Surge in e-commerce activity in Saudi Arabia during pandemic
Restrictions on movement and trade as a result of the Covid-19 pandemic have led to a significant shift in consumer behavior in Saudi Arabia, with locals increasingly turning to digital channels, a recent report authored by Billy FitzHerbert Regional Editor, Middle East, Oxford Business Group (OBG) has revealed.
Significant boost for e-commerce
Despite the comparatively limited medical impact on the Kingdom, the threat presented by the virus alongside efforts to maintain social distancing has led to a significant shift in lifestyle and consumer habits, with e-commerce experiencing a rapid spike in growth.
Online retailer BinDawood Holdings told local media that, since the escalation of the Covid-19 crisis, its average sales on a 10-day basis had increased by 200%, while its average order value rose by 50% and app installations by 400%.
The company has two e-commerce platforms – BinDawood and Danube – which are connected to their respective supermarket and hypermarket chains, enabling customers to purchases groceries and other goods online.
While the economic impacts of the virus have seen many businesses close and millions of people lose their jobs globally, BinDawood officials say the rapid growth in activity has helped the company buck these trends.
All of the company’s 72 stores remain open, including the newest Danube store, which opened last week in Riyadh’s Al Andalus district. The company has also hired more packers and drivers to keep up with demand for online deliveries.
Nana upswing
Elsewhere, fellow Saudi grocery delivery app Nana has also benefitted from the recent turn towards online shopping, raising US$18mn in a Series B funding round in late March to expand operations across the Middle East, with investors including venture capital funds Saudi Technology Ventures and Middle East Venture Partners. This follows a Series A funding round that raised US$ 6mn last year.
The company has expanded capacity three-fold following a surge in demand associated with the Covid-19 outbreak. This is expected to continue in light of the Saudi government’s decision to impose tighter curfews in major cities.
Looking ahead, retailers may need to adapt their supply chains in response to shifting market dynamics. “Vertical integration is a pivotal development strategy, especially considering the recent spike in demand for e-commerce and fresh food delivery, which Saudi Arabia’s supply can hardly meet,” Seifallah Sharbatly, Managing Director, Sharbalty Fruit, told OBG.
Sector growth targets
The emergence of online retail, albeit during a time of crisis, aligns with some of the goals of Saudi Arabia’s overarching strategies.
As part of the Financial Sector Development Programme – itself part of Vision 2030, the Kingdom’s long- term development plan – the government hopes to increase the proportion of online payments to 70% by 2030, up from the 2020 target of 28%.
To help incentivize this growth and ensure long-term sustainability in the segment, the government has also sought to improve the regulatory framework.
In October last year the government implemented the E-commerce Law, designed to regulate digital payments and improve transparency, while on January 31 the Ministry of Commerce and Investment adopted the Implementing Regulations of the e-commerce Law, adding increased oversight to areas such as personal data protection, consumer rights and disclosure obligations.
Broader e-economy impact
Given that oil was responsible for an estimated 63% of national revenue, according to IMF projections, the sharp fall in prices is set to place significant pressure on government budgets.
“The impact of Covid-19 – and the most recent drop in oil prices – on foreign trade will affect the Saudi balance of payments this year and beyond. The magnitude of this impact will largely depend on Saudi export oil prices,” Hans-Peter Huber, Chief Investment Officer, Investment Bank Riyad Capital, told OBG.
