Saudi Arabia is ninety five percent desert and almost eight five percent of the population, of twenty seven million people, live in cities. For digital development there is an advantage to these geographic realities: e-commerce is easier to develop in cities than in rural places. When you have a densely packed population, as urban setting are, delivery of products is easier to arrange. Dependable parcel delivery is a big concern with e-commerce and cities usually have dependable, rapid parcel delivery at reasonable prices.
Saudi Digital Culture
In a Muslim country, like Saudi Arabia, concern about ethical and cultural issues in the marketplace are significant features of e-commerce development. In a conservative Saudi culture women’s role in commerce is a new issue. In the last few years women have gained the right to work, which has a bearing on digital developments. Here’s one way it plays out. If a woman can find a job online, which doesn’t require her to leave her home, she is far less likely to encounter domestic and cultural problems in the marketplace. E-commerce offers these types of opportunities.
The Saudi economy is based on oil production. Ninety percent of Saudi exports are petroleum, and industry represents sixty five percent of Saudi employment. Unfortunately for the Saudis most of that employment is highly technical and requires a foreign labor force that has those skills. Male Saudi unemployment is over ten percent. Women aren’t even counted in current Saudi unemployment statistics, but it’s not likely that women are going to become a big part of the petroleum industry work force in Saudi Arabia any time soon. That’s where digital opportunities come into play.
E-commerce in Saudi Arabia is growing at an estimated 9.3 percent a year, and about one in four Saudi internet users are already active e-commerce purchasers. Many Saudi women who have career ambitions are finding that building an e-commerce business from home is ideal. The Saudi government supports this development because it’s a new area of commercial development away from the petroleum industry. Petroleum has been a great boon to Saudi economic growth, but it won’t last forever. The Saudi government is actively seeking ways to diversify the economy, and e-commerce can play a part.
In an effort to promote science and technology, which includes digital growth, the government has established three technical centers. The first technical center, King Abdulaziz City for Science and Technology in Riyadh, is responsible for an initiative for Arabic content. This project was started before the internet was a big consideration in Saudi Arabia, but much of the content now is being made available online. One of the projects is to translate “Nature” magazine into Arabic and make it available on the internet. This Science and Technology center is also promoting the growth of Information Technology (IT) and is the local address registry for Saudi internet URLs.
A second technology center, Riyadh Techno Valley at King Saud University is developing a partnership with public institutions and private businesses doing knowledge economics research. While this is only a part of what is being developed at Riyadh Techno Valley, this initiative seeks information about high speed internet access and other communications industry information.
Finally, Dhahran Techno-Valley was established as a research and development center for the petroleum industry. While their primary focus is not on internet development, they use online tools as part of their activities. With all three of these technology centers the Saudi government is attempting to introduce technology to the Saudi people and to develop and promote technology based employment. This is not, however, how internet innovation generally takes hold. The Silicon Valley model for start up investment and technology development targets unique online niches that can be leveraged and ideally that can be monetized by licensing or advertisement sales. Big sites like Google, YouTube and Amazon are the face of this Silicon Valley model and yet that’s not what the Saudi technology centers are developing.
At this point Saudi digital innovation involves internet marketing methods for e-commerce. ArabNet Riyadh 2013, the second annual digital gathering in Saudi Arabia happened in early December and was all about unlocking e-commerce in Saudi Arabia. They explored the latest trends in online payments, exhibited more than forty leading Arab companies, and promoted the newest initiatives in Arab content. All of that is good for internet growth around e-commerce, although online payment systems might mean a shift away from protection the local Saudi marketplace gets by using cash on delivery payments.
What is interesting and potentially offers outside investment opportunities in Saudi e-commerce, is the way the Saudis are leveraging Islamic culture on an open internet. Unlike, Shiite rival Iran, who are building a closed intranet as a means of controlling access to Islamic e-commerce, the Saudis are exploring similar Islamic e-commerce but leveraged on the open internet. A third of the world’s population is Islamic, how can that be used for digital advantage without attempting to close off any part of the world wide web? Even if the Saudis look to promote e-commerce just to the Arabic speaking part of Islam, that represents almost four hundred million people in the Middle East and Nothern Africa.
Finally, there’s an interesting digital statistic in Saudi Arabia that I suspect reveals an unspoken part of Saudi e-commerce. In 2012 there were fifty three million cell phones in Saudi Arabia and the population was just under twenty seven million people. That means all most everyone has more than one cell phone. I wonder what this is all about? In other places when an individual owns two cell phones it usually indicates that person has both a personal cell phone and a business cell phone. In Saudi Arabia, where the labor force is eight million people, that can’t be the only reason. I suspect many of those second phones are used for culturally suppressed online commerce and websites. Prohibited materials and other Western e-commerce, which are not approved by Islam may be the reason to own a second phone – a phone that would probably be kept secret. I’m not sure this explains what is going on in Saudi Arabia, but I suspect it might be. I mention this not to accuse Saudi people of wrong doing, but to point out there may be a double marketplace developing in Saudi digital culture.