Insights: The journey of building global businesses from a thriving economy

In the news and in conversation, the focus is always on the first. This could be the first to the moon, the first service of its kind, or the first to sign-on a billion users. These are no doubt excellent achievements and worthy of praise, but an often-overlooked category is those that followed in these pioneering footsteps and found their own success.

Leapfrogging is a term that has been popular since the early 1980s, describing that those nations, economies, organisations, and brands that start on a particular journey later than others have the significant advantage of ‘leapfrogging’ the challenges and incremental improvements that the first-movers went through.

This is particularly relevant for nations and regions that are emerging onto the global stage, as they are able to access the best, proven technology and platforms that the world has to offer, and at an improved adoption curve than the early adopters.

The kingdom emerges

Saudi Arabia is at a perfect point in its history to be one of the most advanced economies, powered by game-changing, localised innovation such as e-commerce, artificial intelligence, data analytics, robotics and so much more. Most importantly, a tech and digital-savvy consumer base will prove irresistible for the leading technology and services providers from around the world, especially as early-adopting economies reach a consumption plateau.

This is a phenomenon – or opportunity rather – that we encounter on daily basis.

To illustrate, China’s e-commerce journey started in 1997, and in less than three decades, it has become an industry with an annual output value of more than $4tn, and featuring large companies over $100bn such as Alibaba, Meituan, JD and PDD . In fact, we are proud to say that five of the top ten e-commerce companies in the world in terms of market value are from China.

Even so, in 2022, China’s e-commerce growth is only 7.86 per cent, so it is evident that new customer acquisition is a challenge. Now compare this with the regional growth statistics. A e-commerce company in the Middle East’s e-commerce space clocked growth rates of 500 per cent in the past five years.

Recent research conducted on the region gave some illuminating insights about the growth drivers. For example, the median age in Saudi Arabia is 31.8, representing significant growth potentials of the economy. Secondly, the average revenue per user of the e-commerce sector in Saudi Arabia is expected to amount to $494.7 in 2023, up 10.4 per cent YoY. Finally, the internet penetration rate in Saudi Arabia is a staggering 97.9 per cent, representing a robust population base for e-commerce to penetrate.

There is no doubt that the Middle East market will be the market with the most potential for e-commerce development in the future. Looking at the recent past, the pandemic time was the greatest driver of e-commerce adoption in the kingdom. The brightest minds are also on the job to work out the logistical challenges around importing, warehousing, last-mile delivery and other practical considerations for a booming sector.

International interest

You can be sure that global players are looking at kingdom as their next theatre of growth. An example of this Saudi-China technology and innovation bridge-crossing would be leading Chinese logistics company J&T, which launched in Saudi Arabia recently and has quickly become one of the top three logistics companies in the country.

Undoubtedly there is a significant value to bringing in Chinese companies with advanced technology, experience, and business models to partner with local companies. Together they accelerate the development of the infrastructure, service mix, and ultimately enhance the customer experience in the Kingdom and in the wider Middle East. On our end, we are working on incubation processes for Middle East e-commerce companies, to include the likes of Taobao and JD.

With notable success already changing lives and business in the kingdom, there is even more to look forward to regarding the longer-term impact that this knowledge-exchange can have on the local economy. History has shown that innovation is inspired by the need to have services and solutions that are fit-for-purpose, from a cultural, socio-economic, and personal preference point of view. This means that force-fitting successful offerings from other markets will not necessarily work.

Conclusion

The positive environment that kingdom currently fosters, coupled with the growing demand among consumers for the global best, will be the defining factors spurring innovation in the kingdom across a variety of areas. With the learnings from cracking a unique market such as Saudi Arabia, businesses and brands that find success will surely take this to the wider region and the rest of the world. At eWTP Arabia Capital we are committed to making this happen.

Read: From an idea to impact: Igniting innovation to thrive in today’s digital economy