E-Commerce Adoption in Saudi Arabi - Research Paper Example

RESEARCH REPORT TITLE e-COMMERCE ADOPTION IN SAUDI ARABIA RESEARCHER Ms/Mrs/Mr. (insert your names here) Department of (please insert your department here) Faculty of (please insert your faculty here) (Insert your college or university name here) SUPERVISOR Start with his/her title then his/her names (for instance Professor Bob Kelly) Department of (insert the name of the department your supervisor belongs) Faculty of (please insert his/her faculty here) (Insert college or university name here where your supervisor is attached to here) Student number: (insert your number here Lecturer: (insert your lecturer’s names here, remember start with the title) Contents Contents 2 1.0.Abstract 2 2.0.Introduction 3 3.0.Literature review 4 4.0.eCommerce Scenarios in Saudi Arabia 6 4.1.Past eCommerce scenarios in Saudi Arabia 6 4.2.Present eCommerce scenarios in Saudi Arabia 7 4.3.Future eCommerce scenarios in Saudi Arabia 11 5.0.Current issues affecting eCommerce Adoption in Saudi Arabia 12 6.0.Suggested solutions 14 7.0.Conclusion 14 8.0.References 15 9.0.Appendix 1: (Evaluated sites) 19 1.0. Abstract eCommerce has become one of the most influential Internet activities, especially from the perspective of market model and business. Currently, eCommerce is regarded as the key platform for streaming business activities as well as broadening product outreach. This has been made possible through significant emphasis put by countries. These countries have been developing eCommerce platform aimed at promoting economical-social systems. An interesting case study regards Saudi Arabia owing to her unique traditional religion, culture and language complexity. At the moment, the Kingdom enjoys high growth rate of internet connectivity; the Kingdom is therefore moving aggressively towards large-scale adoption of eCommerce system. In as much, there are sectors within the Kingdom that are slow in the adoption of eCommerce for business activities. This is as a result of internal set of factors. An interesting twist of events was noticed in 2001 when a study was initiated to look into the level of eCommerce adoption in the Kingdom. One of the major aspects realised was the study on adoption responses from internet users which was designed based on two behavioral models: Theory of Diffusion of Innovations by Rogers and Theory of Planned Behaviour. This paper builds on this and other findings to identify reasons for low popularity of eCommerce and the adoption of eCommerce in Saudi Arabia. 2.0. Introduction The Kingdom has had internet connectivity for several years. However, access to World Wide Web started in 1999 (Cronin, 2000). The implementation involved connecting all Internet access via a universal proxy server at the King Abdul-Aziz City for Science and Technology (KACST). However, a core issue has been to introduce eCommerce which could run Business-to-Commerce (B-2-C) and Business-to-Business (B-2-B) market systems. By the time of this report, these initiatives are at advanced stage but not fully achieved. In as much, there have been factors preventing the achievement of the afore-mentioned generic market systems. These include gender based discrimination and conservative nature of Saudi people which has really downplayed adoption of eCommerce. A research was conducted by King Fahd University of Petroleum and Minerals (KFUPM) in 2002 to determine level of eCommerce adoption and reasons behind low levels of eCommerce popularity in Saudi Arabia. The study which took two years surveyed on Saudi internet businesses activities and other users regarding inclination towards eCommerce and existing eBusiness systems. The findings collectively showed reasons behind levels of eCommerce and rate of its adoption within the Kingdom. The layout of this report is as follows: the next part details literature review. This will be followed by eCommerce scenario where Saudi’s past, present and future eCommerce scenarios will be analysed. Thereafter, well documented literal materials to analyse reasons for low popularity of eCommerce in the Kingdom will follow. Finally, conclusions, potential and the various implications of eCommerce deployment in Saudi Arabia are summarised. 