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If you’re looking to start up or expand an online market internationally, Saudi Arabia can be an exciting and attractive option. The
country is a large and still growing market of eager and Internet-savvy consumers. In this E-Commerce Report, we will take you
through the Saudi Arabian market and the advantages and disadvantages of establishing an online market in the region. We will
address the business culture, trade growth, mobile market, and recent E-commerce developments of Saudi Arabia.
(http://istizada.com/wpcontent/uploads/2016/10/complete-guide.jpg)
Table of Contents
Country Background
Business Environment & Trade
Business Culture of Saudi Arabia
Censorship
Trade and Country Growth in Saudi Arabia
The Top 10 Imports of Saudi Arabia
Internet Penetration
The Top 10 Websites in Saudi Arabia
Top Online Market Websites
Challenges to E-Commerce Start-Ups
Bene ts to E-Commerce Start-Ups
Hopes of Saudis for Future E-Commerce Developments
The State of Mobile Commerce in Saudi Arabia
Recent Market Growth
Conclusion
Country Background
The Kingdom of Saudi Arabia is a large, young, and thriving desert country in the GCC (http://istizada.com/gcc-onlinemarketing-services/). Saudi Arabia ranks 47th in the world (https://www.cia.gov/library/publications/the-worldfactbook/geos/sa.html) in terms of population, and over 45% of that population is under the age of 24. Islam is the o cial
religion of the country and the state follows Sharia law. Although there is a large expatriate community (immigrants comprise
over 30% of the population), non-Muslims are denied citizenship (http://www.state.gov/j/drl/rls/irf/2004/35507.htm). 83.1% of
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Saudis (https://www.cia.gov/library/publications/the-world-factbook/geos/sa.html) live in urban areas, with over 6 million
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residing in the capital Riyadh.
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Saudi Arabia’s economy is oil-based, with petroleum accounting for nearly 42% of the country’s GDP. The government has
recently been trying to diversify the economy in the wake of large falls in oil prices with private investment in healthcare and
tourism industries as well as improvements in telecommunications and natural gas exploration. Saudi Arabia’s GDP as of 2015
was approximately 646 billion (http://data.worldbank.org/country/saudi-arabia).
Business Environment & Trade
In this section, we will examine the business culture of Saudi Arabia as well as various aspects of Saudi Arabian large-scale
trade. We will look at the growth rates and scale of imports to measure the demand of the Saudi market as well as the GDP to
estimate future states of the economy.
Business Culture of Saudi Arabia
There are a few culture-based business methods that vary between Saudi Arabia and the United States. It is important to be
aware of these differences in order to conduct both respectful and e cient business. One crucial difference between business
structures in the two countries is the timing of the work week. Saudi Arabia’s weekend was on Thursday and Friday until June
2013 (http://www.bbc.com/news/business-23031706), when the country switched to the now-standard Middle Eastern work
week of Saturday through Thursday. Saudi Arabia is also considered to have a less rigid and scheduled concept of business
than that of the United States.
Building trust between business partners is a crucial component of doing business in Saudi Arabia. Smalltalk is encouraged
(http://www.ibtimes.com/business-saudi-arabia-culture-differences-watch-406450) before discussion of hard business details,
and business deals should not be rushed. Meetings are generally scheduled around prayer times (speci c times of prayer are
typically listed in newspapers). One important cultural difference in business meetings is the concept of personal space.
(http://istizada.com/wp-content/uploads/2016/10/business-partner.jpg)Saudi businessmen
are generally more comfortable with standing very close to who they’re talking with, in a way
that may encroach on Western standards of personal space. It’s important to be highly
respectful of the business culture by taking the time to get to know business partners, not
scheduling meetings too close to a prayer time, and remaining comfortable with a possibly
different standard of personal space. A more thorough guide to proper business etiquette in
the Middle East can be found here (http://istizada.com/doing-business-in-the-middle-east/).
