This year, online payment solution provider PayFort released the State of Payments Report for 2014 in the Arab world. Although we had already published on Firnas an infographic for the company, offering an overview of the products that Saudi consumers buy online, the cities they buy from, and their preferred methods of payment, we are now addressing these things in more detail to give you deeper insights into the ecommerce sector of Saudi Arabia, and why merchants should go online. Basing our article on PayFort’s study, here are some reasons to make the move:
The study shows that more than 28 million people live in Saudi Arabia, of whom 15.6 million are internet users, and 3.9 million are making online transactions. The majority of these people are aged between 25 and 54.
Despite the low rate of online transactions, online credit card usage is expected to increase. Online transactions vary by gender with only 15% of buyers being females vs. 85% male. This difference will shrink with time; however, online merchants in Saudi Arabia and any other merchants who wish to enter need to better target women, whether through social media campaigns, targeted services, or any type of offered products.
There is also a difference in online transaction payments between Saudis and immigrants in the county. Accordingly, 32% of buyers are Saudis, vs. 59% who are non-Arab immigrants. The reason might be that the e-commerce concept is more popular in the West.
- What are they buying?
If you are a merchant and would like to check what products and services people buy online in Saudi Arabia, then it'll be good to know that airplane tickets are the top purchase, followed by electronics and hotel reservations. Other categories include entertainment, clothes, books, healthcare, auto parts, sports gear and others. It should also be noted that most transactions come from Riyadh.
- How are they paying?
You won’t be very surprised to know that 76% of payments are done through cash on delivery (COD) and that only 24% are made through credit cards. The idea of putting your credit card information on a website still scares a lot of people. However, COD has its share of challenges and new merchants are not encouraged to adopt it for the following reasons:
- In 40% of cases customers return the product they ordered because they changed their mind and didn't want it anymore.
- Merchants have to wait for about four weeks to collect the customer’s money.
- It is difficult to track the costs and manage the revenues the company is making as well as detect fraudulent activities as there is a third party involved in collecting the money on behalf of the merchant.
- High accounting and transfer fees.
Although the sector is still nascent and full of challenges, the concept is becoming widespread and the internet penetration rate is growing, along with the increasing popularity of credit card use. Which means more regional and international websites might immerse themselves in it, and competition will become fierce.