KSA e-commerce market set to grow but local players need more support

Valued at SAR19.3 billion the Kingdom of Saudi Arabia’s e-commerce market accounts for 6%, or SAR19.3 billion, of the overall SAR347.2 billion retail market. This is expected to grow to reach 7.5% or SAR34.7 billion by 2026.

Cross-border e-commerce accounts for 59% of all e-commerce revenue (2021). Interestingly, while this is set to decrease (possibly to 49% by 2026) as local and hybrid players gain traction, it still dominates. Meanwhile, 74% of online shoppers in the Kingdom expect to increase their purchases from Saudi e-commerce platforms compared to purchases from China, GCC, Europe and the US.

However, a new report suggests that further support must be given to ensure a level playing field for all e-commerce players, thereby protecting consumer interests and promoting local investments.

Consumers have voted with their purses to date with the majority opting for cross-border platforms due to lower prices (72%), wider choice (47%), convenience (35%) and brand variety (31%). However, this is seen to be changing, as local e-commerce platforms continue to launch in the market and consumers becoming keener to buy locally.

To support local e-commerce businesses to thrive alongside cross-border accounts some initiatives are needed to create a level playing field for all e-commerce players. These could be a reduction in the minimum duty threshold and reviews of tax laws for foreign organisations and individuals. Thresholds on import quantities could be introduced and local quality standards could be mandated for cross-border players. As it stands current regulations in the market favour cross-border players, and until that changes cross-border sales will continue to hold a major share of the e-commerce market compared to local players.

Findings from a report by management consulting firm Kearney and Mukatafa, a KSA organisation unifying the public and private sectors in the development of industry policy and standards.