Why Saudi Arabia could be the next big e-commerce hub in the Arab world

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Saudi Shopping

Saudi entrepreneurs have often cited the challenges to opening an e-commerce startup in the Kingdom. Many note a lack of public trust towards online payment, non-existent regulations or frameworks for starting up online, and low public awareness to the presence of online shopping in Saudi Arabia. Despite these challenges however, a recent study, by the Qatar Foundation and Northwestern University, shows that Saudi Arabia actually has huge potential for e-commerce startups.

As the second largest e-commerce market in the GCC, Saudi Arabia saw US $520 million in e-commerce sales in 2011.  

While some may think that the UAE is the best place to build an e-commerce company in the region, the same study indicates that Saudi Arabia offers a greater opportunity for new e-commerce companies today. In the Kingdom, more individuals buy products online, invest in stocks, and pay bills online at least once a day than in any other Arab country of the eight included in the study (the others are Qatar, Bahrain, Egypt, Lebanon, Jordan, Tunisia, and the UAE).

Saudi Arabia also has a supportive online payment infrastructure - one of the most open in the region - that supports a range of payment gateways operating in the region, including PayPal, Skrill, CashU, Gate2Play, Cashi and others. The study also shows that Saudi Arabia has the second highest rate of credit card usage and the second lowest rate of users afraid to user their credit cards online.

The number of Saudi consumers willing to make online purchases is also rising. In 2011, 39% of internet users, approximately 3 million people, were buying products and services online. And with the rise of new e-commerce options, this number is likely to rise quickly for a couple reasons. Increased support for e-commerce companies through organizations and partnerships, like Saudi e-commerce alliance Ittejar and angel investor network Sirb, is having a positive effect on e-commerce ventures and several successful e-commerce sites have either launched or expanded into Saudi Arabia.

Flash sales sites MarkaVIP, based in the UAE, and Harir from Jordan are just some that are vocally focusing on the Saudi market, while local Apple product online retailer iPhady is also finding success in the Kingdom. These examples could motivate more entrepreneurs to enter the market and take advantage of a growing customer base and easy online payment opportunity.

What do you think - Does the Saudi market have more e-commerce potential than the UAE? Should startups be focusing their energy here? 

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