The Growth of E-Commerce in Saudi Arabia and Its Influence on Saudi Women

Research Paper (undergraduate) , 2015 , 31 Pages

Business economics - Offline Marketing and Online Marketing

This paper discusses the influence of e-commerce on Saudi females and investigates the factors affecting the adoption of e-commerce in the Kingdom of Saudi Arabia (KSA).

Recently, e-commerce started to get more attention in KSA, particularly among Saudi females. Cultural conditions along with the major role played by the social media have influenced Saudi females to enter the market.

Although Saudi Arabia is considered one of the biggest personal computers markets in the Arab world, e-commerce is growing slowly. The main reason behind the slow adoption pattern is believed to be related to the complexity of providing a proper infrastructure and establishing trust between businesses and the customers. In addition to users readiness, privacy issues, cultural issues, payment issues, and the standard rules that states and guarantees the rights of both parties involved in the online trade.

Introduction

E-Commerce is abbreviated for electronic commerce; it can be simply defined as digitally enabling the exchange of value between two parties over the Internet. Ecommerce mostly uses different technology such as World Wide Web, e-mail and mobile application to transact business (King, 2003). Essentially Businesses attempt to adopt e-commerce technology to expand their market place, increase their competitive advantages, or add more convenience to their shopping experience. Recently, ecommerce started to get more attention in KSA particularly among Saudi female. Cultural conditions along with the major role played by the social media have influenced Saudi female to enter the market.

Although Saudi Arabia is considered one of the biggest personal computers markets in the Arab world, e-commerce is growing in slow adoption pattern. The main reason behind the slow adoption pattern is believed to be related to the complexity of providing a proper infrastructure and establishing trust between businesses and the customers. In addition to users readiness, privacy issues, cultural issues, payment issues, and the standard rules that states and guarantees the rights of both parties involved in the online trade.

This paper will discuss the influence of e-commerce on Saudi female and investigate the factors affecting the adoption of e-commerce in KSA.

Background

E-commerce consists of electronic business transactions that involve the exchange of values between two parties, Business-to-consumer (B2C) as well as business-to-business (B2B) trade. Businesses use the Internet, extranets, or electronic data interchange (EDI) in carrying out e-commerce (2011, Katherine Taken Smith). Essentially Businesses attempt to adopt e-commerce technology because they are seeking to expand their market place, increase their competitive advantages, or add more convenience to their shopping experience. Many businesses sectors are using ecommerce including industry sector, banking sector, telecommunication sector, and more others. E-Commerce allows companies to leverage their relationship with the customers and provide them with everything they want to shop for in one marketplace. The online market along with an open two-way direct communication with them to answer their questions and listen to their concerns and complaints. (Al-Otaibi & AlZahrani).

Timeline

The following time lines shows e-commerce development during the past years, in 1960 EDI permitted companies to carry out electronic transactions, and in 1979 Michael Aldrich demonstrated the first online shopping system, also Thomson Holidays UK is first (B2B) online shopping system to be installed in 1981 and in the following year in 1982 Minitel was introduced nationwide in France by France Télécom and used for online ordering, after two years in 1984 Gateshead SIS/Tesco is first B2C online shopping system. In 1990, Tim Berners-Lee created the first, World Wide Web, using a NeXT computer, and after two years in 1992 Book Stacks opened a commercial sales website (www.books.com) selling books online with credit card processing. In 1994 Netscape release SSL encryption, and the following year in 1995 Jeff Bezos launched Amazon.com and eBay founded by computer programmer Pierre Omidyar as Auction Web. By the end of the 20th century in 1998, PayPal launches pay services. In the beginning of the 21st century in 2000, the dot-com bust. In 2003 Apple launched iTunes stores and in 2006 Facebook signed a deal with Microsoft to provide and sell ads on their site. Finally, Online retail and US e-commerce reached 46.5 billion $ in 2013.

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Development of E-Commerce (data taken from Wikipedia, 2015)

E-commerce in the Middle East

According to PayPal insights report in September 2013. An investigation was done on e-commerce in the Middle East. This investigation concerned about three main elements of e-commerce which are online shopping, payment method, and Mcommerce.