3.0. Literature review The literature available on Saudi’s eCommerce adoption and its level of popularity is extensive and diverse. Much of these literatures have been focussing on B-2-B and B-2-C domains. These literatures, unlike other countries, do not only focus on technology, strategies or social issues but also specific aspects such as e-payment, trust, electronic branding, privacy, and performance measures (Kumar et al. 2000; Plant 2000; Rajput 2000). Nevertheless, literatures focussing on eCommerce adoption and popularity in Saudi Arabia have been simply anecdotal (Young 2003; Travica 2002). For this report, literatures reviewed will be recent studies in eCommerce adoption and popularity in Saudi Arabia. Mustafa (2011) while researching on determinants of eCommerce Customer Satisfaction notes limited access of internet accessibility, poor attitudes towards international eBusiness competition, lack of intra-regional eCommerce infrastructural developments as well as disproportionate internet penetration in rural areas. Other studies that focussed on urban areas of Saudi Arabia found that major obstacle for the progress of eCommerce is lack of customer trust in online merchants (Rayed AlGhamdi et al. 2013; Hani Brdesee et al. 2012; Sadiq et al. 2004). There has been a growing fear among Saudi that merchants may sell products with defects and that once an online payment is made such transaction(s) cannot be reversed irrespective of the nature of the product. This factor has been even made complicated with Saudi cultural beliefs. Some scholars reports that eCommerce adoption has been negatively hit owing to the fact that infrastructural features and designs are less conducive in the sense that some servers take too long to respond, excessive graphics and animation, less attractive aesthetics and lower transactional capabilities (Travica and Olson 1998; Travica & Cronin 1996; Hani Brdesee et al. 2012). Hani Brdesee et al. (2012) are particularly concerned with long responding servers arguing that in some instances customers and merchants may make double or triple transactions on a single product. In 2008, a study was conducted that covered Kenya, Saudi Arabia and South Africa regarding eCommerce adoption as well as their practice on B2B eCommerce (Saudi Ministry of Communication and Information Technology, 2010). While Kenya and South Africa recorded different results, internet based B-2-B eCommerce transactions in Saudi Arabia was not effective in reducing costs of transaction or in the provision of a gateway to global markets for her regional developments. The conclusion made regarding the researches indicates a collective set of factors, the lack of which inhibits eCommerce adoption - enhancing trust and ground rules (see appendix 1 for lists of sites surveyed). This conclusion relates with earlier findings by (Communications and Information Technology Commission, 2007) In a related research, Information Centre - Saudi Ministry of Commerce (2006) also notes that Saudi people have unique cultures and practices which make it hard for applicability of eCommerce model that can suit its products. Additionally, most business, except oil are small and non-competitive in foreign markets thus unable to facilitate eCommerce adoption in the Kingdom (Gibbs, Kraemer and Dedrick, 2003; Molla and Licker, 2005). It can generally be concluded, from the reviews above that there have been efforts on adoption of eCommerce in Saudi Arabia. However, there have been few efforts concentrated on the penetration of internet accessibility in the interior parts of the Kingdom in general. This report documents the broader framework of identifying eCommerce adoption in Saudi Arabia and reasons for its low popularity in the Kingdom. 4.0. eCommerce Scenarios in Saudi Arabia This section explains the past, present and future status of Saudi Arabia’s infrastructure and demographics regarding eCommerce adoption and rates of its spread. Such demographics and infrastructures will then be linked to the perspective of eCommerce growth and adoption in the Kingdom. 4.1. Past eCommerce scenarios in Saudi Arabia From the past, strength of Saudi’s eCommerce has been embedded on the centre of the Islamic World which has the largest economy of $168 billion (Icon Group International, 2000 as cited in Towards the Future of e-Commerce in KSA, 2001). Internet Software Consortium Survey (1994) also reports that earlier eCommerce development was as a result of significant youth population and large IT companies in the Kingdom. Figure1: Relative Advantage of eCommerce and Internet Banking on individual’s life Source: Internet Software Consortium Survey The figure above shows that by 1990s, Saudi people had positive view about eCommerce and Internet banking even though there was no internet connectivity traversing the Kingdom till 1999. Internet Software Consortium Survey (1994) reveals that 71 % affirmed that adoption of eCommerce for banking and shopping makes life convenient while 9% felt no change. The conclusion is that there has been growing interest for eCommerce adoption by Saudi people. 