(http://istizada.com/wp-content/uploads/2016/10/freedom-house.jpg)Another crucial component to be aware of in
Saudi business culture is the limited role of women. Public interaction between the two genders is very limited in
Saudi Arabia. Even in business settings, Western businesswomen may have trouble meeting with a Saudi b
usinessman either without a man present or at all. Businesswomen should be very modestly dressed both in public
and indoors. While Western businesswomen are generally accepted into the culture, there is a great deal more
mistrust than in business dealings with men. Saudi women make up only about 20% of the country’s work force
(http://www.nytimes.com/2015/02/03/business/international/businesswomen-navigate-traditions-in-saudiarabia.html?_r=0) due to di culties surrounding women in the workplace – such as a lack of women’s restrooms,
inability of women in Saudi Arabia to drive or walk in public unaccompanied, and general discomfort in interaction
between the genders.
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Censorship
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While a majority of countries in the Middle East practice strict internet censorship, Saudi Arabia is perhaps the most pro cient
(https://www.theguardian.com/world/2009/jun/30/internet-censorship-arab-regimes) in this task. The kingdom uses a ltering
system to sort and censor material in two categories: immoral and dangerous. Saudi citizens actively report immoral websites,
such as pornography, slurs against the royal family, and gambling. A security committee blocks websites that re ect jihadi or
radical ideas. Heated discussions of country politics and debated social norms are also highly censored. This high rate of
censorship, however, should not be a deterrent to those who wish to start up an E-commerce business in Saudi Arabia.
Censorship in Saudi Arabia is primarily an attempt by the government to promote societal values and protect citizens from
radical ideas. According to Freedom Houses’s Freedom on the Net (https://freedomhouse.org/report/freedom-net/2015/saudiarabia) report of 2015, although censorship is strict Saudi Arabia actively promotes economic development and e-ser vices on
the web. As long as your website does not offend common social values (e.g. discussions of alcohol, women’s driving,
gambling) and avoids mention of weighty country topics (Islamic State, terrorism, etc.) and criticism of the royal family, it will be
welcomed in Saudi Arabia.
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Trade and Country Growth in Saudi Arabia
Imports and country growth in Saudi Arabia have been rapidly declining (http://wits.worldbank.org/CountryPro le/en/SAU) after
an all-time high in 2005, when 222,985 million SAR (Saudi riyals) worth of imports were received into the country. From the
fourth quarter of 2015 to the rst quarter of 2016, imports decreased by approximately 19,474 million SAR. Imports amounted
to approximately 170 billion USD (http://www.worldstopexports.com/saudi-arabias-top-10-imports/) in 2015, which re ected a
2.2% decrease from 2014 but a 29.2% increase from 2011.
The Top 10 Imports of Saudi Arabia
Technology (machines, pumps, etc.)
Vehicles
Electronic equipment
Iron and steel
Precious metals (primarily gold and imitation jewelry)
Pharmaceuticals
Cereals
Medical equipment
Plastics
On this list of imports, the most rapidly growing Saudi markets were for precious metals, vehicles, and pharmaceuticals. Iron
and steel, both as products and in their natural forms, lagged in recent years and showed a nearly 23% decline.
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While GDP growth has also been declining in recent years (likely due to lower oil prices
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across the world), it has not done so at nearly so sharp a rate as imports and country
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growth. However, WorldBank predicts sharper declines in real GDP growth in the
future. Here, we have created a table with WorldBank data
(http://www.worldbank.org/en/publication/global-economic-prospects#data)
describing the past and projected percentages of real GDP growth in Saudi Arabia,
compared to the world and the Middle East.
This graph demonstrates a sharp decline in Saudi Arabian GDP growth from 2015 to
2016 with a slow recovery in later years. Please note that this graph shows that the
rate at which GDP will increase has declined, not that the GDP itself has done so.
Although growth rates are declining now, they are well projected to pick up in the future
and the country maintains a robust economy.
Internet Penetration
Internet penetration is extremely high in Saudi Arabia, especially when compared to other countries in the Middle East and the
GCC. Saudi Arabia. Approximately 20,813,695 Saudis use the Internet – which is about a 64.7% penetration rate
(http://www.internetlivestats.com/internet-users/saudi-arabia/). This rate has rapidly grown from just 2.21% in 2000
(http://www.multpl.com/saudi-arabia-internet-users/table/by-year). The quick spread of Internet in the past 16 years has been
hugely in uential for the country – 7.96 million Saudis (http://www.globalmediainsight.com/blog/saudi-arabia-social-mediastatistics/) have Facebook accounts in 2016 and Saudi Arabia is known for its wide usage of YouTube (http://life-insaudiarabia.blogspot.com/2015/05/highest-number-of-youtube-views-in.html), with Saudi citizens responsible for nearly 90
million views a day.
