6: Conclusion & Recommendation 71
6.1 Conclusion 71
E-commerce is an electronic tool that enables individuals and companies to buy and sell services or products over electronic networks such the WWW. Through e-
commerce, consumers can purchase needed items, often at a discounted price, without the hassle of driving, parking, or standing in long queues. In addition, it is also often possible to find niche products and specialized services online that are not available in local “brick and mortar” stores. This study undertook a comprehensive review of e-commerce to obtain a thorough understanding of its condition in Saudi Arabia and to determine why it is still in an immature state. The research will be beneficial to the researcher and others who plan to enter the e-commerce market in Saudi Arabia. In order to fortify our
preliminary knowledge of the literature on e-commerce in Saudi Arabia, we conducted an online survey that elicited general perceptions and attitudes of Saudi consumers as well as opinions about e-payments and perceived obstacles to online shopping of Saudi consumers. An online survey tool, which was distributed via social networks and listservs, collected 1,740 responses from Saudi consumers.
Research has also shown that in the last five years the percentage of the Saudi Arabian population with financial cards has increased from 7% in 2005 to 31% in 2010 (Euromonitor International, 2010). According to our survey, 74% of respondents have credit cards, leading us to believe that, even though only 31% of the Saudi population holds credit cards, the majority of Saudi Internet users (extrapolated from our
respondents), the target market for online merchants, hold credit cards. The reason behind the increase of credit card holders is the recent development of credit cards that are compliant with Islamic “Shari’ah” law (Euromonitor International, 2010). The 9% of survey respondents who do not hold credit cards and do not plan to apply for one mostly attribute this decision to doubt about Saudi banks’ coverage of fraudulent activities and the non-compliant nature of conventional credit cards with Islamic law.
The main online payment systems used in Saudi Arabia are SambaConnect, SADAD and PayPal. Because of the high cost associated with installing the system on a website, SambaConnect is only utilized by 14 online merchants. They are mostly large enterprises with high sales volume. The SADAD system differs from other e-payment methods in that it is the national e-payment channel for e-government services. Fifty- eight percent of the 103 organizations that use SADAD are e-government organizations. Our survey supports this statistic. We found that while 54% of respondents used SADAD to pay bills, 58% never used SADAD for online shopping purposes. This provides us with a clear indication that SADAD has not been utilized as an e-payment option for online shopping; however it is well utilized by e-government and commercial organizations that issue high volume periodic bills. Finally, PayPal is considered a trustworthy and inexpensive e-payment system that any online merchant in Saudi Arabia can employ. However, it was not available in Saudi Arabia until March 29, 2011. Our survey clearly indicated that a major obstacle to online shopping is payment security. Nevertheless, 70% of respondents said they would trust a Saudi website if it used PayPal
Saudi websites are not e-commerce-oriented (CITC of Saudi Arabia, 2010). Most companies in Saudi Arabia only use their websites to provide information about the company and its products and services. According to our research, the websites that have implemented SambaConnect and SADAD only offer products and services that do not require shipping. This clearly indicates that the postal infrastructure was not sufficiently reliable to facilitate e-commerce practices that involve shipping. Therefore, Saudi websites are not able to take advantage of business opportunities that require the use of advanced e-commerce practices.
Before 2009, shipping purchases to home addresses was definitely a problem because residential and many commercial addresses did not exist. In 2009, the SP
installed a new GIS-based addressing system called Wasel that embedded state-of-the-art RFID technology chips. This addressing system created a unique address for all locations in the nation. Unfortunately our survey findings indicated that exactly half of the
respondents were not aware of their home addresses. Another interesting finding from our survey relates to the trustworthiness of SP services in general. We found that most respondents do not trust SP to deliver their purchases. However, they do trust alternative global postal services.
Research has shown that the number of Internet users in Saudi Arabia increased by 44% CAGR from 200,000 in 2000 to 11.4 million in March 2011, which means that 43.6% of Saudis use the Internet (Internet World Stats, 2011). Our findings indicate that 52% of Saudi Internet users (survey respondents) always and often shop online.