First, Kingdom of Saudi Arabia, in online shopping people spend less time on online shopping due to unsecure methods, physical inspection, and shipping expenses. On the other hand they would like to spend more time on online shopping for the easiness/convenience in ordering and receiving the order. Then, payment methods where cash on delivery represents more than 80% of online purchases, followed by cards at 15% and PayPal at 5%. Finally, Mcommerce which has increased from 2012 to 2015, driven by a rise in sales through tablets. Smartphone users constituted 26% of KSA mobile shoppers. Second, Qatar, in online shopping people would spend less time online for several reasons such as unexpected delivered item, save delivery time, or split their expenses between online and physical stores. 41% would spend more time due to lower prices products, and 2% spend more because of security. Then, payment methods where cash on delivery is dominated by 75%, 7% of online shoppers use PayPal to complete their transactions while Credit cards are used in 18% of the cases. Finally, Mcommerce which is forecast to increase from a little bit less than 0.1Bn USD (0.4Bn QAR) to over 0.45Bn USD (1.7Bn QAR) in the same time period, driven by a rise in sales through smart phones. Smartphone users constituted 4% of mobile purchase behavior. Third, United Kingdom of Emirates, in Online shopping physical inspection and the desire to see the item before making an order is contributing to less time spending on online shopping as well as the product price. Like KSA the easiness/ convenience in ordering and receiving the order are factors encouraging them to spend more time on online shopping. Then, payment methods where PayPal is the third most used method of payment at 30%. In the UAE, credit cards are the second payment method used for shopping on computers after COD. Finally, M-commerce supported by high Smartphone penetration of 74 %, m-commerce is predicted to grow to nearly 1.50Bn USD (5.5Bn AED) by 2015 and will be driven up by a rise in Tablet penetration and purchases (PayPal Insights e-commerce in the Middle East September, 2013)

The Research Questions

- What are the factors affecting the adoption of e-commerce in KSA?
- What are the factors influencing the adoption of e-commerce by Saudi female?

Literature Review

In order to answer our research questions, this part of the paper aims to review relevant accumulated knowledge and available literature in order to evaluate related research. In a recent study published by the International Journal of Business and Management, the researchers Dr. Al-Hudhaif and Alkubeyyer conducted a research on "e-Commerce Adoption Factors in Saudi Arabia".

The objective of their research was to:

- Find out the level of e-Commerce adoption in Saudi Arabia.
- Identify the factors that affect the adoption of e-Commerce.

They conducted their research using the survey method by distributing questionnaires to a selected sample of the top 100 Saudi companies that are considered to be the leaders in the industry. The questioner targeted Marketing and IT staff in these companies to determine the level of the industry’s e-readiness. That is "the ability to use information and communication technologies (ICT) to develop one's economy and to foster one's welfare."(E-readiness) At the end of their research they found out that the level of adoption of e-Commerce in Saudi Arabia was 51% for institutionalized adopters and 42% for initial adopters (Al-Hudhaif & Alkubeyyer, 2011)

As a result, the following hypotheses were proven to be true.

- The perceived Organizational eReadiness factors contribute positively to the Institutionalization of e-Commerce.
- The Perceived External eReadiness factors contribute positively to initial adoption of eCommerce. (Al-Hudhaif & Alkubeyyer, 2011)

This means, that for new businesses, the decision of e-Commerce adoption highly depends on the external factors, which are the e-readiness of the company's customers and partners in addition, to the supporting industries' e-readiness and finally the government's e-readiness.

As for advanced institutions, the decision of adopting e-Commerce depends more on the internal factors such as, technology resources, organizational and managerial factors. The only external factor that might affect their decision would be the market force's e-readiness (Al-Hudhaif & Alkubeyyer, 2011).

Another research paper focused on the external factor, which is customer's ereadiness. The researchers stated factors that affect the Saudi customer's decision on whether to consider e-commerce as an option and rely on it or not. Some of these factors are:

1. The advantage of e-commerce to the customers and whether it would make their lives easier or not.
2. Practical compatibility of the users with new technology. The more comfortable customers are with using technology, computers, Internet, the more they are likely to consider adopting e-commerce.
3. The lower perceived risks associated with e-commerce services, the higher chance the individual customer accepts the technology and decides to use it.
4. The friendliness of the e-commerce website and the easy navigation and shopping process significantly increases the adoption of e-Commerce.
5. Location of residence can have a significant impact on the customer's decision of adopting e-Commerce. Customers who live in cities are more likely to use eCommerce than those who live in rural areas (Sait, Al-Tawil, & Hussain, 2004).

The third research paper conducted by E.Makki and L.-C.Chang from The Catholic University of America, Washington, DC, United States about “E-Commerce in Saudi Arabia: Acceptance and Implementation Difficulties”

The objective of their research was to Identify:

- Inhibitors differences between local Saudi consumers and Saudi citizens in USA.
- Mobile usage and social networking role in e-commerce in KSA,
- Main factors affecting “positively/negatively” in the acceptance and implementation of ecommerce in KSA.
- Possible solutions to address the problems.
- Suggest solutions to improve the rate of acceptance and implementation of e-commerce in KSA.

