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E-Commerce in Saudi Arabia: A Report
Report by the Sacha Orloff Consulting Group: [UPDATE]: We have published this report as some of its data might be useful to some; however, it has a few flaws and some statistics that we have called into question.
The major stats it cites include:
- The retail sector in the Kingdom of Saudi Arabia is the largest among GCC countries, and is predicted to hit SR 250 billion ($66.7 billion) in 2012.
- By 2014 alone, overall IT spending is expected to reach US$ 5.7 billion, comprising over 50% of total ICT investments throughout the GCC.
- SMEs in the Kingdom have a 52% internet penetration rate.
- Mobile penetration in KSA is now around 132%, as determined by a CITC iCT Market study assessing individual users' number of personal phone lines.
- The report's statistic on the internet penetration in Saudi Arabia at 63% is misleading, as in fact only refers to the health sector, as cited by this CITC report on Internet and Computer Usage. The correct internet penetration rate is likely closer to Internet World Stats' assessment of 38.1% penetration as of 2010.
- 95% of the population owns a mobile phone.
- 29% of those polled say they have a propensity to purchase on mobile phones, with 58% preferring cash on delivery as their payment method, and 22% preferring credit card.
Items most likely to be purchased on mobile phones are, in order from most to least:
-Travel (Airlines/ Hotels)
- Technology/ Electronics
- Health/ Cosmetics
- Financial Services
- Supermarket Goods
(n.b. percentages were requested on this and other graphs from the authors but were not available).
- The GCC B2C e-commerce market is expected to reach US $15 billion by 2015, with total e-commerce sales valued at $US 3.5 billion in 2011.
- 67% of online consumers in Saudi Arabia are under 35 years old, and most of them made their first purchase 5 or more years ago. Surprisingly, according to this data, 69% of them prefer credit card purchases.
[UPDATE:this statistic does not seem representative of the overall population given that casual reports from the region's leading online retailers point to 70-80% of orders in Saudi Arabia being placed with COD as the preferred payment option. We are looking into the origins of this statistic, which was not published in the original report].
- The report advises that retailers looking to take advantage of the market gap and venture into e-commerce should "focus on generating a recognizable online brand identity that differentiates itself from Western ‘copy and paste’ models."
Major challenges to e-commerce in Saudi Arabia include:
- gateway payment systems
- difficulties performing banking
- the usage of P.O box systems rather than residential postal addresses and finally
- the speed and access of internet services
- unclear regulations within the virtual sphere
- under-developed customer and after-sales services
- lack of trust by consumers in online buying processes.
Yet with the biggest retail market in the GCC, contributing to 17% of GDP, Saudi is ripe for e-commerce as long as brands build trust.
Download the report above to read more.
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