A significant shift in consumer behaviour has been noticed in Saudi Arabia, with local consumers increasingly turning to digital channels, amidst restricted movement due to the on-going COVID-19 pandemic, observes the Oxford Business Group (OBG). The efforts to maintain social distancing have led to rapid spike in e-commerce activities.
Saudi Arabia-based Danube Online and the Danube App – the e-commerce arms of supermarket and hypermarket chain operated by Bindawood Group of Companies – have seen average daily sales up over 200% and average order value up 50% in approximately the last two weeks, compared to the same figures in February 2020. “To meet the increased demand on Danube Online, Danube App and BinDawood App, we are expanding, hiring more staff for our online operations. We have begun working with external delivery aggregators with the support of the Ministry of Commerce and Trade. We are onboarding approximately two-three aggregators per day, training them on the online system to get them up and running, and increasing our capacity day-by-day,” shared Majed M. Al Tahan, co-founder & managing director, Danube Online.
Saudi grocery delivery app Nana has also benefitted from the recent turn towards online shopping, raising $18 million in a Series B funding round in late March to expand operations across the Middle East. Investors included venture capital funds Saudi Technology Ventures and Middle East Venture Partners. This follows a Series A funding round that raised $6 million last year. The company has expanded capacity three-fold following a surge in demand associated with the COVID-19 outbreak. This is expected to continue in light of the Saudi government’s decision to impose tighter curfews in major cities.
Looking ahead, retailers may need to adapt their supply chains in response to shifting market dynamics. “Vertical integration is a pivotal development strategy, especially considering the recent spike in demand for e-commerce and fresh food delivery, which Saudi Arabia’s supply can hardly meet,” said Seifallah Sharbatly, managing director of Sharbalty Fruit.
The increase in the pace of online retail, notwithstanding the crisis, aligns with some of the goals of Saudi Arabia’s overarching strategies, states OBG. As part of the Financial Sector Development Programme – part of Vision 2030 – the government hopes to increase the proportion of online payments to 70% by 2030, up from the 2020 target of 28%.
To help incentivise this growth and ensure long-term sustainability in the segment, the government has also sought to improve the regulatory framework. In October 2019, the government implemented the E-commerce Law, designed to regulate digital payments and improve transparency. On January 31, 2020 the Ministry of Commerce and Investment adopted the Implementing Regulations of the E-commerce Law, adding increased oversight to areas such as personal data protection, consumer rights and disclosure obligations.