4.2. Present eCommerce scenarios in Saudi Arabia In 2001, Ministry of Commerce (Kingdom of Saudi Arabia) established a technical committee, including experts from Ministries of Commerce, Communication and Information Technology and Finance. The committee also drew members from King Abdulaziz City for Science and Technology (KACST) and Saudi Arabian Monetary Authority (SAMA) (Saudi Ministry of Commerce, 2001). The agenda was to streamline mechanisms for modern eCommerce adoption and participation. Recommendation of this committee has been the starting point for present eCommerce adoption and popularity among Saudi people. Since 2001, the rate of eCommerce adoption has been growing steadily. Going by the data recently released by KACST (2008), the rate of internet subscribers transacting business online has grown to approximately 574,000 up from 457,000 in 2003---with an average of 2.5 eCommerce users per subscriber. The figures below can best explain present scenario of eCommerce adoption in the Kingdom. Table 1: Online Shoppers by Age and Gender (2004-2012) Years (age of the participant) %years 36+ 54% 25-35 53% 14-23 43% 16 and below 30% Sex (male/female) % years Respondents (male) 67% Respondents (female) 31% Source: Saudi Ministry of Communication and Information Technology Looking at figure 2 above, it can be conclude that about 50-53% of Saudi people have been shopping online since 2004. This trend has been increasing steadily. Figure 2: Growth of teledensity in Saudi Arabia Source: STC, US Census Bureau The figure 3 can be related with figure 2 as they both help explain the rate of teledensity throughout Saudi Arabia. This is actually building blocks where estimation of eCommerce participants can be done. Figure 2: Owned payment card by Saudi people (2004-2012) Source: Saudi Ministry of Communication and Information Technology The figure above indicates that almost half of the Saudis (approximately 48%) own online payment Card. Interestingly, the data above shows that about 70-80 % online purchases are done on Cash-On-Delivery with only 30% currently done online. 4.3. Future eCommerce scenarios in Saudi Arabia Basing on the statistics aforementioned, eCommerce industry is growing steadily in Saudi Arabia. The estimated number of eBusiness and eCommerce users is projected at 49 million by 2017 (Saudi Post, 2010). On the other hand, B-2-C eCommerce sales in the Kingdom is estimated to be $15 billion by 2020 (up from $4 billion in 2012) (Saudi Post, 2010). Lastly, the value of mCommerce in the Kingdom is projected at $3.1 billion by 2020. The projections above were based on figures below: Figure 3: Reasons for future adaptability to eCommerce Source: Saudi Ministry of Communication and Information Technology 5.0. Current issues affecting eCommerce Adoption in Saudi Arabia More relevant to the adoption and popularity of eCommerce is the level of security. Based on the culture and religion of people of Saudi, security awareness has been a major issue in the implementation especially among businesses and individuals in terms of strong encryption measures. As reported by Alkadi (2008), currently, there are only eight servers in the Kingdom that can manage strong encryption algorithms of over 40 bit with four other servers using less effective encryption (algorithms in nature) less than 30 bit. This has been caused by lack of emphasis on security in the private sector. Another issue well documented in the customer trust regarding online merchants (Rayed AlGhamdi et al. 2013; Hani Brdesee et al. 2012; Sadiq 2004). While some people doubt the credibility of some sites, there have also been growing fears that some products may be faulty with such sites not guaranteeing refunds. This factor has been even made complicated with Saudi cultural beliefs. Alkadi (2008) also notes that Saudi people have unique cultures and practices which make it hard for applicability of eCommerce model that can suit its products. According to AlGhamdi et al. (2013), credit cards are the most common method of eCommerce dealings in the Kingdom though many people are reluctant using such cards due to the culture. 32 of the 40 respondents interviewed argued that the culture prohibits them from engaging in transactions linked with convectional interest rates. The table and figure below can help summarise other current issues affecting eCommerce adoption. Table 4: Inhibitors of adoption of the online channel Saudi retailers Source: Source: Saudi Ministry of Communication and Information Technology Figure 3: Factors inhibiting adoption of online retailing by Saudi vendors Source: Source: Saudi Ministry of Communication and Information Technology 6.0. Suggested solutions Based on the issues raised above, KACST has been drawing strategies to institute a Public Key Infrastructure (PKI) to secure Kingdom-world-wide-web eCommerce transactions. In addition to this, the Saudi Arabian Monetary Agency (SAMA) has been piloting an online payment system to necessitate Business-to-Business (B2B) eCommerce. This will be based on ‘Society for Worldwide Interbank Financial Telecommunication’ (SWIFT) technology. This will deliver straight and transparent processing of payment and share transfers to individual and business entities. 