KSA study reveals increasing interest in buying local ecommerce in Saudi Arabia over cross-border players
A new report from Kearney and Mukatafa, explores the impact of cross border ecommerce in Kingdom of Saudi Arabia (KSA), revealing that as consumers in the Kingdom continue to embrace online shopping, they are switching their support to buy from homegrown platforms, local and hybrid players, instead of their cross-border peers.
Consumers, to date, have been opting for cross-border platforms due to lower prices (72 percent), wider choice (47 percent), convenience (35 percent), and brand variety (31 percent). As of 2021, cross-border ecommerce accounts for 59 percent of all ecommerce revenue and, while this is set to decrease (to potentially 49 percent by 2026) as local and hybrid players gain traction, it still dominates.
As local ecommerce platforms continue to launch in the market, consumers have expressed their support for ‘buying local’ with 74 percent of online shoppers in the Kingdom expecting to increase their purchases from Saudi ecommerce platforms compared to their purchases from China, GCC, Europe and US. However, further support will be needed to ensure a level playing field for all ecommerce players, thereby protecting consumer interests, and promoting local investments.
Prince Waleed Bin Nasir Bin Fahad Al Saud, CEO of Mukatafa commented, “It is a strong sign that local e-commerce businesses are gaining more traction in the market. We must make sure that these businesses are supported to thrive as well as cross-border accounts. There are suggestions in which we could help this happen successfully including, as seen in other international markets, a reduction in the minimum duty threshold and reviews of tax laws for foreign organisations and individuals.”
Prince Waleed suggested that thresholds on import quantities could be introduced and local quality standards could be mandated for cross-border players. He added, “It is these types of initiatives that will need to be addressed if we are to create a level playing field for all ecommerce 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 ecommerce market compared to local players.”
In his statement, Mohammed Dhedhi, Partner at Kearney Middle East, pointed out that “the flourishing ecommerce ecosystem in KSA empowers citizens to use innovative digital payment options, in line with Government initiatives under Vision 2030 to guide private sector investments to provide critical pillars for the sector’s growth such as increasing cashless transactions and expanding the geographical coverage of ecommerce delivery beyond the Kingdom’s major cities. The growth of the local and hybrid ecommerce players will contribute to protecting consumer interest and promoting local investments with strong potential for job creation.”
Valued at 19.3B SAR, KSA’s ecommerce market is 6 percent (19.3B SAR) of the overall 347.2B SAR retail market (according to Euromonitor) and this is expected to reach 7.5 percent (34.7B SAR) by 2026.