Launch of Saudi Arabia 2030 vision opens up multitude of sectors and opportunities for SMEs
By Alice Johnson
The Kingdom of Saudi Arabia (KSA) is becoming an increasingly relevant option for companies looking at growing their operations, particularly since the launch of Vision 2030, which has opened up a multitude of sectors and corresponding opportunities for SMEs.
‘Small and medium-sized enterprises (SMEs) are among the most important agents of economic growth; they create jobs, support innovation and boost exports,’ the Saudi Arabia Vision 2030 goals read. ‘SMEs in the Kingdom are not yet major contributors to our GDP, especially when compared to advanced economies. Therefore, we will strive to create suitable job opportunities for our citizens by supporting SME entrepreneurship, privatization and investments in new industries.’
Currently, SME contribution to GDP in KSA stands at 20%, whereas some advanced economies boast rates of 70%. Vision 2030 aims to increase the GDP contribution of SMEs to 35% by the target date, by providing greater access to funding, review laws and regulations and help the Kingdom’s youth and entrepreneurs to market their ideas and products. These goals aim to boost SME contributions to the economy and are a mandate of the recently-established SME Authority.
The KSA Vision 2030 also aims to grow the contribution of modern trade and e-commerce to 80% of total retail trade. This is something that helped the established, successful digital UAE brand Mumzworld decide to enter the market in its neighbouring country. The past seven years has been a journey of growth, trial and success for the brand: “We have focused our efforts to date on building a brand with the foundations for long-term viability and sustainability and customer centricity: a loved brand cultivated via grassroots and community marketing, a loyal customer base, and profitable and scalable unit economics,” Mona Ataya, Founder and CEO, Mumzworld, said. “While the journey has been long and exciting, we are only at the tip of the iceberg. We are now ready for accelerated expansion across the region with KSA being the #1 priority.”
October 2018 saw the second round of funding for Mumzworld, raising a total of $20 million to spur its acceleration into the KSA market as well as invest in new technology. “The decision to enter KSA was not optional,” Ataya continued. “The KSA market is large, rapidly-growing and under-served.” In fact, the Saudi e-commerce market reached $7 billion in 2016, forming the largest throughout the GCC.
“We intend to deploy our newly raised funds to scale more rapidly across more than 120 cities in Saudi Arabia,” she continued, “where our existing strategic partnerships with key supply chain players enable us to offer a seamless customer experience.”
A Challenging Task
Despite the fact that e-commerce penetration of retail sales is set to triple by 2020 in Saudi Arabia, e-commerce is still a relatively new sector – for the UAE as well. This has meant that Mumzworld had to build “everything from scratch. This has been a challenge for us and other industry players,” Ataya continued.
Logistically, the current delivery infrastructure outside of major Saudi cities is also challenging; coupled with the fact that 50% of online shopping in Saudi originates outside major cities, because of limited access to products. Sourcing talent has also been a challenge for the UAE brand, which nonetheless is currently “aggressively hiring” in both markets.
With these challenges in mind, how did Mumzworld tackle this large-scale expansion? “Our starting point was to identify the right partner – Tamer Group,” Ataya added. Tamer Group is a consumer goods heavyweight in the region, distributing FMCG and products from brands such as Johnson & Johnson. In combination with their other partners (including Saudi groups operating in adjacent segments with manufacturing and distribution facilities), “They possess over 250,000 retail and wholesale outlets, over 150 logistics facilities, over 1,500 vehicles, and over 7,000 employees,” the Mumzworld CEO said. “In essence, in order to scale very rapidly across Saudi Arabia, Mumzworld could not have tied up with a better set of partners. For our scale, Mumzworld will avail the advantages of these strategic partnerships that we have set up in Saudi.”
Since the partnerships were cemented, progress has been “smooth” Ataya said, adding that the brand has grown eight-fold since the operation started. “Our awareness level in KSA has also grown exponentially, and we currently enjoy 63% top of mind awareness in KSA amongst our target, the brand is the highest rated in our vertical, in high growth mode, and on a path to aggressive profitability and value.”
Advising the Next Generation
With such success and expertise under their belts, what advice would Mumzworld give to SMEs looking at entering the KSA market?
“Stay customer obsessed,” Ataya said. “Understand consumer needs and work to solve local problems. Saudi consumers are very smart, unique and have specific needs and expectations – ensure your offering delivers on their needs and is not just a cut and paste of international standards,” she added.
And finally, “Find the right partner. This is key!” she said. Tamer Group, have invested in Mumzworld and their capabilities are serving as the infrastructure upon which Mumzworld can quickly proliferate across Saudi,” she concluded.