Online Business Growth In Saudi Arabia

The Middle East is a paradise for investors looking to deepen their pockets by taking advantage of the complete digital turnaround.

Slowly and steadily, the Kingdom of Saudi Arabia (KSA) has been making its place in the world of e-commerce, and now they are ready to take it to the next level.

After the announcement of Vision 2030 in April 2016, the development plans in Saudi Arabia have shifted to the 5^th gear. The government's prime objective is to shift the main revenue focus from oil to diversify in different sectors.

The driving force that helps Saudi Arabia realize its vision is the ever-growing spending potential of the average consumer increasing every day. Moreover, the main ingredient to this successful recipe is that millennials today are getting more indulged in using electronic appliances. 

Surveys point towards the fact that the younger crowd (between the ages of 16-23) makes up for the majority of online participants. Even though they don't possess the same spending power as the older generation, they shop for their needs online.

Why is the Online Business In Saudi Arabia Growing?

Investors searching for a desirable place to invest should once definitely give the e-commerce sector of Saudi Arabia a thorough look. Multiple reasons are making the sector grow in Saudi Arabia; let's have a look at them:

1.Marketing Trends

At the pace at which technological advancements arrive, our ease in doing things is becoming evident. The traditional method of shopping in brick and mortar establishments is slowly fading. According to a Forbes survey in 2017, nearly 12 million shoppers in Saudi Arabia purchase commodities online. This change in trend is a massive factor in the growth that we are witnessing right now.

2.Covid-19 Impact

Panos Linardos, chairman of The Retail Leaders Circle, said that when the pandemic was at its peak starting March in 2020 for six months straight, regional e-commerce saw unprecedented growth. He also added that even though physical shops are beginning to re-open after the arrival of the vaccine, e-commerce retains the gains it saw during the lockdown period.

3.Clothing Market Boom

As big players such as Zara, Shoppers Stop, Maxx, Nextdirect, and Bershka set up business in Saudi Arabia, they will completely revolutionize the online market scenario because of their strong brand presence in people's minds.

Speculation made in 2017 suggested that the online fashion market in Saudi Arabia should increase at a CAGR of 20.2% during 2018 and 2022 in terms of GMV due to the increasing demand for clothing and footwear from online sellers providing the best deals at reasonable prices. The footwear was expected to record the highest growth in the coming five years, projected to grow at a CAGR of 28.3% in the market to 2022.

4.Social Media Impact

It was estimated that 93 million people, 63.3 percent of the internet-using population, were active on social media. The amount of social media users in Saudi Arabia is growing at a rampant rate. Social media platforms like Twitter, Facebook, Instagram, etc., have a direct impact on the buying behavior of a consumer. Consistent reviews and advertisements play a major role in the overall power of influencing that can be done with social media.

5.Food Delivery Digitization

Saudi Arabia is witnessing massive growth in the food industry due to the evolution of the delivery system. Restaurants enjoying significant goodwill in the market also opt for the online food delivery service to generate more profits. Online platforms such as UberEats, Talabat, MakeMyMeal, etc., are generating a significant chunk of their profits from this online business, impacting the overall online business growth in Saudi Arabia.

6.Cross-Border Purchases

Online shoppers in the UAE made 58 percent of their online purchases from overseas vendors in 2016. There have been improved gateway security and reliable and free shipping methods, which has primarily persuaded many buyers to purchase products outside the region.

7.E-commerce Payment System Development

Previously, the preferred payment method has been cash on delivery in Saudi Arabia. The introduction of several online payment gateways has persuaded the region's residents to prefer online payment systems. The established government also actively tries to convince the people to change payment methodologies by introducing particular regulatory frameworks.

8.Internet Penetration

The government of Saudi Arabia is making the internet available in every corner of the country. The drive towards development has helped with the internet penetration rate. In 2020, 93.31% of the population had access to the internet, which will grow with time.

All of the above reasons show how Saudi Arabia is a golden place for investment right now. The online business is growing more than ever, and as advancements arrive, Saudi Arabia will keep up with the pace. Registering a company in Saudi Arabia can prove to be an excellent business move right now.

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