Amazon, a member of the U.S.-Saudi Business Council (USSBC), is expanding its investments in Saudi Arabia with a set of new partnerships with SMEs, tech startups, and local entrepreneurs. The partnerships and investments are helping to fuel the region’s already burgeoning tech and online retail sectors, which retained their strong growth despite shocks to other economic sectors caused by the COVID-19 pandemic in 2020/2021. The growing inclusion of the young Saudi population in the country’s booming tech start-up and e-commerce sectors create an attractive investment climate for Amazon and other industry leaders, and Amazon is eager to capitalize on these opportunities.
Saudi Arabia’s Growing E-Commerce Sector
The research firm Statista reported that e-commerce revenue in Saudi Arabia is expected to reach $7 billion this year, with an annual growth rate of 5.38 percent propelling that the sector’s revenue to reach $8.7 billion by 2025. Statista’s report identified fashion as the largest e-commerce segment among consumers, with average annual revenue per consumer estimated at $248.69.
Amazon’s foray into the Middle East’s online retail space began in 2017 with its $650 million acquisition of the locally founded online retail platform Souq.com, which at the time was the largest e-commerce company in the region. The acquisition also included Payfort (Souq’s online payments gateway) and Souq’s fulfillment operations, allowing Amazon to quickly establish a foothold in Saudi Arabia and the Middle East with the platform’s existing logistics and operations infrastructure. In the following years, Amazon strengthened its Saudi operations by installing 15 new facilities and training and employing 2,000 new people. In July 2020, Amazon cemented its presence by rebranding the Souq.com domain to Amazon.sa.
Local Employment and Partnership Opportunities
Amazon announced plans in March 2021 to hire 1,500 new Saudi employees and add 11 new facilities to its network in the Kingdom, which will boost its national storage capacity by 89 percent and expand its geographical delivery network by 58 percent. The company currently operates three fulfillment centers in Riyadh and Jeddah as well as 11 delivery stations and two sorting centers across the Kingdom, and this latest planned expansion will increase those figures to six fulfillment centers and 13 delivery stations. In conjunction with new partnerships with Saudi Post and 10 other local service partners, Amazon expects its fulfillment network in Saudi Arabia to reach across a total floor area of 867,000 square feet by the end of 2021.
Amazon has adapted well to the specific economic and social characteristics of the Saudi Arabian market, with its local staff able to fit the company’s operations and communications with the Arabic language in the country. Another important characteristic of the Saudi market is the prevalence of mobile phones. 80 percent of Amazon’s Saudi customers are on mobile or smart phones, and the country’s population skews young: two thirds of the Saudi population is under the age of 35. Families are typically larger than in the U.S. market, so consumables and groceries have a higher importance within Amazon.sa’s marketplace. Ronaldo Mouchawar, Vice President of Amazon Middle East and North Africa, explained in an interview with Arab News that the e-commerce and tech startup space in Saudi Arabia is comprised of a growing number of venture capital firms, family offices, and young entrepreneurs, with whom Amazon is eager to seek partnership. Mouchawar, who was previously a co-founder of Souq, also explained in the interview that Amazon’s partnerships and investments offer a win-win scenario: Amazon’s expansion in Saudi Arabia will rely on the country’s young, tech-savvy workforce for its growth, while creating plentiful employment opportunities for the Saudi people.
The Start-Up Ecosystem and Vision 2030
The Saudi government welcomes and supports foreign investment and partnerships from companies like Amazon in line with Vision 2030, the country’s ambitious economic transformation and diversification program. To support the initiative’s main goal of shifting the country’s economy from its traditional reliance on oil and gas, the Saudi government has in recent years funded and encouraged growth and innovation in its tech sector, most recently under a $15 billion public-private technology fund to develop digital infrastructure announced at the Saudi 4th Industrial Revolution conference held in Riyadh in July 2021. The tech startup ecosystem in Saudi Arabia performed remarkably during the COVID-19 pandemic in 2020, with startup investment in e-commerce, delivery/logistics, financial services technology (FinTech), and online education more than doubling since the same period in the year prior. In 2020, despite the pandemic, entrepreneurial activity increased by 24 percent year-over-year (YoY), according to a report by the Global Entrepreneurship Monitor. The same report found that a third of surveyed Saudis had interest in launching a business in the next three years. Another report by research platform Magnitt found that the Saudi technology start-up sector’s total value of investment deals grew 55 percent YoY in 2020 to $152 million. The strong progress made during the pandemic in Saudi Arabia’s digital transformation and economic diversification is certain to continue past the end of this year.
If you are interested in partnering with Amazon, please reach out to Ana Carmen Neboisa at anacarmen@ussaudi.org. For more information on Saudi Arabia’s startup ecosystem in 2020, click here to read another featured article from the USSBC.
