According to the United Nations Conference on Trade and Development UNCTAD, e-commerce is a prominent feature of the evolving digital economy. The total value of global e-commerce business-to-business (B2B) and business-to-consumer (B2C) sales amounted to $25.3 trillion in 2015 ($22.4 trillion for B2B, plus $2.9 trillion for B2C). Global B2B sales were estimated on the basis of official data for China, Japan, the United States, and the EU, which together accounted for 67 percent of world GDP in 2015.
The United States was by far the largest e-commerce market in 2015, with combined sales of over $7 trillion, followed by Japan and China. While the US was ahead by some margin in B2B e-commerce sales, it was just behind China in the B2C segment.
Emerging markets such as China and India are experiencing unprecedented growth in e-commerce. India has emerged as the fastest growing e-commerce market in the world. In 2015, e-commerce spending in the country grew 130% year on year.
However, e-commerce is not just a “cool tool” to get your shopping necessities fulfilled, as behind the phenomenon lies a whole ecosystem involving governments, laws, infrastructure, producers, vendors, banks and technology companies functioning as stakeholders.
According to IDC’s Worldwide New Media Market Model, the relentless shift globally from offline to online — and now to mobile — is driving the rapid growth of online spending.
Although the share of some growing e-commerce markets such as the MENA region, Central Europe, and India, is barely 2.5% of the worldwide e-commerce spending, this represents a tremendous potential for growth, fuelled by investments from international companies.
This is evident from the Saudi e-commerce market, for example, which has been experiencing unprecedented growth over the past several years. The National Transformation Program (NTP) and Vision 2030, together, envisage a multifaceted development of the economy. Enabling economic diversification, driving growth of the small- and medium-sized enterprise (SME) segment and fostering innovation and entrepreneurship are at the core of these objectives.
According to the Saudi Communications and Information Technology Commission (CITC), B2C e-commerce spending surpassed $7.9 billion in 2016. Saudi Arabia’s young population, increasing broadband and smartphone penetration rates, as well as the government’s growing focus on digital economy, are key factors for this shift towards online commerce in the country. In addition to local online sellers, startups and home-based businesses, a number of larger regional and international players are investing and expanding their physical presence in Saudi Arabia. Furthermore, traditional businesses ranging from FMCG companies to banks are increasingly seeing e-commerce as a rapidly growing complementary channel for their products and services.
That said, challenges remain in channeling the desired number of the public to e-commerce in the Kingdom and other emerging markets around the world. . These include cybersecurity, a lack of awareness about consumer-protection rights as well as logistical issues including delivery time, cost, goods handling, the absence of a collaborative forum for all stakeholders, the limited availability and reliability of payment options, and the dearth of high-quality and affordable services from logistics providers.
It will be important for all stakeholders and allied industries in the e-commerce ecosystem around the world to come together and contribute to the progress. Having a vibrant and all-inclusive e-commerce market will necessitate change on multiple fronts. Developing telecommunications infrastructure, enhancing the efficiency of distribution systems, creating a robust digital payment ecosystem, supporting the local industry and creating avenues to foster innovation and entrepreneurship will all be vital in taking Saudi Arabia to the next stage of its e-commerce journey.
The global e-commerce industry is constantly reshaping itself by creating new products and services, engaging customers in innovative ways, developing new business models and optimising supply chains.
As for Saudi Arabia, CITC mentions that the government is making it easier for international companies to establish a footprint in Saudi Arabia, while actively promoting local e-commerce start-ups and encouraging traditional retailers and SMEs to adopt e-commerce.
By 2020, the government plans to more than double the annual foreign direct investment to reach $18.6 billion, improve the country’s ranking on the World Bank’s Ease of Doing Business Index from 82 to 20, and create about half-a-trillion-dollar investment opportunities. These initiatives will attract more domestic and international investors to the Saudi economy. in turn, e-commerce will create new growth opportunities for local producers and home-based sellers, enhancing consumer confidence by promoting fair trade, strengthening the policies and frameworks that protect consumer rights.
This way, e-commerce will serve its main purpose, which is to evolve into a tool for real sustainable economic development.