7.0. Conclusion In summary, eCommerce adoption and popularity is steadily growing. Subsequently, business environment of the Kingdom has been giving eCommerce great opportunity for success, something which will position the Kingdom as a religion powerhouse in eBusiness and eCommerce. As noted, to achieve these, the country needs substantial improvements in telecommunication infrastructure with easy and affordable Internet access, while shifting towards broadband connectivity. In addition to this, the infrastructures mentioned in the report will only blossom if they are supported by skilled IT personnel. This will also curb the need for resources in the Kingdom. 8.0. References AlGhamdi, R., Drew S. and Alkhalaf S. (2011). Government Initiatives: The Missing Key for E- commerce Growth in KSA. World Academy of Science, Engineering and Technology.77 (1), 1-10. Alkadi, I. (2008). Explore the Future of Telecommunications and Information Technology in KSA, Communications and Information Technology Commission, Riyadh. Cronin, M. (2000). Unchained Value: The New Logic of Digital Business.” Boston, MA. Harvard Business Press.Davis, 1989. CITC (Communications and Information Technology Commission) (2007). Internet Usage Study in the Kingdom of Saudi Arabia Communications and Information Technology Commission, Riyadh. Gibbs, J., Kraemer, K.L., and Dedrick, J. (2003). Environment and policy factors shaping global eCommerce diffusion: a cross-country comparison. The Information Society, 19, pp. 5– 18. doi:10.1080/01972240309472, http://dx.doi.org/10.1080/01972240309472 Hani Brdesee, C., Brian, S., Siddhi P. and Wafaa A. (2012). Organisational Culture and Adoption of ElectronicCommerce. Melbourne, Australia: The 7th International Conference onComputer Science & Education. Information Centre - Saudi Ministry of Commerce (2006). E-commerce in the Kingdom of Saudi Arabia ', paper presented to Arab Organization for Industrial Development Conference Tunisia, 19-21 April. Internet Software Consortium (1994), “Internet Domain Survey”, http://www.isc.org/ds/. Saudi Ministry of Commerce 2001, E-commerce in the kingdom: Breakthrough for the future, Saudi Ministry of Commerce, Riyadh, (Arabic source). KACST and Saudi Ministry of Economy and Planning (20090. Strategic Priorities for Information Technology Program. King Abdulaziz City for Science and Technology, Riyadh. Kumar, H., Fingar, P., and Tarun S. (2000). Enterprise E-Commerce: The Software Breakthrough for Business-to-Business Commerce.” Tampa, FL: Meghan-Kiffer Press. Molla, A., and Licker, P.S. (2005). eCommerce adoption in developing countries: a model and instrument, Information & Management, 42, 877–899. doi:10.1016/j.im.2004.09.002, http://dx.doi.org/10.1016/j.im.2004.09.002 Mustafa, I. (2011). Determinants of E-Commerce Customer Satisfaction, Trust, and Loyalty in Saudi Arabia.Department of Accounting & MIS.11 (All), All. Plant, R. (2000). eCommerce: Formulation of Strategy. Upper Saddle River, NJ: PrenticeHall. Rajput, W. (2000). E-Commerce Systems: Architecture and Applications. Boston: Artech House. Rayed, A., Anne, T. A., and Nguyen, V. (2013). Wheel of B2C E-commerce Development in Saudi Arabia.Advances in Intelligent Systems and Computing.208 (3), 1047-1055. RoyaGholami, B., Clegg, S. and Abdullah A. (2011). An Investigation into the Adoption of Electronic Commerce among Saudi Arabian SMEs.Journal of Electronic Commerce in Organizations. 9 (2), 41-65. Sadiq, M.Sait, K. Al-Tawil, P., and SyedAli H. (2004). E-COMMERCE IN SAUDI ARABIA: ADOPTION AND PERSPECTIVES. Computer Engineering Department,.12 (1), 54- 74. Saudi Ministry of Communication and Information Technology (2010). ICT Indicators in the Kingdom of Saudi Arabia (2010), Ministry of Communication and Information Technology, viewed 15 Dec 2010, http://www.mcit.gov.sa/english/Development/SectorIndices/ Saudi Post (2010). Production and Services, Saudi Post viewed 14 Dec 2010, http://www.sp.com.sa/English/SaudiPost/ProductsServices/Pages/Wasel1.aspx Saudi Ministry of Communication and Information Technology 2010, ICT Indicators in the Kingdom of Saudi Arabia (1st Half- 2010), Ministry of Communication and Information Technology, viewed 15 Dec 2010, http://www.mcit.gov.sa/english/Development/SectorIndices/ Travica, B. (2002). Diffusion of Electronic Commerce in Developing Countries: The Case of Costa Rica,” Journal of Global Information Technology Management, Vol 5, No 1, pp: 4- 24. Travica, B. and Rebecca Olson (1998). Usability of Business Web Sites in East and Central Europe,” Proceedings of the AMCIS 1998 Conference, October 24-29, Pittsburgh, PA. Travica, Bob, and Blaise Cronin (1996). The Business Web in Russia: Usability for the Western User,” Proceedings of the AMCIS 1996 Conference, October 21-24, Baltimore, MD. Towards the future of e-Commerce in KSA. Ministry of commerce, Saudi Arabia, (2001). Information & Management, 42, 877–899. doi:10.1016/j.im.2004.09.002. 9.0. Appendix 1: (Evaluated sites) Read More