Saudi Arabia's shopping malls goldmine
The Saudi retail market can only be described as a goldmine, with its large population of young adults and the increasing number of shopping malls which are being built to accommodate the increasingly affluent and highly mobile population. This report from Global Investment House takes a look at the different retail sectors in the Kingdom
The Saudi apparel retail industry is one of the high-growth markets in the Arab region especially in the women and children segments. The apparel business grew rapidly over the last several years as people became more fashion-oriented. The growth in the sector is attributed to high young population and increasing purchasing power in the backdrop of recent economic boom. Growth of this sector is evidenced by the growth of fashion retailers. In fact according to Colliers International, Riyadh has 2.5 million square meters of gross leasable shopping mall space in Riyadh versus 1.1 million in Jeddah and 1.7 million in Dubai as of 2007.
The branded retail apparel market is quite competitive in Saudi Arabia.
Considering the clothing style in Saudi Arabia, men mostly
wear the traditional white thobes along with the red shemaghs.
Women on the other hand, wear the black abayas and tarhas for
everyday use. Despite the fact that all women wear the
traditional Abaya on top of their clothes, underneath the
abaya, Western dress is most common. Western dress is adopted
more by the younger Saudi generation outside school. Non-Saudi
adults usually wear the Western dress code.
The market for apparel sales in Saudi Arabia are made up of
varied products not representing global brands in addition to
unbranded items, which are generally imported from Asia.
However, with the maturing of the market, there has been a
shift towards branded apparel sold through international
retail chains. Sales of braded apparels are estimated to be
around 25 to 30 per cent of total apparel sales. Its share
continues to increase as evidenced by the expansion of the
number of outlets and the number of malls specialized in
international retail chains.
The market share of branded apparel has witnessed a steady
increase in the last decade due to changes in consumer tastes
and converging global fashion trends. Saudi consumers have
become increasingly sophisticated, demonstrating brand
awareness and brand loyalty, demanding quality service and
value for money and carefully looking out for new product
lines from their preferred brands.
Saudi Arabian Apparel market is heavily reliant on imports
especially when it comes to fabric, cloth, accessories and
ready-made Western style clothes. These imports come from all
over the world depending on price range and quality. There is
a noticeable distinction and a clear line between the high-end
and low-end types of clothes. European and American clothes
are usually classified as high-end and targeted towards the
upper social class, whereas, garments imported from the Far
East especially from China offers much lower prices and
quality and is geared towards the lower social class, which
represents the largest section of the pie. Saudi
manufacturers, on the other hand, mainly supply military
uniforms and traditional abayas.
Apparel outlets in Saudi Arabia range from exclusive
boutiques carrying true haute couture and top international
designer labels to souq stalls. In Saudi Arabia, Riyadh is
currently the largest market for retail apparel in Saudi
Arabia accounting for around 40 per cent of total apparel
sales, and is followed by Jeddah at around 30 per cent and
Dammam and Khobar at around 20 per cent. The growing presence
of international branded apparel in these big cities has
contributed to growth in branded apparel sector.
Jeddah is larger on the mid-tier due to the large number of pilgrims it receives during the Hajj and Umrah seasons, while Riyadh being more important for the top end of the market due to the presence of a larger base of wealthier consumers.
Dammam/Khobar comes in the third place, although it does
gain some seasonal importance during Hajj and Umrah seasons
when pilgrims coming from Bahrain and Kuwait stop over for
shopping on their way back form the pilgrimage. Though going
forward the smaller cities are expected to grow at a higher
rate, the larger cities like Riyadh, Jeddah and Dammam will
continue to contribute bulk of the sales.
The major market segments in retail apparel include women's wear, footwear, children's wear, menswear and eyewear.
Some segments of the market like women's
wear are more
developed whereas other segments are yet to catch up. Menswear
represents a small segment of the ready-made clothing sector
in comparison to women's wear and children's wear.
Women and children are the majority shoppers in the apparel
market. They are mainly targeted by providing excellent
service, wide variety and quick turnover of products and
regular promotional campaigns to win their loyalty and regular
visits. The smaller segments are expected to grow at a higher
rate in the coming years relative to the mature segments due
to their lower base. This growth will stem from the effective
targeting of hitherto underdeveloped sectors, namely eyewear
and menswear, while the more mature areas of women's wear and children's
wear will remain the backbone of the market and
continue to experience healthy growth.
Saudi Arabia is a major market for women and children's
clothing. The market is segmented between the high-end branded
sector, the mid-market branded sector and the lower-priced
market. The high-end and mid-market sectors of the apparel
market are dominated by imports from Europe and the US. The
lower end of the market is characterized by imports from the
Far East and South East Asia, some of which are styles copied
from European and American brand names.
The Saudi economy has witnessed an economic boom over the
past few years thanks to the high crude oil prices, which have
risen from $25 per barrel in 2003 to exceed $130 per barrel in
2008. This oil boom led to the increase in government revenue
and expenditure, which in turn boosted the economy.
Furthermore, the government is investing revenue surplus in
building infrastructure and growing the manufacturing and
services sectors in the long term. This in turn will help in
preserving the countryís economic strength for the upcoming
The impact of a healthy economy on clothing spending is
notably positive. With higher levels of disposable income, and
consumer confidence, Saudi consumers are spending more money,
particularly on non-necessities such as mass market branded
clothing. Continued growth in GDP for the short to medium term
will have a positive affect on the growth of purchasing power
Government initiatives like Saudisation are expected to
have a positive impact on retail sector. Saudisation will
impact the composition of workforce and therefore will
increase income levels for Saudis nationals. This in turn may
increase expenditures on consumer products as a whole and
primarily expenditure on clothes and accessories.
The construction boom of residential, commercial, and
leisure projects, which has taken place all over the kingdom
in the last few years, has led to the availability of large
retail space. The rise of the modern shopping malls in Saudi
Arabia has been taking place at a fairly steady rate over the
last ten years, with malls becoming increasingly
Opening of numerous shopping malls and the ease and
convenience this has provided shoppers with has contributed to
growth in branded apparel sector. This trend is expected to
continue in the near future with the openings of new shopping
malls, providing retail companies with thousands of square
meters to do more business in Saudi Arabia. Mall development
is likely to be extremely important to the future of the
branded fashion market. Mall development is expected to spread
to smaller cities during the forecast period.
The branded retail apparel market is quite competitive in
Saudi Arabia. The competition is further set to as more
business families who were quite successful in other retailing
areas are actively seeking to enter this potentially lucrative
market. The big players in this sector focus on acquiring
franchise agreements with well-known international suppliers.
Currently there are four large companies dominating the
branded apparel market, each representing a considerable
number of international franchises: Al Hokair, Al Shaya, Al-Sawani and Nesk Group of Trading Projects, or Al
In addition to these, there are a few smaller companies with just less than five international franchises. Brands offered by Al Hokair include Marks & Spencer, Zara, Promod, Monsoon and others. Brands offered by Al-Sawani include Guess, Esprit, Leviís, Fossil, Benetton and so on. Brands offered by Al Shaya include Bhs, Debenhams, Mothercare, River Island and Next. Well-known brands of Next include Mango, Gerry Weber, Oui, Taifun and Okaidi. Additionally, an important segment in this market is the small retailers who own one or more shops. With their low overheads, these retailers are able to offer very competitive pricing on their products especially in the medium to low category.
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