E-commerce in Saudi Arabia

E-commerce in the Kingdom of Saudi Arabia is an economic activity conducted either fully or partially by a service provider and a consumer within the Kingdom of Saudi Arabia, using electronic means, with the aim of selling products, offering services, advertising them, or exchanging related data.

E-commerce in the Kingdom began in 2001 and expanded significantly, with the sector's transactions reaching approximately USD5.7 billion by 2020. The growth continued, making the Kingdom one of the top ten fastest-growing countries in the world in the field of e-commerce, with an annual growth rate exceeding 32 percent during the first quarter of 2023.

E-commerce in the Kingdom contributed USD10.48 billion to the national accounts in 2020, based on various e-commerce sectors. The clothing and footwear sector led with approximately USD3.21 billion, followed by electronics with around USD3 billion. The furniture and home appliances sector contributed about USD1.48 billion, while the food and pharmaceuticals sector had the lowest return at USD776 million.

The Kingdom is expanding its e-commerce infrastructure as consumers increasingly turn to its products and services. Studies have shown that 84 percent of small and medium-sized enterprises (SMEs) in the Kingdom are in sectors that can benefit from e-commerce.

The growth of e-commerce has contributed to the expansion of the Saudi market, making it one of the largest e-commerce markets in the Middle East and North Africa. Since the onset of the COVID-19 pandemic, the Kingdom has ranked twenty-sixth globally in e-commerce sales.

According to a global study conducted by the United Nations Conference on Trade and Development in 2017 to understand and set benchmarks for countries' readiness to engage in online commerce, the Kingdom ranked forty-sixth out of 144 countries. It was on par with countries like Italy and Russia and outperformed larger economies such as India and China.

The Global E-commerce Index in 2020 showed that the Kingdom ranked second in the Arab world and forty-ninth globally out of 152 countries included in the index, which was issued by the United Nations Conference on Trade and Development (UNCTAD).

Data from the Ministry of Commerce indicates that the number of licensed e-commerce stores in the Kingdom increased by about 14 percent in 2020 compared to 2019, reaching 28,676 stores and e-commerce platforms by the end of the first half of 2020. This represents an increase of 3,571 platforms compared to 2019, when there were 25,105 stores and platforms. The issuance of e-commerce licenses recorded a growth of 21 percent by the end of the second quarter of 2023, with 35,314 licenses issued, compared to 29,007 licenses in the second quarter of 2022, according to the Business Sector Bulletin issued by the Ministry of Commerce.

The e-commerce market in the Kingdom benefits from several strength factors, including the increase in national income, growing demand for e-commerce, the widespread use of smartphones and smart devices among consumers, the dominance of youth in e-commerce services, a wide variety of services and products, the availability of capital, and the ease of buying and selling from different parts of the world

E-commerce has further opportunities to become the preferred method for consumers in the long term. It has proven its efficiency in creating a promising and dynamic market that brings many benefits to the broader economy. According to data from the Saudi Central Bank in 2021, e-commerce had a strong presence in the national economy, as Mada, the Saudi Payments Company, processed more than 347 million transactions with a value exceeding SAR74 billion.

Given the development of this modern form of commerce, it aligns with Saudi Vision 2030 and supports its objectives by contributing to economic diversification, attracting investments, creating job opportunities, and providing new channels for local industry.

In terms of institutions developing their supportive and incentive programs for the e-commerce ecosystem, the e-commerce programs and services of the General Authority for Small and Medium Enterprises (Monsha'at) work to enhance the role of e-commerce in economic development. These programs aim to increase the benefit of small and medium enterprises (SMEs) from the opportunities provided by e-commerce, improving their competitiveness, expansion, and growth, and strengthening their commercial identity both locally and internationally.

The international dimension adds significant value to the e-commerce market, helping to attract leading global companies in this field. In 2016, the e-commerce platform Noon .com was launched with an initial investment of USD1 billion, offering twenty million products to customers. Additionally, the Ma’roof app for e-commerce stores was launched on smart devices, and by the beginning of October 2023, the number of stores registered on the Ma’roof platform exceeded 67,000.

With the development of e-commerce operations and the expansion of its services, efforts were made to regulate it in a way that maximizes its benefits for the state and consumers. As a result, the E-commerce Law was issued by Royal Decree in 2019.

The E-commerce Law consists of twenty-six articles that provide the necessary protections for e-commerce transactions against fraud, deception, and misleading practices, safeguarding the rights of both the merchant and the online shopper.

The law works to protect the rights of all parties involved in commercial transactions and contributes to enhancing the disclosure of contact information for the online store or service provider, as well as clarifying the essential characteristics of goods and services.

To place e-commerce in the Kingdom on a more prepared and stable path, the E-commerce Council was established in 2018. The council consists of seventeen representatives from various government entities and three representatives from the private sector. It works to implement initiatives that support e-commerce in the Kingdom.

The council is responsible for several tasks that support the development of e-commerce, including proposing e-commerce policies and regulations, overseeing the E-commerce Acceleration Program, coordinating with relevant entities to prevent duplication, and eliminating obstacles that hinder the growth of this sector.

The Ministry of Commerce monitors and supervises the performance of the e-commerce market through its regulatory and oversight mechanisms. It enforces the E-commerce Law on any violations that threaten the integrity of transactions or waste the economic value of this trade. An example of this was in 2020, when forty-four online stores were penalized for violating the E-commerce Law and its executive regulations. In 2022, the Ministry of Commerce blocked seven online stores for violating the E-commerce Law and its executive regulations by misleading consumers and failing to comply with their contractual rights. In the same year, the ministry identified two hundred online stores that did not meet the compliance standards for e-commerce reliability. These stores were referred to the Committee for the Consideration of Violations of the E-commerce Law and its executive regulations to impose legal penalties, in line with the ministry's responsibility to monitor and track e-commerce activities to protect and safeguard consumer rights.

On March 15, 2024, the Ministry of Commerce launched an initiative to evaluate e-commerce stores using artificial intelligence technologies, aiming to enhance compliance and protect shoppers' rights. This initiative coincided with World Consumer Rights Day. The ministry identified eleven approved criteria for assessing the compliance of e-commerce stores. These include displaying the commercial registration number and necessary licenses on the store’s homepage, displaying the tax number and necessary licenses, linking the online store to the commercial registry, verifying the store in the Saudi Business Center platform, having a policy for protecting consumer data and privacy, providing a return and refund policy, offering a policy for handling customer complaints and suggestions, outlining consumer rights and obligations regarding shipping and delivery, providing easy customer service contact options, ensuring the website is secure and of high quality (site speed, ease of use, and an HTTPS link with cybersecurity protection), and finally, ensuring no unpaid violations are issued against the business.