Interestingly, those who shop online prefer to shop at western global websites rather than Saudi websites. This concurs with our review of the literature that reveals the immature
state of e-commerce in Saudi Arabia. Saudis who do not make purchases from Saudi online merchants consistently cite two reasons: 1) they do not trust Saudi online merchants’ infrastructure in relation to shipping and payment protection, and 2) Saudi online merchants do not have attractive offerings and the presentation of items is not appealing.
The research survey inquired about obstacles that deter Saudi online consumers from shopping online in Saudi Arabia. The main obstacles are inadequate security and lack of trust as well as not being able to physically handle items before purchase. Other major obstacles that respondents listed are the poor infrastructure of Saudi websites and shipment services, and a negative subjective perception of Saudi customs regulations. Surprisingly, we found a normal distribution amongst respondents in terms of language preference, leading us to believe that culture and language are not major factors affecting Saudi online shoppers.
In summary, e-commerce in Saudi Arabia is here to stay and can prove a valuable asset to any business only if its place in the business is recognized and its e-commerce services are implemented correctly. The main three obstacles that hinder Saudis from shopping online are the lack of government regulations that protect buyers and sellers, lack of secure online payment system, and the poor mailing infrastructure. We believe that these obstacles will gradually decline due to the release of ETA, PayPal and Wasel in Saudi Arabia. Given that these challenges are being addressed, we believe the future is bright for e-commerce in Saudi Arabia. In addition, many companies have only recently
Groupon.com) came online. This clearly indicates that e-commerce in Saudi Arabia is growing and has a promising future.
6.2
Recommendations:
Based on the results of our study, we are prepared to make the following recommendations that, when implemented, will enhance the success of e-commerce in Saudi Arabia. These recommendations would be of interest to government agencies, Saudi banks, entrepreneurs or established companies who want to enter the e-commerce market in Saudi Arabia.
6.2.1 Technical Recommendations:
• Create E-payment gateways and platforms in association with the financial system. • Develop stronger security that ensures the confidentiality of transactions and
websites.
6.2.2 Governmental Recommendations:
• The Saudi government needs to provide assistance to help develop the underlying infrastructure and support technical services to build a positive environment for accessible and effective e-commerce.
• It is evident that SP should undertake a campaign to inform people, through social
media and newspaper and TV commercials, about their mission to create an “address for each person”. In addition, the government could require or encourage the use of the new SP addresses.
• We found that SADAD is a trusted e-payment tool; however it entails a complicated and expensive instalment procedure for online merchants. Therefore we recommend that the government simplify the installation of SADAD for online businesses to facilitate its use as an e-payment tool for online shopping.
6.2.3 Market Recommendations:
• A good way to enter the Saudi market is by providing services that do not require
shipping since many people have had bad experiences with delivery of products and do not trust shipping companies. This is, in part, because delivery service is
extremely slow.
• Since 65% of Saudi own smartphones and half of those owners use it to access the
Internet an average of 68 minutes a day, online merchants can leverage the use of smartphones applications to market and sell their products.
• Another good way to enter the e-commerce market in Saudi Arabia is by
• Saudi banks could promote the newly implemented Visa debit card or MasterCard
debit card, which is compliant with Islamic law. Unlike a conventional credit card, these credit-debit cards, does not incur interest, which is prohibited by Islamic law. Although these credit-debit cards are technically a debit card because it immediately deducts the purchase price from your bank account, it has some of the advantages of a credit card because it can be used online or internationally.