The Top 10 Websites in Saudi Arabia
(http://istizada.com/wp-content/uploads/2016/10/Top-10-Websites-in-ArabiaGoogle-Search.jpg)Following is a list of the most visited websites
(https://www.similarweb.com/top-websites/saudi-arabia) in Saudi Arabia in
October 2016:
Google.com.sa
Youtube.com
Facebook.com
Twitter.com
Live.com
Instagram.com
Yahoo.com
Haraj.com.sa
Souq.com
Moi.gov.sa
The majority of this list is typical for any country, with Google and various social media pages dominating the list of most
visited websites. However, it is also an exciting list for those wishing to invest in E-commerce in Saudi Arabia. Two of the top
ten websites – haraj.com.sa and souq.com – are E-commerce websites. Haraj.com.sa is an online auction website and
souq.com is a general online store for the Middle East that is much like amazon.com. The presence of these two sites on this
list suggests large-scale con dence in online transactions and that Saudis are ready and able to engage in online markets.
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Contact IstiZada today if you
are interested in a starting a successful
ecommerce marketing campaign targeting Saudi Arabia.
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Top Online Market Websites
Following is a list of the most popular online markets (http://www.alexa.com/topsites/countries/SA) in Saudi Arabia in October
2016:
(http://istizada.com/wp-content/uploads/2016/10/most-popular-online-markets-inSaudi-Arabia.png)
Haraj.com.sa
Souq.com
Cobone.com
Aliexpress.com
Jarir.com
Extrastores.com
Alibaba.com
Opensooq.com
Markavip.com
These websites are generally E-commerce sites directed towards a broad Middle Eastern audience. However, Saudi Arabia
makes up a large amount of the tra c to these sites – nearly 22% (http://www.alexa.com/siteinfo/souq.com) of the tra c to
souq.com, 75% (http://www.alexa.com/siteinfo/jarir.com) of jarir.com, and 21% (http://www.alexa.com/siteinfo/opensooq.com)
of opensooq.com.
Challenges to E-Commerce Start-Ups
In 2016, Saudi Arabia received an “Ease of Doing Business”
(http://www.doingbusiness.org/data/exploreeconomies/~/media/giawb/doing%20business/documents/pro les/country/SAU.pdf?
ver=3) ranking of 82 out of 189 countries by the World Bank Group. This ranking has dropped sharply in recent years, as well as
its ranking in ease of starting a business. This information suggests a lack of simple or fast procedures for registering
businesses. It takes an average of 19 days and 12 procedures to start a business in Saudi Arabia.
This di culty in opening e-commerce start-ups in Saudi Arabia is largely due to a lack of regulations
(http://www.wamda.com/2013/04/local-experts-team-up-to-support-e-commerce-in-saudi-arabia) and business frameworks in
the kingdom. This lack makes it di cult to locate reliable shipping services, ascertain that a website is in accordance with
Saudi law, or pay customs. Though the public has a great interest in e-commerce entrepreneurship and opportunity, it is hard to
begin without knowledge support from others.
Bene ts to E-Commerce Start-Ups in Saudi Arabia
A recent study on media and Internet use (http://menamediasurvey.northwestern.edu/#section=online_transactions&q=1) in
various countries in the Middle East by Northwestern University in Qatar demonstrated that while E-commerce in Saudi Arabia
was growing slowly, it showed great promise for future market expansion. This study estimated that approximately 8% of the
Saudi population regularly bought items online, 6% used online banking services, and 7% made travel reservations on the
Internet. While these seem to be low numbers, they demonstrate that Saudi Arabia clearly outperforms other countries in the
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Middle East in terms of building trust in online markets. In fact, the Kingdom was ranked the second largest market for E
commerce (http://www.pymnts.com/news/2013/will-saudi-arabia-become-the-next-big-ecommerce-market/) in the GCC in
(http://istizada.com/)
2013 after having received $520 million in online sales in 2011.
