The e-commerce sector is rapidly expanding across the Middle East, driven by digitization and technological advancements. The region’s e-commerce market reached $1.88 billion in 2024 and is projected to grow to $10.96 billion by 2033, reflecting an impressive annual growth rate of 21.58%.

Saudi Arabia stands out as a key player in this growth. The kingdom’s e-commerce sector continued its upward trajectory in 2024, with 40,953 businesses now registered—a 10% year-on-year increase. The kingdom now ranks among the top 10 countries globally in expanding this sector. 

REASONS FOR GROWTH

According to Dalal Alrayes, Spare co-founder and CEO, Saudi Arabia has historically been positioned for rapid e-commerce growth. “Fueled by a young, tech-savvy population with rising incomes, coupled with strong regulatory support for transformation, improved logistics, and digital payments, we saw an accelerated trend for consumers to shift their purchasing habits toward online.”

Saudi Arabia’s widespread internet and smartphone access (98% and over 90% penetration, respectively) and the kingdom’s youth-driven market, with approximately 70% of the population under 35, a demographic inclined to shop online, is also driving its growth. 

“Additionally, the government’s support for small and medium enterprises (SMEs) through Monsha’at initiatives provides resources for SMEs to build digital platforms, boosting their participation in the eCommerce market,” says Abdul Majeed AlYemni, Co-founder and CEO of Salasa.

Pointing to the widespread adoption of local payment solutions and digital wallets as a key factor, Omar Gammal, EVP of Global Business Development at Paymob, says, “Innovative payment options such as Buy Now, Pay Later (BNPL) services—Tabby and Tamara—have further expanded consumer purchasing power. These developments have unlocked new revenue streams for merchants, empowering them to scale and thrive in Saudi Arabia’s fast-evolving digital economy.”

Cashless payments are a major driver of the booming e-commerce sector. “Digital payment infrastructure is the backbone of Saudi Arabia’s booming e-commerce sector,” says Gammal. “The ubiquity of mada cards, which processed over 6.2 billion transactions in 2023, highlights the market’s digital maturity. The upcoming Saudi Payments Gateway will further streamline domestic transactions, reducing costs and improving merchant acceptance rates.”

Alrayes points to Open Banking and Open Finance, which she predicts will significantly reshape e-commerce in the country in the coming years. She notes how they are already reshaping how retailers offer payment options to their customers in the US and Europe. 

“Open Banking provides the option to pay using Account to Account, which transfers the funds directly from a consumer’s account to the merchant. For the consumer, it is cheaper than using cards and more secure, as the payment is authenticated and directly transferred by the bank.”

Social media’s transformative impact on e-commerce, acting as both a marketplace and marketing channel, has also been a key. With a young, tech-savvy population highly engaged on platforms like Instagram, X, TikTok, and Snapchat, brands leverage these tools to build trust, showcase products, and drive sales. 

Mazen AlDarrab, Co-founder and CBO of Zid, says, “Our Snapchat integration feature has driven up to 8 times ROI with seamless ad management. TikTok shop integration allows merchants to connect with creators and turn views into sales.”

With that significant reach in the population, it is no surprise that merchants are becoming more creative in incorporating social media into their distribution strategies, adds Alrayes. Social media companies are evolving their offerings for merchants, providing them with no-code platforms to sell their products and services.”

THE GOVERNMENT’S HAND

The government aims for 80% of retail to come from modern and e-commerce channels and 70% of payments to be online by 2030. This ambitious vision is driving rapid growth in the sector, as evidenced by an 82% year-on-year surge in logistics sector registrations in Q4 2024, reaching a staggering 16,561.

“By prioritizing digital transformation, entrepreneurship, and financial inclusion, the government has created an environment where businesses can innovate and scale,” says Gammal.

He points to regulatory reforms like streamlined licensing and stronger consumer protections, which have lowered merchants’ barriers to entry. Additionally, significant investments in digital infrastructure, logistics, and the payments ecosystem have fueled further growth.

Dina AlSamhan, Co-founder and CBO of qeen.ai, echoes Gammal’s sentiment, saying the government has been critical in fostering a digital-first, technology-driven economy. She points to Monsha’at’s e-commerce initiatives to help merchants establish their online presence.

AlSamhan further emphasizes the positive impact of reforms that reduce business barriers and the government’s bold investments in technology, citing the $40 billion AI fund launched in 2024 as a prime example. 

AI AND TECHNOLOGY

One cannot discuss the development of e-payments and rapid digitization without exploring the role of AI in the matter. AlSamhan believes AI can completely transform the e-commerce experience, driving stronger customer engagement and long-term brand loyalty. “AI elevates the customer experience by consistently delivering relevant and compelling content that engages shoppers and drives repeat purchases.”

Technology is the key to optimizing supply chain operations and enhancing efficiency in the e-commerce sector. AlYemni references Salasa’s operations, highlighting the organization’s comprehensive use of advanced technologies and systems to optimize supply chain operations and enhance efficiency for e-commerce merchants.

“One of the key features is the seamless integration of Salasa’s Operation Management System (OMS) with popular e-commerce platforms like Zid and Salla, allowing merchants to streamline their operations and leverage AI to gather valuable data,” says AlYemni. This integration introduces more autonomy, enabling merchants to automate processes and make data-driven decisions that improve efficiency.”

The adoption of predictive analytics, AI, and Internet of Things (IoT) technologies is transforming the kingdom’s e-commerce landscape. 

“IoT devices collect and analyze customer behavior data, enabling e-commerce platforms to offer personalized product recommendations and targeted promotions. Tech bridges online and offline retail experiences by enabling features like in-store pickup for online orders and synchronized inventory management,” AlDarrab says. “This integration ensures that customers have consistent experiences across channels, a growing demand in the Saudi market.”

FUTURE TRENDS

Clearly, AI’s rapid evolution will profoundly shape the future of e-commerce. This technological shift enables SMEs to boost revenue by up to 25% and compete more effectively with larger enterprises.

“By democratizing access to advanced, enterprise-grade tools, autonomous AI agents enable smaller merchants to operate more efficiently and compete more effectively,” says AlSamhan.

The shift from horizontal to vertical AI solutions in e-commerce, AlSamhan adds, is driven by AI agents’ ability to optimize for precise outcomes in increasingly complex scenarios, enhancing the value of specialized, end-to-end solutions.

“Looking ahead, autonomous AI agents are set to radically transform e-commerce workflows, unlocking entirely new business models and operational efficiencies.”

AlYemni says social media platforms will further play a critical role in shaping the future of e-commerce and consumer behavior.

“Platforms now offer merchants seamless integrations with social media channels, enabling in-app checkouts and personalized social media ads. This integration streamlines the consumer journey, allowing brands to create a more direct and engaging shopping experience for their customers.” 

Anticipating changes such as more personalization and dynamic promotions in the future, Gammal says digital payments and flexible payment plans will likely become the norm. Think BNPL for everything enabled by Open Banking, making online shopping even more convenient,” says Gammal. 

Undoubtedly, the kingdom’s e-commerce is poised for continued expansion, fueled by government-driven digital transformation and its emergence as a regional commerce hub. Alrayes says that with stronger digital infrastructure and growing consumer trust, merchants offering flexible omnichannel payments will lead Saudi Arabia’s digital economy.