Setup a successful eCommerce business in Saudi Arabia necessitates a thorough understanding of licensing and operational requirements. Let’s take a closer look at what you’ll need to get started.
Market Insights
- Saudi Arabia is home to over 25,000 legally registered eCommerce businesses, accounting for 1.2% of the global eCommerce market.
- The country’s eCommerce market represents nearly half of the entire Middle East market, valued at around $1.5 billion.
Government Support & Key Considerations
- The success of eCommerce in Saudi Arabia can be attributed to strong governmental support and favorable policies.
- Starting an eCommerce business is an excellent opportunity for both residents and foreign investors.
Requirements for Starting an eCommerce Business If you’re interested in launching an eCommerce business in Saudi Arabia, be prepared to meet the following requirements:
- Obtain a commercial register for your business, whether you are a local or foreign investor.
- Comply with regulations, such as the Saudi eCommerce Law, which is designed to protect consumers and ensure the legality of electronic traders.
Social Media Usage in Saudi Arabia
- Over 14 million Facebook users
- 8 million Instagram users
- 9 million Twitter (X) users
Saudi eCommerce Law: A Closer Look
- Implemented by the Ministry of Commerce and Investment in 2019, the law contains 26 articles to regulate eCommerce activities.
- Both consumers and traders must fulfill specific requirements to obtain a license for eCommerce activities.
- The law applies to all electronic platforms, including social media websites like Instagram.
Obtaining an eCommerce License in Saudi Arabia To legally operate an eCommerce business in Saudi Arabia, adhere to the following steps:
- Secure a free electronic commercial register from the Ministry of Commerce and Investment, which can be completed online in as little as 180 seconds.
- Open a bank account in your company’s name with one of Saudi Arabia’s banks to manage financial transactions.
- Create an account with a shipping company to ensure timely delivery of products and protect customer rights.
By following these guidelines, you’ll be well on your way to establishing a successful eCommerce business in Saudi Arabia.
Steps to Start eCommerce Business in Saudi Arabia
After Obtain a business registration for eCommerce from the Ministry of Trade and Investment. You can start eCommerce business in Saudi Arabia by following these steps:
- Choose a domain name and name for your eCommerce store.
- Choose a suitable hosting company.
- Design a logo and colors.
- Choose a suitable eCommerce software program.
- Secure a payment gateway to accept payments from client.
- Set up a customer service system to handle inquiries and complaints from customers.
- Set up a system for logistics, shipping and handling orders from customers.
- Promote your eCommerce store through marketing and advertising efforts.
It’s important to regularly evaluate and enhance your online store in order to maintain client satisfaction and achieve success. In addition to register your eCommerce in Maroof platform.
What is Maroof?
Maroof is a new online service offered by the Saudi Arabian Government in partnership with the private sector company “Business Trust Services”. It is not a mandatory requirement for opening an e-commerce store in Saudi Arabia, but aims to enhance trust between customers and online merchants, as well as to help store owners increase their conversion rates.
The platform creates a database that assesses the reliability and professionalism of online stores based on feedback from customers who have had previous interactions with them. Additionally, it verifies that the store is a legitimate, local Saudi company.
The Maroof website management system evaluates stores and grants them certain privileges if they meet specific criteria. These criteria include registration and authentication of the store’s online platform and social media pages, adherence to commercial regulations and consumer protection laws, and obtaining a certificate of authenticity from the Ministry of Commerce and Investment.
Fulfilling Obligations for Saudi Online Store Owners
Saudi online store owners have certain responsibilities they must adhere to in order to run a compliant and trustworthy business. These include:
1- Displaying Business Information:
Displaying their name, address, contact information, and electronic commercial registration number prominently on the website, such as on the footer or an About Us page.
2- Protecting Customer Data:
Ensuring the confidentiality and protection of customer data by only collecting the information that is necessary for the sales process, and obtaining customers’ consent to terms and conditions during registration.
3- Transparent Business Operations:
Providing details about the business, such as contract information and the merchant’s operating procedures, on an About Us page or in the website’s Terms and Conditions.
4- Product Transparency:
Providing accurate product or service descriptions, pricing information, delivery and payment options, and any guarantees offered on the product pages.
5- Clear Terms & Conditions:
Including clear terms and conditions for customers to review when they register on the site or make a purchase.
6- Prompt Delivery:
Delivering goods to customers in a timely manner, with a maximum delay of 15 days, after which customers have the right to a full refund.
7- Flexible Return Policy:
Allowing customers to return goods that do not meet their expectations, or to receive a replacement or refund within 15 days. However, customers cannot cancel the contract in certain situations, such as when the product matches the description on the online store, defects are caused by customer mishandling, or if the service or commodity can be consumed without physical proof (such as digital products, books, newspapers, etc.).
Consequences of non-compliance: Penalties for eCommerce in Saudi Arabia
If you operate an eCommerce business in Saudi Arabia without obtaining the proper license for your online store, you are at risk of non-compliance with the country’s eCommerce Law. According to articles 18 and 19 of this law, the consequences of non-compliance can include corporate or firm receiving a warning, being fined up to one million Saudi riyals, and having your website or online store temporarily or permanently blocked.
The competent committee has the power to make this decision. Furthermore, it’s also possible to file a complaint with the administrative court, as stated in article 20 of the Saudi eCommerce Law. It’s essential to be aware of these regulations and the potential consequences of non-compliance to ensure compliance with the law and avoid penalties.
Overcoming Challenges for eCommerces in KSA: Expert Key issues
The following are some of the main challenges faced by eCommerces in Saudi Arabia:
Language barriers:
Most online stores in Saudi Arabia are in English, with few exceptions like Noon and Amazon that are in Arabic. Should provide content and agreement in Arabic.
High cost of creating an online store:
The cost of designing and creating an online store in Saudi Arabia is higher compared to other Arab countries, due to the cost of programming and marketing from local companies. Should take that into budget consideration.
Difficulty in finding reliable developers:
You need to carefully research and inquire about them and see their previous work, or consider an outstanding Saudi group that can help program and design a complete online store.
Obligations to fulfill:
After obtaining a license for an online store in Saudi Arabia, it is essential to be aware of the obligations that the owner of the Saudi online store must fulfill.
Connecting eCommerce to E-invoicing
The first step, which begins on December 4th, is simply to stop using paper invoices or Excel/Word invoices. There must only be an electronic issuance of the invoice from the website’s system or the accounting system connected to the website. The invoice should be in PDF format.
We will provide you with details before starting the second phase on the best solutions for automatically linking the invoice with the Saudi Arabian General Authority of Zakat and Income.
Q: Is DropShipping legal in Saudi Arabia?
A: To sell products through dropshipping in Saudi Arabia, you must obtain a business license. Failing to do so may result in fines. However, if you sell products to other countries through dropshipping, a business license is not required, even if you are a foreign national living in Saudi Arabia.
Q: Is it legal for a non-Saudi drop shipping store to sell to customers in Saudi Arabia?
A: Yes, it is legal for a non-Saudi dropshipping store to sell to customers in Saudi Arabia, as long as the customer pays value-added tax and customs duties.
Final Words
All in all, it’s very important for the store owner to be transparent and clearly communicating about their business operations and commercial obligations. They should make it very clear for the customer how the store works and what their rights are.
Note: You can setup offshore LLC company in USA and give franchise rights to Saudi local firm.
