The dynamics of e-commerce in KSA

While it may not reach the heights of 20-25% penetration, the e-commerce market in the Kingdom of Saudi Arabia (KSA) is growing, stated session moderator Sundeep Khanna, Partner, Deloitte at IMAGES RetailME’s recently concluded Saudi Retail Forum (SRF).

So, what are the dynamics driving the e-commerce market in the Kingdom? What kind of changes in customer behaviour are visible, particularly since the pandemic?

“The mall culture is quite dominant in Saudi Arabia and the GCC region. Pre-pandemic we didn’t really talk much about e-commerce. However, when the pandemic hit and we had to shut stores, we had to quickly find a way to deal with our stock, pay salaries and keep the machinery running. So, brands started developing online presence to create a new sales channel,” observed Aurelien Cuellar, Director Technology & Omnichannel, Chalhoub Group.

“As a result, over the past three years, e-commerce has grown. For instance, the share of e-commerce in our business is more than 10% versus offline, and we see this increasing in the next few years until 2030. And to ensure steady growth, localisation is crucial – localisation of content, campaigns and customer engagement,” he added.

In agreement is Karima Saleh, Co-founder of Kaafmeem – a local, online, ready-to-wear modest fashion brand. “Since the pandemic, the growth for e-commerce has been accelerated and it helped brands like us to grow. The customer has become more aware and price sensitive. Payment methods have diversified moving away from what used to be predominantly cash on delivery.”

Staying with alternative payment methods, Sultan Thawab Al-Jeaid, Director – Freight Forwarding & Logistics, Cara (part of Seera Group) said, “Companies have found alternative methods of payment, which has made the fulfilment process easier.”

At this point, offering a supply chain perspective, Roman Poludnev, Business Development Director, Honeywell said, “For effective supply chain, e-commerce distribution centres need to be decentralised. They need to get closer to customers to fulfil smaller ticket size but larger number of orders. It’s a challenge that’s not easy to overcome, especially since demand can be unstable with seasonal spikes. One of the ways to improve productivity is to invest in tech enabled smaller distribution centres, fully automated and robotic distribution centres. Technology will be a key solution for e-commerce supply chain.”

The pandemic certainly impacted consumer behaviour, transforming from being need based to becoming value based. To gain market share, companies encouraged a promotion-driven culture which is difficult to sustain, observed Julie Samaha, Head of E-commerce, Tamimi Markets. “The solution could lie in creating experience driven customer behaviour, offering speed and convenience and using [our] brick-and-mortar facilities to fulfil online orders to reduce the cost of operation. What I must admit is that the government has played a big role in the accelerating the growth of e-commerce in KSA by building robust logistics infrastructure, ramping up delivery and enhancing data protection.

Turning towards the power of social commerce, Khanna shared that it was a $1.3-trillion market globally in 2023, estimated to grow to about $8.5 trillion by 2030.

In this context, sharing his perspective, Enis Ayari, Chief Executive Officer, Alphapedia & Bumpli observed, “Brands such as Shein and Temu are heavily leveraging TikTok through their advertisement and getting the attention of people, sometimes in just 0.2 milliseconds. That’s the power of social commerce. In a brick-and-mortar retail environment there is time to engage with people, while social commerce is a completely different ballgame where we need unique creators and influencers capable of creating engaging, entertaining and hyperpersonalised content to create brand awareness, recall and retain the audience.”