What are the biggest challenges facing Saudi e-commerce in the Middle East and North Africa today?
I answered this important question during an interview at the MENA ICT Forum, and more importantly, explained what people in the region are doing to solve these big problems. Click this link to watch a 4.5-minute video recording of the interview, and read this article for a more in-depth look at the these important issues.
1. Payment inefficiencies.
The problem: The lack of a major payment gateway that serves the MENA region is the biggest barrier to successful e-commerce today. A payment gateway is a service that allows businesses to handle payments electronically.
Instead of using this new type of service, our region is still using the old-fashioned, inefficient cash on delivery model. This means that customers order products, then pay for them at their doorstep by handing cash to the delivery agent. In some local companies, 60% of transactions are done using the cash on delivery model.
While cash on delivery seems to be a safe model, it comes with many headaches. For example, a company that uses the cash on delivery model has to deal with transporting the cash from the customer’s house to their office. This requires cash insurance and extra security. The courier also has to pay the company back, which means extra accounting work to reconcile the books. So, even though cash the is top payment method in the MENA region today, it is creating a burden for companies.
The solution: Customers and businesses need to move toward electronic payments and mobile payments, and away from cash payments. My partners in the e-commerce business and I are working to make online payments easier for both shoppers and companies.
2. Lack of trust in local e-commerce brands.
The problem: People in the MENA region don’t trust local e-commerce brands. They choose to support foreign brands, such as those from the United States or Europe, even when this is less convenient for them.
The solution: A group of Saudi entrepreneurs, including Ecommerce Sea CEO Mazen Al-Darrab, have recently formed a group called Ittejar, which provides basic accreditation for Saudi e-commerce websites through their Mothoq project. E-commerce websites that meet Ittejar’s standards get the Mothoq certificate of approval.
They are then added to the Mothoq website and given the option of placing the Mothoq seal on their own sites. That way, customers can see whether a local e-commerce site is trustworthy, easing their worries.
3. The Saudi addressing system.
The problem: Many people in Saudi Arabia don’t know their addresses. They are used to the idea that houses are not formally addressed, even though this is no longer true. Because of this, when they order products, they provide complicated directions explaining how to reach their homes instead of giving their addresses.
The solution: Municipalities have put addresses and even QR codes on every building. Because of these QR codes, anyone who walks into a residential or commercial building can just scan the QR code with their mobile phone to find out the address of that building.
The Saudi Post and Google have also been working together to make buildings easier to find. Now, anyone can enter any Saudi Postal number into Google and find the correct building, down to 4 meters of accuracy.
Additionally, a new app created by information technology and services expert Abdulla Elyas and other entrepreneurs makes sharing your address easy. The app, Enwani, links your phone number to your exact address. Once you choose to share your address with someone through the app, they can find your home or office using a detailed, easy-to-navigate map.
So, while the days of having to follow confusing directions just to find someone’s house or office are not yet gone, things are finally improving.
Several of these issues came up at the ICT MENA session on e-commerce at which I spoke. That session was so packed that the moderator had to actually lock the door to the room!
I hope that interest in e-commerce will continue to grow in the coming years, inspiring new solutions that will help everyone in the region.