The continuing growth and success of the Saudi E-commerce market over other Middle Eastern markets is largely attributed to
greater amounts of trust in online payment systems. Saudis report low amounts of fear in using credit cards, and have access
to a wide variety of payment gateways (http://www.wamda.com/2012/07/demystifying-e-commerce-payment-gateways-in-thearab-world-infographic) (PayPal, CashU, etc.) to ensure that their money is secure.
Mastercard, in their 2014 Online Shopping Behaviour Study (http://newsroom.mastercard.com/mea/press-releases/onlineshopping-on-the-rise-in-saudi-arabia-mastercard-survey/) on Saudi Arabia, found that nearly 50% of its survey respondents had
used the Internet to shop and that 80% of those were “highly satis ed” with the experience and quality of the market. They also
found that although around 45% of online shopping in Saudi Arabia is conducted through foreign websites, Saudis are
increasingly looking to local sources. These statistics all indicate that Saudi Arabia has both the foundations necessary for
successful E-commerce and the promise of a budding market.
Hopes of Saudis for Future E-commerce Developments
In a 2014 study conducted by Mastercard (http://newsroom.mastercard.com/mea/press-releases/online-shopping-on-the-risein-saudi-arabia-mastercard-survey/), Saudi survey respondents indicated what they would like to see in the future that would
further motivate them to do their shopping on the Internet and explained when and why they made decisions to shop online or
in stores. (http://istizada.com/wp-content/uploads/2016/10/saudi-creditcard.jpg)Consumers cited 3 major concerns when deciding whether or not to purchase
online: the reputation and seeming trustworthiness of the website, the reputation and
security of the payment platform, and the value of the items. If the website had been
recommended by other Saudis or was known to be legitimate and if it used a nancial
platform such as Paypal or CashU that was familiar to Saudis, citizens were more likely
to buy. The most commonly bought items were airlines, travel expenses, grocery and
home products, electronics, and clothing.
However, a major deterrent to E-commerce growth in Saudi Arabia has been reliance on an unreliable and costly payment
method. (http://istizada.com/wp-content/uploads/2016/10/cash-on-deliverymethods.jpg)Many Saudis prefer – due to mistrust in payment platforms – cash
delivery methods (http://www.thenational.ae/business/retail/cash-on-deliverydemand-still-holding-back-e-commerce-growth-in-gcc) through which they order
goods online and pay at their doors. This trend is frustrating for online markets –
Namshi, a fashion website, reported that they found on average a 40% return rate –
clearly an unsustainable business model. Over 90% of their business came through
cash-on-delivery sales. To create a successful E-commerce market targeting Saudi Arabia, it will be necessary to really
emphasize the trustworthiness of both the website itself and of the payment platform.
Saudis also indicated their hopes for developments that would make online shopping more accessible and favorable to brickand-mortar stores. Around 55% of the consumers (http://newsroom.mastercard.com/mea/press-releases/online-shopping-onthe-rise-in-saudi-arabia-mastercard-survey/) surveyed by MasterCard suggested that lesser delivery fees would greatly increase
their likelihood of shopping online. Ease of additional service charges and streamlined, intuitive transaction methods were also
considered important areas needing improvement. Though reliable product delivery to Saudi Arabia could be costly, the ability
to offer that service for minimal fees could be a major factor that would drive Saudis to prefer one site over another. Another
interesting insight from the survey claimed that Saudis are more likely to buy from environmentally responsible producers. In
general, however, Saudis greatly desire e-commerce developments that will create websites and online markets that are
trustworthy, easy to use, and without high service fees.
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The State of Mobile Commerce
in Saudi Arabia
According to MasterCard’s “Mobile Payments Readiness Index” on Saudi Arabia
(https://mobilereadiness.mastercard.com/country/?sa), Saudi Arabia has a willing environment for mobile commerce but is
lacking in the infrastructure necessary to make this transition from cash payments. MasterCard claims that while many Saudi
Arabians are already familiar with and using mobile payment methods, banks and mobile network operators in the country have
not made the necessary collaboration to promote an e cient mobile payment system. Although Saudi Arabians do over
(http://cxm.world/saudi-shopping-habits-are-moving-online-infographic/)75% of the country’s grocery shopping on their phones
(http://cxm.world/saudi-shopping-habits-are-moving-online-infographic/) – likely due to lack of mobility – other goods are not
bought over mobile due to high delivery charges and lack of trust in payment methods. There has been a 35% growth
(https://www.entrepreneur.com/article/274692) in the number of Saudi citizens who do their grocery shopping online,
according to a recent study by an e-grocery start up in Saudi Arabia called Todoorstep.com. Todoorstep.com estimates the
market for online grocery shopping methods to be approximately SR 430 million a year. This information helps to demonstrate
that the issue is not consumer willingness (https://mobilereadiness.mastercard.com/country/?sa), but the lack of a responsive
system promoting a high rate of mobile payment platform penetration to match the very high Internet and mobile phone
penetration rates.