Appendix A - Financial Cards Forecast in Saudi Arabia: 2010-2015
Source: (Euromonitor International, 2010)
Source: (Euromonitor International, 2010), * $1 USD=0.26666 SAR 8.1 10.3 12.6 14.6 18.2 21.5 0 5 10 15 20 25 2010 2011 2012 2013 2014 2015 Mi lli on s
Forecast: Number of Financial Cards in Circulation in Saudi Arabia 2010-2015
Table A-1: Financial Cards Performance Forecast 2010-2015
Total 2005 2006 2007 2008 2009 2010
Number of Transaction (mn) 79.1 100.5 129.9 172.7 231.1 285.2
Appendix B – How SADAD Works
Source: (www.sadad.com)
1. Billers send summary billing information to SADAD at a pre-determined schedule 2. SADAD validates data received and uploads it to its database
3. SADAD notifies Billers of any discrepancies
4. Customer requests bill(s) information through Bank channels(1) 5. The Bank forwards the request received to SADAD
6. SADAD retrieves billing information from its database and forwards it to customer 7. Customer selects the bill(s) to be paid and the respective amount(s)
8. The Bank debits the customer account and confirms the transaction 9. SADAD updates its database based on the Bank’s confirmation(2) 10. SADAD notifies the relevant Biller(s)
11. At the end of the day, SADAD initiates settlement instructions through SARIE 12. At the end of the day, Billers receive reconciliation reports from SADAD showing a
breakdown of all transactions processed by SADAD 13. SADAD updates bills status to “settled”
Appendix C – SADAD Billers
Biller Name (Biller Code) Service Category 1 Saudi Electricity Company (002) Telecom. & IT
2 Mobily (005) Telecom. & IT
3 "Bravo" (Biller Code 014) Telecom. & IT
4 Nesma Advanced Technology (Biller Code 037) Telecom. & IT
5 SaudiNet (Biller Code 038) Telecom. & IT
6 Zain telecommunication company (Biller Code 044) Telecom. & IT
7 Go Telecom (Etihad Atheeb Telecom Company) (Biller Code 033) Telecom. & IT
8 Saudi Business Machines (Biller Code 083) Telecom. & IT
9 Perfect Presentation Telecommunication & IT (2P) (code 107) Telecom. & IT
10 Al-‐Elm Information Security (code 085) Telecom. & IT
11 Integrated Telecom Company (Biller Code 055) Telecom. & IT
12 Cyberia (Biller Code 059) Internet Provider
13 Sahara Net (Biller Code 048) Internet Provider
14 AwalNet (Biller Code 041) Internet Provider
15 NCCI (003) Insurance
16 Cadre Economic Cities (Biller Code 035) Human Development
17 Marafiq (Biller Code 004) Utility
18 Sama airline (Biller Code 011) Airlines
22 Aljomaih Automotive Company (052) Retail
23 Al-‐Hamrani Company for Investment in Trade (ACIT) (023) Multi-‐Investment
24 ALJABR TRADING COMPANY (086) Multi-‐Investment
25 Tajeer Company (063) Leasing
26 Showtime (Biller Code 032) Media & Publishing
27 AlYamamah Press Establishment (Biller Code 047) Media & Publishing
28 AL-‐Jazirah Newspaper (Biller Code 053) Media & Publishing
29 Arab Media Company (Biller Code 076) Media & Publishing
30 Dar Alyoum pressing, printing and publishing (biller code 074) Media & Publishing
31 Ola Almajd Trading Co. (AL MAJD TV channels) (081) Media & Publishing
32 Awan For Market Data (Biller Code 039) Media & Publishing
33 Samba Financial Group (credit card) (Biller Code 012) Banks & Financial
34 NCB (credit card and Personal Finance) (Biller Code 016) Banks & Financial
35 American Express (Saudi Arabia) (Biller Code 018) Banks & Financial
36 SABB PS (Biller Code 029) Banks & Financial
37 Alyusr Instalment Co. (Biller Code 024) Banks & Financial
38 Saudi Hollandi Bank Credit Cards (Biller Code 031) Banks & Financial
39 Mubasher (Biller Code 034) Banks & Financial
40 The Saudi Arabian Agricultural Bank (Biller Code 045) Bank & Financial
41 Falcon Credit Card from NCB (Biller Code 056) Banks & Financial
41 Bank Al-‐Jazira Credit Card and Financing Services (Code 078) Banks & Financial
42 Arab National Bank Payments (Biller Code 082) Banks & Financial
43 AlRajhi Bank Services (Biller Code 054) Banks & Financial
45 Riyad Bank Payments (biller code 067) Banks & Financial
46 King Abdul Aziz University (009) Government /Education
47 Qiyas (Biller Code 008) Government /Education
