Saudi Arabia: Saudi e-commerce sales using Mada cards reached SR14.11 billion ($3.76 billion) in February – an annual increase of 25 percent, the Kingdom’s central bank has revealed.

This figure includes transactions through online shopping, in-app purchases and e-wallets, and excludes transactions by Visa, MasterCard and other credit cards.

Mada serves as Saudi Arabia’s national card payment scheme, aimed at advancing digital payments within the country, particularly in supporting e-commerce, point of sales, and ATM growth. Linked directly to the cardholder’s bank account, it enables real-time, secure, and reliable transactions for a variety of purposes, including purchasing, cash withdrawals, and online payments. 

The number of e-commerce transactions also increased by 44 percent on a year-on-year basis to reach more than 84 million in February.

The shift in consumer behavior post-COVID-19, supported by regulatory reforms, robust internet infrastructure, and the continuous advancement of sophisticated e-commerce businesses, has been key drivers of the shift away from cash.

In the past three years, online sales in Saudi Arabia surged by almost 60 percent across various categories, with significant growth seen in media products, apparel, and footwear segments, according to the American International Trade Administration in a January commercial guide. 

Additionally, the average spend per e-commerce user in the Kingdom rose by over 50 percent.

The organization anticipates continuous growth, projecting Saudi Arabia to reach 33.6 million e-commerce users by 2024, marking a 42 percent increase from 2019.

Factors contributing to this growth include the country’s 97 percent smartphone penetration rate, high mobile broadband subscriptions, and ranking as the 10th country globally for internet speed.

Moreover, 72 percent of Saudis over the age of 15 possess bank accounts highlighting the readiness of the population for digital transactions and online commerce.

The organization emphasized the prevalence of local platforms and the introduction of new entrants like Amazon Prime, which debuted in January 2021.

Other contributing factors include the government’s initiatives to enhance the sector’s regulatory framework, aimed at bolstering confidence among Saudis and encouraging the use of its platforms, with a focus on protecting consumers and businesses alike.

However, the organization also highlighted challenges for this sector, particularly the need to strengthen cyber-security measures to counter malicious emailing, which poses risks such as phishing scams exposing sensitive information like passwords, financial details, and personal data.

The shift to online shopping became apparent in the wake of the COVID-19 pandemic, significantly altering consumer behavior and impacting traditional retail outlets. The rise of e-commerce has proven essential, providing digital access to products and enabling businesses to adapt to changing market trends and consumer preferences.

This trend is reflected in data from the Kingdom’s central bank, also known as SAMA, showing a remarkable surge in e-commerce sales. In 2020, at the onset of the pandemic, sales increased by 279 percent, soaring from SR10.25 billion in 2019 to nearly SR39 billion.

This momentum continued in 2021 with a further annual rise of approximately 91 percent, reaching SR74 billion, and a subsequent increase of 65 percent in 2022 to SR123 billion. By the end of 2023, e-commerce sales through Mada cards had reached SR157 billion, underscoring the sector’s robust growth.

According to data from the German e-commerce database website, the top five online retailers in Saudi Arabia’s e-commerce sector for 2023 are jarir.com, nahdionline.com, amazon.sa, extra.com, and namshi.com.

Jarir.com leads the market with revenues of $452.8 million in 2023, followed by nahdionline.com with $330.1 million in sales, and amazon.sa with $328.5 million.

These top three online retailers collectively account for a market share of 38.7 percent among the top 100 stores in the Kingdom’s e-commerce market, as reported by the database.

The ranking is based on the top stores by net sales in the market for the year 2023.

According to a 2023 Deloitte Digital report, these companies are utilizing data and analytics to gain deeper insights into their customer base, tailoring their offerings to better meet their needs.

The Kingdom has come a long way from a population initially lacking trust in online retailers, limited payment options, and product diversity, to now holding the potential to become a thriving e-commerce market, according to the firm.

This transformation is particularly supported by the Saudi government’s implementation of various initiatives aimed at boosting the digital economy’s contribution to the Kingdom’s gross domestic product.

The adaptability of the regulatory framework and its adjustments to market dynamics have created an environment conducive to the growth of e-commerce and the flourishing of innovative technologies.

As the industry evolves, new payment methods are emerging, prompting the central bank to establish a sandbox for testing and regulating these innovations. This serves as a crucial platform for the industry to experiment with and adopt new technologies.

Additionally, the Communications, Space, and Technology Commission introduced a dedicated sandbox for delivery applications, streamlining operations and enhancing efficiency for e-commerce businesses.

Regulatory initiatives have facilitated the entry of major players like STC, and partnerships such as Aramco’s collaboration with Google Cloud have further supported and provided infrastructure for all participants in the e-commerce ecosystem, Deloitte added.

Furthermore, the establishment of free zones has played a pivotal role in simplifying logistics and expediting the movement of goods, thus bolstering Saudi Arabia’s e-commerce landscape.