This information offers hope for marketers able to introduce mobile platforms that are trustworthy and easy to use into their
online markets. MasterCard argues that if these systems were more present, they would be used more frequently by Saudi
Arabians. The argument is supported by the recent trend of “Instagram E-commerce” (http://cxm.world/saudi-shopping-habitsare-moving-online-infographic/) in Saudi Arabia – where Gulf citizens use the reliable platform of Instagram to buy and sell
handmade goods. Because Instagram has a reliable payment platform, it is trusted and increasingly used by Saudis as an
online shop – even if it was not meant as one. In short, Saudi Arabians would be enthusiastic about the ability to shop from
their phones if they had a more reliable way to do so.
(http://istizada.com/wp-content/uploads/2016/10/recent-market-growth.jpg)Saudi Arabia has planned
enormous infrastructure developments in the future designed to improve payment gateways. The
country has recently raised their broadband penetration level to 22% in areas previously unable to
receive service. Saudi Arabians are reported as very active users of the Internet and of their mobile
devices. Hope of more e cient infrastructure in the future and the eagerness of Saudis to actively use
their phones to shop gives us an optimistic outlook for huge growth of mobile commerce in a short
time.
Recent Market Growth
Market reports on E-commerce in Saudi Arabia have been overwhelmingly positive both in terms of recent growth and future
prospects. Though the banking infrastructure for mobile payments is poor, banks have begun to offer incentives and special
products for customers that shop online to encourage the use of bank cards. Saudi Arabia ranks highest in the Middle East for
E-commerce market attractiveness (https://www.ystats.com/product/saudi-arabia-b2c-e-commerce-market-2016/) despite the
popular cash-on-delivery system (http://www.thenational.ae/business/retail/cash-on-delivery-demand-still-holding-back-ecommerce-growth-in-gcc) and lack of trust and e ciency in payment platforms. This is due to high Internet penetration, a
young, dynamic, and rising population, and eagerness to utilize mobile phones to shop online. Almost 67% of Saudi participants
in the online market (https://www.linkedin.com/pulse/20140806111358-347276004-5-tip-to-star-an-e-commerce-website-insaudi-arabia) are under 35, according to a 2014 analysis by visa. The same study estimated Saudi Arabia’s market growth
between 2013 and 2014 to be around 43%. Technological developments and increased communication with global and local
online retailers have recently led Saudi Arabia’s E-commerce market to be valued at approximately SR15 billion annually
(http://www.arabnews.com/news/463005). Wamda has found that more Saudis engage in the online market
(http://www.wamda.com/2013/07/why-saudi-arabia-could-be-the-next-big-e-commerce-hub-in-the-arab-world) through
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investing in stocks, buying goods, and paying goods than any other Arab population. E-commerce transactions in the country

are projected to nearly double in value (https://www.ystats.com/product/saudi-arabia-b2c-e-commerce-market-2016/) by 2020.
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All these statistics offer great hope to prospective E-commerce start-ups in Saudi Arabia.
Conclusion
Though conducting business in Saudi Arabia presents certain challenges, such as adaptation to a new business culture, lack of
infrastructure for registering businesses and establishing mobile payment platforms, and high levels of censorship, there are
great bene ts to investing in the quickly expanding E-commerce market. The market is projected to greatly rise in value in the
next few years and offer a speedy and large return on investment. Start-ups and expanding businesses can feel con dence in
expanding into Saudi Arabia today.
Contact IstiZada today if you are interested in a starting a successful
ecommerce marketing campaign targeting Saudi Arabia.
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