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Saudi Arabia’s Retail Market Driven by Youth, Digital Growth, and Evolving Consumer Preferences
Saudi Arabia’s retail sector is set for growth, fueled by a young, digitally-savvy population and increasing consumer confidence, say industry experts.
Saudi Arabia’s retail market is undergoing a transformation, driven by a digitally savvy young population, increasing consumer confidence, and evolving spending habits.
Abdellah Iftahy, senior partner at McKinsey & Co., noted that by 2035, 75 percent of retail spending will come from Saudi youth, with brands needing to adapt to the changing consumer preferences.
A shift towards value-for-money offerings is expected, fueled by a growing middle class.
E-commerce is also projected to grow significantly, with one in four retail transactions expected online by 2035. This trend is accompanied by rising disposable incomes and increasing digital adoption.
The food service sector is also poised for growth, with investments expected in entertainment, hospitality, and restaurants.
While the grocery sector is seeing a shift toward value-added products and discounters, spending on dining and entertainment is rising, reflecting strong consumer confidence.
In addition to budget-conscious spending, the luxury retail sector is expanding, with international brands looking to strengthen their presence in the Kingdom.
Iftahy noted that luxury spending, particularly by Saudis abroad, is expected to grow faster than other retail subsectors as supply increases in the local market.
Despite the growth prospects, challenges remain for Saudi retailers.
These include rising operational costs, workforce productivity gaps, and the need for digital transformation.
Iftahy emphasized that improving productivity and leveraging consumer data would be key to overcoming these challenges.
The role of women in the workforce is also influencing retail trends, as more Saudi women enter the labor market.
Meanwhile, sustainability and ethical consumerism are becoming more important to younger Saudi shoppers, with brands demonstrating a commitment to sustainability expected to gain an edge.
Despite global economic uncertainties, both Iftahy and Karl Nader, partner and managing director at AlixPartners, see continued growth in Saudi Arabia’s retail sector.
Opportunities abound for both local and international players, particularly those offering differentiated products or value propositions.
The retail market’s future will depend on embracing e-commerce, data-driven strategies, and experiential retail to meet evolving consumer demands.
Abdellah Iftahy, senior partner at McKinsey & Co., noted that by 2035, 75 percent of retail spending will come from Saudi youth, with brands needing to adapt to the changing consumer preferences.
A shift towards value-for-money offerings is expected, fueled by a growing middle class.
E-commerce is also projected to grow significantly, with one in four retail transactions expected online by 2035. This trend is accompanied by rising disposable incomes and increasing digital adoption.
The food service sector is also poised for growth, with investments expected in entertainment, hospitality, and restaurants.
While the grocery sector is seeing a shift toward value-added products and discounters, spending on dining and entertainment is rising, reflecting strong consumer confidence.
In addition to budget-conscious spending, the luxury retail sector is expanding, with international brands looking to strengthen their presence in the Kingdom.
Iftahy noted that luxury spending, particularly by Saudis abroad, is expected to grow faster than other retail subsectors as supply increases in the local market.
Despite the growth prospects, challenges remain for Saudi retailers.
These include rising operational costs, workforce productivity gaps, and the need for digital transformation.
Iftahy emphasized that improving productivity and leveraging consumer data would be key to overcoming these challenges.
The role of women in the workforce is also influencing retail trends, as more Saudi women enter the labor market.
Meanwhile, sustainability and ethical consumerism are becoming more important to younger Saudi shoppers, with brands demonstrating a commitment to sustainability expected to gain an edge.
Despite global economic uncertainties, both Iftahy and Karl Nader, partner and managing director at AlixPartners, see continued growth in Saudi Arabia’s retail sector.
Opportunities abound for both local and international players, particularly those offering differentiated products or value propositions.
The retail market’s future will depend on embracing e-commerce, data-driven strategies, and experiential retail to meet evolving consumer demands.
