(Source: Arab News | May 18, 2018)
The battle for Saudi Arabia’s online shoppers is on.
One year on from the Amazon-Souq deal, the Kingdom’s youthful population is being increasingly targeted by the region’s burgeoning e-commerce industry.
With the largest economy in the GCC and the youngest Internet-connected population in the world, the Kingdom represents a golden goose for the world’s online retail players.
Online sales in Saudi Arabia are expected to surge to $13.9 billion by 2021 from about $8.7 billion in 2017, according to market researcher BMI.
The overall GCC e-commerce market is now tipped to grow to $24 billion by the end of the decade, say management consultancy A.T. Kearney.
UAE-born Souq.com, which was acquired by Amazon in 2017, has already built up a following and brand relationships in Saudi Arabia since its launch in 2005.
After months of delays, Noon.com also launched in the Saudi market in December last year, after starting up in the UAE earlier in the year.
Investors in Noon.com, including Emaar chairman Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund, have put $1 billion into the project.
Saudi Arabia offers great scope for retail players looking to expand said Sam Blatteis, CEO of The MENA Catalysts and ex-Google head of Gulf government affairs.
As he puts it: “The Kingdom’s population has already expanded 50 percent since the start of the millennium, and has the highest YouTube and Twitter usage on earth. At this point, the pace of change has never been this fast, and yet it will never be this slow again.”
He said: “Tech titans from the world’s two largest economies – China and Silicon Valley – are signaling they plan to expand in Saudi Arabia. The Kingdom’s 2030 vision is only 12 years away and Saudi’s ‘Generation Y’ leadership is increasingly running the country. They are moving mountains to overhaul strategic industries from transportation to education legalizing ride-hailing apps to rolling out coding classes in schools nationally.”
As competition heats up in the marketplace and more players join the fray, trends will lean to specialization, said Monica Peart, senior forecasting director at E-Marketer.
“As more local e-commerce players arrive on the scene, you will start to see price competition and product competition. They will start to specialize, which will engender even more e-commerce activity,” added Peart.
But for e-commerce to really take off in Saudi Arabia and the wider GCC, shoppers “must be able to find better goods online than on the local shelves,” said Peart.
She added: “For this scenario to become a reality, the region will need to ramp up its last-mile services, time-to-delivery, online ranges and its choice of payment gateways.”
According to Walid Mansour, managing partner at Middle East Venture Partners (MEVP), which has investment in several e-commerce related ventures, including last-mile delivery company One Click, “e-commerce is growing at a very fast pace but faces challenges.”
Mansour highlights lack of data analytics as a key hindrance to the market. “What’s needed to boost the online commerce market is data, including predictive data, which leads to insights for actions, as well as automated marketing services,” he said. “But of course, there are a lot of (e-commerce) players in the market now, which means there is a lot of growth potential. The market is getting better … but it’s not there yet.”