Saudi Arabia has become synonymous with change. Social, economic, cultural, in the context of Saudi, these words are always closely tailed by ‘change’, like an over enthusiastic private investigator on the heels of a suspect. The same can be said of ‘digital’.
‘Change’ (or transformation to the well renumerated) is never far away.
So, given this is a piece on digital in KSA, you can be certain it’s about change. Digital retail in KSA presents an interesting dichotomy. Digitally intelligent, connected consumers who spend significant amounts of time online.
Who overwhelmingly prefer to shop offline, rather than online. 55 per cent of the Kingdom’s population is under 35, smart phone penetration is 116 per cent , internet connectivity 99 per cent and the average daily time spent on social media is 2.5 hours (25 per cent more than the global average and more than countries like China and the US).
However, most sources put e-commerce penetration at about 8 per cent, roughly the same as South Africa. While 8 per cent is modest by comparison to markets like the UK (25 per cent) or China (50 per cent), e-commerce in Saudi continues to grow faster than global averages. E-commerce is entering a new stage of the digital maturity curve.
Adoption and growth
This next wave of adoption and growth is being driven by three significant changes. Leading the change is the emergence of a strong domestic Direct-to-Consumer commerce ecosystem.
Traditional (physical) retail in the Kingdom has long been built around multi-brand, horizontal (multi-category) experiences. Souqs have evolved into shopping malls and digital retail has followed this same path, with marketplaces and aggregators pioneering the early growth of commerce.
But in the last two years, KSA has seen tens-of-thousands of mono-brand and independent e-commerce sites launch.
Local SaaS commerce platforms like Salla and Zid, along with global solutions like Shopify, make ecommerce accessible. Salla alone lay claim to over 20,000 active websites – the vast majority of which serve the Saudi market.
It’s not just the domestic ecosystem that’s evolving. In recent months we’ve seen three global e-commerce giants expand their focus towards the KSA. Shein and Temu, hedging against regulatory and macroeconomic risks in international markets, are investing heavily in growing their audience in the GCC.
And Trendyol, already popular in Turkey, has doubled down on its efforts to expand across KSA by signing a strategic partnership with Cenomi (the largest vertically integrated fashion and lifestyle brand in KSA).
Social commerce disrupts local landscape
Social commerce looks poised to further disrupt the local landscape. Long discussed as the ‘future of online shopping’, until now, outside of Asia, attempts at converging social and transactional have failed to land. TikTok
Shops is changing this. Across Asia, TikTok Shops is having the same impact on retail that Google did 20 years ago.
Currently live in six markets, annualized sales (GMV) already top $350m. For perspective, that’s half of what Amazon sells globally. TikTok is changing how people discover, search and shop, and it’s launching in KSA later this year.
Meta is also making steps to integrate commerce solutions into their ecosystem. WhatsApp Shops already provides a store front, cataloging and simple checkout solution. A pilot for native in app purchases and payments is live in India and we can expect to see this being rolled out in KSA soon.
For brands, TikTok Shops and the accessibility of turnkey SaaS platforms like Salla mean it’s never been easier (or cheaper) to launch a digital sales channel.
Domestic SMBs now have access to digital infrastructure to enable them to reach bigger audiences and scale operations efficiently. Regional success from international platforms like Shein will prompt further investments in local distribution, reducing shipping times and further fueling their popularity.
For us consumers, with more choice comes more competition and this means even better prices and better shopping experiences. TiKToK Shops (and other social commerce innovations that follow) provide us with even more ways to shop.
The result, a generational shift in consumer shopping behaviour.
