Abdo Chlala, Country Manager at Amazon KSA, takes us on an in-depth look at the company’s operations and future ambitions
E-Commerce Growth in Saudi Arabia
Saudi Arabia is one of the largest and fastest-growing e-commerce markets in the region. Government data indicates that almost two out of three people in the Kingdom shop online today at leading sites such as Amazon.sa.
There are a number of factors that contribute to the growth of the country’s online retail sector. At 99%, Saudi Arabia has one of highest internet penetration rates in the world, making online shopping more accessible to customers. This is especially attractive to the Kingdom’s young and tech savvy youth population who seek convenience, a wide selection of products, and attractive offers. At Amazon, the company continues to innovate across these pillars to deliver what customers want.
Furthermore, the development of logistics infrastructure and technology in Saudi Arabia has contributed to a more seamless experience for customers, thus leading to the boom.
The availability of more reliable and popular online payment options is another factor that has made online retail more appealing to customers. Underlying all these developments is the government’s investment in the digital transformation of the economy through its Vision 2030 goal of a diversified future.
Today’s Trend
With e-commerce projected to account for over 25% of retail sales by 2035, compared to 10% currently, as reported by McKinsey, building efficiencies in the last mile has become a critical factor for businesses to remain competitive and deliver superior customer experiences.
Technology is the key to building robust last mile operations. Data and predictive analytics, AI and 5G connectivity, provide prescriptive solutions for the smooth movement and delivery of packages. Another recent trend in Saudi Arabia’s last mile delivery is flexible delivery options, with customers having the option to choose dates and time of delivery. Today’s customers want to buy from businesses that understand who they are and what they need. As the online retail sector continues to grow, these trends will further drive the last mile to become even more seamless and efficient.
Fueling Saudi Vision 2030
Since the launch of Amazon.sa in 2020, it has been committed to Saudi Arabia’s vision for a diversified future, with investments designed to deliver socio-economic impact. Amazon focuses on giving customers what they want – a wide selection of products, low prices, and fast delivery – making it attractive for more customers in Saudi Arabia to shop online, while also strengthening the Kingdom’s payments sector by encouraging Saudi customers to move towards digital payments.
Supporting local SMEs is a fundamental part of Amazon’s work and contributes towards the Vision 2030 goal to increase SME contribution to the Kingdom’s GDP from 20% to 35%. The company enables entrepreneurs and startups in Saudi Arabia to use its tools, services and programs to grow their business online. In fact, Amazon is working closely with Monsha’at, and MISA to empower 40,000 SMEs by 2025, connecting them with millions of Amazon.sa customers.
Amazon recently rolled out its ‘Saudi Made’ storefront featuring thousands of locally manufactured products making it easier for customers to support local businesses. As its network grows, it provides opportunities for more entrepreneurs and SMBs in the logistics and delivery business in Saudi Arabia to utilise its infrastructure, technology and training, enabling them to scale their businesses as Amazon’s Delivery Service Partner.
Additionally, the company is invested in nurturing the Kingdom’s talent by offering its employees a variety of roles where they can learn in-demand skills and pursue a range of career paths – from technology and analytics to delivery and supply chain roles.
Investments in Technology and Innovation
Amazon brings over 25 years of global logistics technology and innovation to Saudi Arabia in line with the Kingdom’s goal to be the go-to logistics hub for the region. The transformative technologies in the company’s fulfilment network play an integral role in ensuring speed, safety and reliability for its customers.
All Amazon’s facilities in Saudi Arabia are equipped with its latest global innovations powered by Machine Learning and Artificial Intelligence to enhance efficiencies in the fulfilment processes. Complex algorithms are deployed to accomplish within minutes what used to take hours. This world-leading efficiency enables the company to offer same-day and next-day delivery through Amazon Prime in Saudi Arabia.
The business also leverages innovative technology to maximise efficiency on the road, provide guidance to drivers on delivery routes and reduce delivery times by placing delivery stations and other pick-up points close to large Amazon customer populations. Its teams are constantly evaluating how it can leverage technology to improve processes, enhance safety for employees, and ensure a smooth and seamless experience for customers.
Towards Sustainability
As part of Amazon’s commitment to be net-zero carbon across all of its business by 2040, its sustainability initiatives support the Saudi Vision 2030 goal of a Net Zero future by 2060. The company is making strategic investments in people and technology to reduce carbon emissions at every stage of the fulfilment process – from the time an item is picked off the shelf in a fulfilment centre, to the materials used to pack the item, and the transportation method that gets the parcel to the customer’s door.
As of the end of last year, Amazon has 500+ wind and solar projects globally, and it is proud to be the world’s largest corporate purchaser of renewable energy since 2020. In its facilities across the region, Amazon incorporates carbon-friendly design concepts, efficient control systems, data and analytics to improve energy efficiency. In its transportation network in MENA, it is exploring alternative delivery methods to reduce its impact on the environment. It continues to look at a variety of factors including route distance, size of the order and infrastructure passing into and out of urban areas to determine the optimal way to deliver to customers across the Kingdom.
In packaging, Amazon’s aim is to achieve smaller and lighter packages using science-based systems to reduce waste. The system determines the type and size of packaging needed, enabling the company to pack more packages into each delivery, resulting in fewer trips.
Across every aspect of its operations, Amazon is taking small but meaningful steps to make sure it is an environmentally responsible company, and while some actions and investments will have immediate carbon savings, others will take years to demonstrate results. The company remains focused on leveraging its scale and assets to fight climate change, and work to accelerate innovation that can also help others reach net-zero carbon.
The Next Chapter
The e-commerce market in Saudi Arabia is estimated to reach USD 27.37 billion by 2029, more than double its current value. With this burgeoning growth, the online retail sector is constantly evolving. Artificial Intelligence is the latest disruptor that is expected to lead the next wave of transformation and support personalization in online retail. However, despite the advancements in technology, what customers want has not changed – wide selection, low prices, and fast delivery, and AI is enhancing these core customer values.
AI is taking personalisation to the next level in the customer journey, helping customers seamlessly navigate wide selections to find just what they need. Amazon’s newly launched AI recommendation engines, such as Rufus in the US, offer customers a personal shopping assistant that gives feedback and advice. In MENA and in Saudi Arabia, Amazon deploys AI to personalise and localise its devices. For example, in 2021, the company launched Alexa in the Saudi Arabic dialect. It also rolled out a range of new localised services for Alexa users in Saudi Arabia such as requesting prayer times, setting reminders, and adding quizzes and recipes, designed to make daily spiritual practices and rituals easier and more accessible.
Look into the future, technology continues to elevate online retail in the region, by fostering a more personalised, localised and innovative customer experience.