As the global e-commerce market surged significantly during the pandemic, the Middle East-North Africa (MENA) region has shown relative lagging behind other e-commerce markets by 18 percent. The reason is that Saudi Arabia and GCC e-commerce players face challenges regarding their product assortments availability, pushed further by the limited capability of the region's logistics players and lack of the necessary infrastructure to facilitate digital innovations.
However, Saudi Arabia possesses massive potentials for the e-commerce market to flourish. Through Vision 2030, the kingdom aims to transition the economy away from fossil-fuel production, encouraging retail players to leverage e-commerce to expand their businesses. As a result, the kingdom has seen over 60 percent increase in online sales annually across categories in recent years, with media, apparel, and footwear taking the largest market share.
Regardless, Saudi Arabia's e-commerce transactions only take up 6 percent of the total retail sales in 2020. In contrast, other mature markets such as the US and China's e-commerce transactions have taken at least 30 percent of the total sales during the pandemic.
Challenges that hinder Saudi Arabia's e-commerce industry rely on developing the telecommunications, internet, regulatory framework, and financial services industries. Therefore, the government has recently launched supportive commerce laws to define the operations of adjacent services to enhance the kingdom's e-commerce values and improve the trustworthiness of the technology to the end consumers. The pandemic also plays a vital role in pushing brick-and-mortar stores to online presence.
Other aspects that Saudi Arabia must further develop include raising the level of internet security, increasing postal reliability, and transitioning the bankable population to non-cash payments. The enhancement of server security and postal reliability would act as the e-commerce infrastructure, requiring investments and public-private partnerships to take part in building the ICT readiness. On the other hand, shifting the bankable population's cash preference towards non-cash methods is mainly a cultural concern.
Albeit resolving Saudi Arabia's e-commerce market challenges require multilayered approaches, the sector expects to drive economic growth by recording a transaction value of USD 2 billion by 2025. The optimist view of Saudi Arabia's e-commerce market is due to the kingdom's strategic position as one of the leading regional e-commerce hubs, offering expansion opportunities and leading to substantial job creations from the region and beyond.
The impact of e-commerce on Saudi Arabia's job creation can be seen from Amazon's recent decision to open 3,400 new jobs in the kingdom, primarily on the technological, creative, and entrepreneurial segments. The decision has resulted in Saudi Arabian residents accounting for over 60 percent of the total Amazon's permanent workforce. In addition, the region's leading digital player, Noon, has provided approximately 8.000 jobs for Saudis since its inception.
As the global driving force of the retail industry, Saudi Arabia needs to double down on building the region's e-commerce strength. The right set of governmental approaches can further advance the required infrastructure and gradually shift consumer habits to allow local players to expand their visibility from brick-and-mortar to online, contributing to the journey of turning Saudi Arabia to become the MENA's digital powerhouse.