By Layan Damanhouri
JEDDAH – E-commerce experts revealed that Saudis make up 55% of shoppers online in the region and spend an average of SR3,000 on online purchases per month, a local daily reported.
Of the total number of population in Saudi Arabia, 32% of Saudi nationals are e-commerce customers as well as 59% of all non-Arab residents.
Shopping online has attracted many enterprises to incorporate for its numerous advantages including easy accessibility, product reviews boosting sales, speed of service and lesser costs for the seller.
Moreover, Internet penetration in the region is high as the number of devices is quickly rising with an average of two internet-capable devices per person.
Among the major challenges facing e-commerce sellers in the Kingdom are the lack of a reliable payment system, a gap in regulation, and maintaining a trustworthy environment, among others.
“Most SMEs are transitioning to online stores because it is cheaper and is more convenient to consumers,” said Mohannad Alnabulsi, deputy CEO and accelerators director at Qotuf, an incubator and the executive arm for the SME Authority.
“Of all online purchases, 40% was returned to the seller while 78% are satisfied with their online experience,” he said. “This shows e-commerce is strong in Saudi Arabia.”
However, payment remains a challenge due to customers’ fear of paying via credit card.
“These fears are grounded on the fact that hackers lurk the Internet, and using one’s credit card might pose a threat to their financial security should these hackers gain access to their information,” Alnabulsi said. “Another downside in dealing with e-commerce stores is that the service is highly dependent on the store’s quality of services before and after sales although a solution is being used today by opting for a cash-on-delivery payment system.”
In Saudi Arabia, e-commerce is considered one of the fastest growing sectors but remains new. Online consumers remain cash-oriented, according to business owners and entrepreneurs.
“A large majority of people prefer to pay cash upon receiving delivery, which is accompanied with a lot of problems for the seller. We look forward to regulations allowing for debit card payments online as not everyone owns a credit card,” said Ammar Waganah, CEO of Dokkan Afkar.
The infrastructure is still not complete, said Lulwa Al-Sudairy, young entrepreneur and CEO of Artistia.com. “There are a lot of gaps in the system in terms of logistics, shipping, and even maps,” she explained. “It’s difficult to deliver products because people don’t realize that they need to have accurate addresses for them to get shipments on time. There is a government initiative to help citizens find their addresses but people are still not used to put accurate addresses by street name and residence number.”
There needs to be more done in educating the consumer, she further said. “Scams were a major problem but are starting to decrease because security requirements are increasing and people are becoming more aware of how to purchase online by checking rankings, choosing the right social media accounts and reading product reviews before making a purchase.”
Last year, the Ministry of Commerce and Investment confiscated 90 social media accounts that marketed over 45,000 scam ads for rip-off products to over 1.5 million people. Vendors caught in selling such products are charged for violation and can be put to prison for up to 3 years and be given a fine of SR1 million.
Currently, a law regulating e-commerce is absent in the Kingdom despite witnessed growth in the sector. The Ministry of Commerce and Investment is currently drafting an e-commerce law since 2014.
“The draft regulation aims to promote a trustworthy environment for online transactions and includes stipulations on online errors, protection of personal data, online advertising, and conditions regarding warranty guarantees and return policies,” the ministry's spokesman Abdulrahman Alhussein told Saudi Gazette.
“The draft regulation also requires sellers to disclose their contact information and to provide terms and conditions of the contract between the seller and the customer. In addition, providing a detailed receipt of the cost including all the fees is also a requirement by the ministry to all online vendors,” he added.
The draft is currently under revision by several factions. No details were disclosed on when it will be implemented.
© The Saudi Gazette 2017
