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RetailBetting on increasing consumer base,spendingThe retail sector in the Kingdom of Saudi Arabia, the largest is the Middle East, is largely beingdriven by the growing population, higher per capita income and growing organized retail. Thetwo largest cities Riyadh and Jeddah drive the Kingdom’s retail sector growth. Key players inthe retail sector include Savola, Al Othaim, Fawaz Al-Hokair Group, Jarir Bookstore, FitaihiGroup, Saudi Automotive Services Company, and Carrefour.Favorable demographicscoupled with increasingpreference for internationalbrands, is likely to propelgrowthSupply of retail goods in KSA is still limited. Most supermarkets sell only food items. In addition,the Kingdom is not self-sufficient in terms of supply of retail goods, such as textiles, footwear,and furniture, and relies on imports from countries, including China, Europe, Italy, and the US.However, in spite of the increase in prices of imported goods, demand for these products isrising primarily due to the increase in population and income levels. KSA’s retail sales wereestimated at around SR198.6bn (USD53bn) in 2008, more than half of GCC’s total retail salesof USD100bn in 2007. EIU forecasts retail sales to be close to SAR230bn in 2009 and expectsthe uptrend to continue, going forward. Non-food retail sales are expected to touch SAR28.2bn.Saudi Arabia’s organized retail sector, which includes large retail chain operators, hasregistered significant growth in the past two years, supported by the opening of the sector toforeign investment in March 2007. The increased investment in the sector helped large retailcompanies to aggressively expand their retail operations in the country. However, theunorganized sector, including single-outlet operations, lagged large retailers in terms of growth,as they were hampered by: a) limited availability of finance; and b) spike in purchase cost ofcommodities. Going forward, intensifying competition in KSA’s retail sector is likely to trigger awave of consolidation, with giant retailers acquiring single-store outfits.Sales volume also grew steadily, driven by a rapidly growing population and increased spendingpower of consumers brought about by the rapid economic expansion. By the end of 2008, SaudiArabia’s total population was close to 24.8mn (according to General Statistics and InformationDepartment) and this figure is expected to reach 30.3mn in 2012 (Source: FAO, UN), supportinggrowth in this sector. Over 70% of the country’s population is in their twenties. The entry of thispopulation into the country’s workforce, coupled with the increasing preference of consumers forinternational brands, is likely to propel growth in Saudi Arabia’s retail segment. In terms ofgoods, demand for textiles, clothing and footwear, furniture, and white goods is increasing withthe rise in individual purchasing power. Modern retail formats such as hypermarkets andsupermarkets are becoming increasingly popular.JUNE 2009SAUDI ARABIA FACTBOOK52