread adoption of technological solutions, with likely social consequences including increased access to goods and services in rural areas, increased product delivery due to greater geographic reach, and lower consumer prices.

While efforts to strengthen the digital ecosystem and advance modern trade and e-commerce in the Kingdom are ongoing, the government plays a key role in ensuring that the aforementioned enablers are in place. BCG has highlighted many requirements for this goal to be realised:

  • Improve the speed and quantity of shipping and delivery services, especially outside main metropolitan areas
  • Incentivize and foster healthy competition and innovation in the delivery arena
  • Leverage the advanced and extensive digital infrastructure with modern payment solutions, both through regulatory powers and changing customers’ perceptions
  • Ensure a smooth flow of goods across borders in line with the Kingdom’s strategic priorities
  • Create a system that develops entrepreneurialism and local talent to nurture the growth of local businesses
  • Incentivize localization of global e-commerce players, while promoting fair competition to help the domestic e-commerce scene develop

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