They followed a quantitative approach in targeting internet users, Saudi consumers, and local Saudi retailers. Interviews were conducted through previously prepared questions that are designed for each group of people. Some data were used from previous research conducted by R. Alghmadi, S.Drew, and T.Alhussain, due to the lack of reaching Saudi retailers and local consumers.

Since Saudi Arabia has always suffered from the lack of accurate home and street addresses, delivery issues has shown to be a major inhibitors for local Saudi consumers more than retailers. However, the result of the questions dedicated to the consumers to anticipate main factors affecting the acceptance and the implementation of e-commerce, physical inspection was on top (53.8% as an inhibitor and 62.4% as a motive), followed by government regulation with slightly lower percentage (52.4% as an inhibitor and 52.6% as a motive). This might be due to trust issues which raise the importance of awareness (e.makki and L.-c.chang).

The third ranked factor was the price; the cost of e-commerce to vendors in Saudi Arabia is perhaps affecting the price to be higher than physical stores. Payment methods ranked 6th with nearly 21% as inhibitors for retailers, where it took the 1st rank as a strongly needed motivator with about 58%. Social media encouraged Saudis to buy online, while mobile usage was moderate (e.makki and L.-c.chang).

Based on the result of their study, they identified the main inhibitors affecting the acceptance and implementation of e-commerce in KSA as the following:

- Secure Online Payment Methods
- Government regulations
- Delivery Systems
- E-Commerce Awareness

1. Inhibitor: Secure Online Payment Methods

Problem: cultural, religious reasons, credit card eligibility, privacy, and security. Saudi consumers avoid the use of credit card for several reasons; interest is a main reason to avoid using credit cards since it's forbidden by Islam. Also, the high fees and other banks requirements contributed to this problem.

Solutions: PayPal is globally recognized payment method that act as a mediator between customers, banks, and retailers. It also provides excellent features like customer protection to facilitate refund. PayPal uses credit card or wired deposit, to encounter this problem, PayPal can be connected to customer debit account.

2. Inhibitor: delivery systems

Problem: physical address

Solutions: Google, geocoding and GPS, where customers can locate their delivery address on the map in merchant’s website. Retailers then can use GPS, or Google Maps App to reach the location.

3. Inhibitor: Government regulations.

Problem: the lack of rules and e-commerce regulations.

Solutions: the government should establish E-Commerce rules and regulations for ECommerce transactions as well as licensing for individuals. Government agencies should be more involved in helping researchers to study this aspect by providing statistical information to assist in quantitative research.

4. Inhibitor: E-Commerce Awareness

Problem: to overcome the factor of physical inspection for consumer and the trust issues.

Solutions: with the growing of social media in KSA, users should utilize it for sharing ECommerce awareness campaigns and promote their product and services. TV and street signs could be helpful. Not only convenience should be promoted, economic and cultural benefits should be explained to increase public participation.

They concluded that Deficiency of government rules and regulations governing ECommerce transactions, consumer protection, online business licensing and resolving security and privacy issues. Secure online payment methods that both retailers and consumers can rely on. Delivery systems that has not been resolved yet. E-Commerce awareness of the economic and cultural benefits (e.makki and L.-c.chang). E-Commerce government rules and regulations apparently are the most significant inhibitors to E-Commerce in Saudi Arabia to consumers and retailers as well as security payment systems. E-commerce awareness’s factor is affecting both retailers and consumers, however social media, could significantly assist in increasing ECommerce awareness in Saudi Arabia.

Another research paper published by Mutlaq, B. Al-Otaibi and Rasheed, M. Al-Zahrani, they performed a research on “Electronic Commerce in the Kingdom of Saudi Arabia”. The Research Objectives:

The writers’ main objective is to review the current status of E-Commerce in KSA and they use 7 items to reach the result:

1. Evaluating E-Commerce contributions in serving organizations.
2. Evaluating E-Commerce solution providers’ role in serving organizations.
3. Evaluating the impact of complementary services.
4. Evaluating adoption of modern technologies.
5. Evaluating adherence to standards.

[...]

• Authors: Manahil AlQulaity (Author), Wejdan Bajaber (Author)
• Publication Year: 2015
• Pages: 31
• Catalog Number: V312495
• ISBN (eBook): 9783668114937
• ISBN (Book): 9783668114944
• Language: English
• Tags: growth, e-commerce, saudi, arabia, influence, women