48 Al-‐Yamamah University (Biller Code 072) Government /Education
49 King Saud University (Biller Code 080) Government /Education
50 Arab Open University (AOU) (biller code 017) Government /Education
51 The Saudi Home PC initiative (CITC) (007) Government
52 Madina Municipality (006) Government
53 Ministry of Water and Electricity (015) Government
54 Riyadh Municipality (Biller Code 010) Government
56 The Department of Zakat & Income Tax (Biller Code 020) Government
57 Holy Makkah Municipality (Biller Code 027) Government
58 Jeddah Municipality (Biller Code 028) Government
59 Communications and Information Technology Commission Government
60 Eastern Province Municipality (Biller Code 025) Government
61 JEDDAH Chamber of Commerce and Industry (Biller Code 019) Government
62 Saudi Post (Biller Code 021) Government
63 Saudi Arabian Standards Organization (Biller Code 049) Government
64 Saudi Customs (Biller Code 030) Government
65 Ministry of Commerce and Industry (Biller Code 013) Government
66 General Commission for Tourism and Antiquities (Biller 057) Government
70 Jazan Province Municipality (Biller Code 064) Government
71 Ministry of Transport (Biller Code 075) Government
72 Ministry of Culture and Information (Biller Code 051) Government
73 Ministry of Labor (Biller Code 050) Government
74 Riyadh Chamber of Commerce and Industry (Biller Code 073) Government
75 AlQassim Province Municipality (Biller Code 070) Government
76 Real Estate Development Fund (Biller code 040) Government
77 The Saudi Industrial Property Authority(Biller Code 068) Government
78 The General Organization for Social Insurance (Code 060) Government
79 Aseer Province Municipality (Biller Code 084) Government
80 Saudi Project for Utilization of Hajj Meat (Biller Code 043) Government
81 Ministry of Finance (Biller Code 088) Government
82 MOI-‐Alien Control (Biller Code 090) Government
83 MOI-‐Driving License (Biller Code 091) Government
84 MOI-‐Saudi Passport (Biller Code 092) Government
85 MOI-‐Traffic Violation (Biller Code 093) Government
86 MOI-‐Motor Vehicle (Biller Code 094) Government
87 MOI-‐Labour Importation (Biller Code 095) Government
88 MOI-‐Civil Registration (Biller Code 096) Government
89 Najran Province Municipality (Biller Code 087) Government
90 AlJouf Provence Municipality (Biller Code 103) Government
91 Saudi Port Authority (biller code 089) Government
92 Ministry of Islamic Affairs (MOIA) (biller code 077) Government
94 Municipality of Northern Borders (biller code 102) Government
95 Saudi Food And Drugs Authority (code 109) Government
96 General Authority of Civil Aviation (GACA) (098) Government
97 Baha Province Municipality (104) Government
98 AlAhsa Municipality (code 112) Government
99 Royal Commission for Jubail and Yanbu (RCY) (046) Government
100 Taif Municipality (113) Government
101 Saudi Arabian General Investment Authority (SAGIA) (108) Government
102 Saudi Credit Bureau (SIMAH) (biller code 036) Government
103 Deputy Ministry for Mineral Resources (DMMR) (biller code 116) Government
Appendix D – Websites with SambaConnect
Participating Online Merchants with Samba Connect
Organization Name Service Category Website
Daily Visitor 1 Saudi Arabian Airlines Airlines www.saudiairlines.com 32,287
2 Hjzcom Travel www.hjzcom.com 1,323
3 Saudi Railways Organization Train Tickets www.saudirailways.org 454
5 Atheeb Telecommunication
Internet & Phones Cards
www.go.com.sa 3,339
6 Al-Elm Information Security
Tourist VISA
application www.etv.com.sa < 10 7
Tatweer International Software Development Co. Ltd
Stock Trading
Software www.mostathmer.com < 20
8 FanaPay Software, Phone
cards
www.fanapay.com 1,102 9 Rawabit Technology LTD Software www.sijil.com < 10 10 Saudi Telecoms Co. (STC) Telecom Provider www.stc.com.sa 332,820
11 Arab Media Company Publication Subscription
www.arabmediaco.com < 20
12 US Embassy for Visa Payment United State Visa www.samba.com NA
13 ASHARQIA Chamber Government
Services
14 Tawuniya Insurance Services online.tawuniya.com.sa 378
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