March 19, 2018,   1:03 PM

Saudi Arabia's Growing E-commerce Market Is Attracting Global Brands Online

meetu bhasin


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Shoppers in Saudi Arabia have showcased a rising tendency of purchase of fashion products through online portals led by availability of price discounts, offerings of wide varieties of products and ease of shopping has driven the consumers to make online purchase. It has been witnessed that in 2017 the number of e-commerce users in Saudi Arabia has reached to 12.5 million and is further expected to increase at a CAGR of 12.4% by 2020. The average user spends SAR 2,317 online, which is expected to reach SAR 2,405 by 2020, reflecting right time to make strategic move by tapping into the uncovered online space.

The country has large middle and upper class population with per capita disposable income of SAR 34,280 (recorded in 2016), which signals vast opportunities for online fashion sites. Women in Saudi Arabia abide by the societal norms, which restrict them from making frequent visits to brick and mortal stores and hence resort to online channels of shopping to keep themselves abreast with the latest trends in fashion.

It has been observed that a large percentage of online shoppers are between the age group of 25 to 34 years constituting almost 50% of the total orders received in online fashion market followed by 34 to 54 years old population. Whereas 16-24 years old accounted for a low share due to their restricted ability to spend, although they account for the largest online user group.

Ken Research, publisher of market intelligence reports in its latest study titled “Saudi Arabia Online Fashion Industry Outlook to 2022 - By Apparel, Footwear and Fashion Accessories, By Menswear, Women wear, Kids wear, by Footwear (Sneakers, Flip-Flops, Sandals, Boots), by Apparel (Top, Dresses and Bottom, Jackets, Shirts and Shorts)” mentioned that apparel segment dominates the kingdom's online fashion market with GMV contribution of 52% in online fashion market. There are many international brands present in the online space such as Mango, Nike, QUIZ, H&M, Lacoste, Hugo Boss and other premium brands. Women have recoded highest online sales as compared to men in Saudi Arabia and the number is expected to rise with more women workforce.

Online Payment- A Concern over Ease

Online shopping is not left untouched in presence of cyber crime which is the biggest concern of the payment channels and online shoppers. Saudi consumers prefer cash on delivery (COD) option rather than credit card payments at the time of delivery of product. About 85% of all payments in Saudi Arabia are COD based and the main factor influencing this high use of cash is the limited alternatives to cash and consumer’s low satisfaction with existing payment methods. The payment gateways that encourage electronic payments are still under threat of cyber theft. Moreover Saudi Arabia is considered to be the second largest global market for spam e-mail. So improved cyber security is necessary to generate greater consumer trust in E-commerce transactions. Most of the customers do not read the privacy statements while making an online purchase. Exercise of self vigilance while engaging in online activities can prevent the potential threat to loss of personal information that results from spamming.

Way Ahead for Online Fashion Market

Ken Research estimates, online fashion market in Saudi Arabia is expected to increase at a CAGR of 20.2% in next five years during 2018 and 2022 in terms of GMV due to the increasing demand for clothing and footwear from online sellers providing the best deals at reasonable prices. Footwear segment is expected to record the highest growth in coming five years projected to grow at CAGR of 28.3% in the market to 2022.

The forward integration trend will soon cover large percentage of the market as offline giants are entering into online space. Players such as Zara, Maxx, Shopperstop, Nextdirect and Bershka which have entered into the market are going to revolutionize the online market as they have readily available portfolio with strong brand awareness among the people.

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