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Saudi e-commerce market value 'to exceed $13 bn by 2025'

RIYADH, December 7, 2021

As Saudi Arabia makes sustained progress to its 2030 Vision, the Kingdom’s e-commerce market has witnessed rapid growth in recent years. Driven predominantly by apparel, electronics, and appliances, e-commerce sales have increased by more than 30 per cent on average annually, with growth observed across all categories. 
 
Boston Consulting Group’s (BCG) new report, titled ‘The SAR50 Billion E-commerce Opportunity in Saudi Arabia,’ highlighted that the sector’s market value increased to almost 60% between 2019 and 2020, and is now projected to exceed SAR50 billion ($13 billion) by 2025. 
 
The report, prepared in collaboration with Meta, details how e-commerce growth largely outpaces that of traditional retail and shows no signs of abating. However, the segment is still in a nascent phase at present despite undergoing fast growth. 
 
In 2020, online sales in KSA accounted for approximately 8% of total retail sales compared to 18% worldwide, and this figure is also much lower than those in leading e-commerce markets where penetration easily exceeds 30% or 40%.
 
BCG Managing Director and Senior Partner Pablo Martinez said: “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.
 
“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.”
 
The growth of the Kingdom’s e-commerce industry will generate a significant number of jobs requiring varied qualification levels, including skilled positions in management and technical work functions, and many will be both appealing and present residents with viable employment avenues. 
 
At the same time, a thriving e-commerce sector will support entrepreneurial activities due to low entry barriers for specialised players. 
 
Suha Haddad, Director of Agencies and Ecosystem Development for MENA, Meta, said: “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.”
 
In addition to players leveraging the existing ecosystem to begin their activities with limited investment, e-commerce can also facilitate entrepreneurship through the provision of efficient market access to new consumer products. 
 
Moreover, the development of a diverse landscape of technological service providers will drive the widespread introduction of technological solutions, while likely social impacts include the accessibility of goods and services in rural areas, heightened product delivery due to greater geographical reach, and better consumer prices. 
 
While efforts are ongoing to improve the digital ecosystem and advance modern trade and e-commerce in the Kingdom, the government has a significant role to play in ensuring that the aforementioned enablers are in place. BCG has identified several imperatives for this ambition to become a reality:
- Improve the speed and quantity of shipping and delivery services, especially outside main metropolitan areas
- Incentivise 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
- Incentivise localisation of global e-commerce players, while promoting fair competition to help the domestic e-commerce scene develop.-TradeArabia News Service



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