The outlook for the Saudi retail sector remains optimistic, backed by a positive mix of economic, social and demographic factors.
Saudi Arabia’s retail sector is the largest in the GCC. It represents 45% of the GCC retail market, followed by the UAE (26%) and Qatar (11%). The country’s share in the GCC retail sector is expected to increase to 47% by 2018. The UAE’s share is projected to fall to 24% while Qatar’s share is to increase to 12%.
Saudi Arabia ranked 11th out of 30 countries in the 2017 AT Kearney's Global Retail Development Index up from 17th place in 2015 and 2nd among MENA countries (UAE ranks 5th out of 30). Saudi Arabia’s ranking reflects that its market is large and unsaturated for retailers looking to expand.
The retail sector is mainly driven by its large and young population, rising disposable income and a pickup in consumer confidence. In Q3 2017, the number of point of sale transactions grew by 36% to 173,437,432 worth USD 12.6M, compared to the same period in 2016. Total credit card loans were also up by 1.3% in Q3 2017 relative to the same period last year, to reach USD 3.1M.
Besides, eased restrictions on FDI ownership are expected to strengthen the sector. In 2016, SAGIA announced that they would permit 100% foreign ownership in the retail and wholesale sector, subject to a number of obligations and requirements, including a minimum share capital requirement of USD 5.3M. Entities with 100% foreign ownership are required to invest at least USD 53.3M over the five years after their license is granted.
The online shopping platform Noon.com which launched in Saudi Arabia on 13 December, is aiming to carve out a share in what is still a relatively nascent market for e-commerce.
Noon is a joint venture between Emaar Properties, Saudi Arabia’s Public Investment Fund and the Kuwaiti franchise operator MH Alshaya. It initially launched in the UAE in October.
The Saudi market offers significant growth potential to online retailers, given that the online share of the total Saudi retail market is around 1.4%.