Download - Retail Leaders Circle February 2020
2Retail trends in Saudi ArabiaIST
Retail is an important sector but is under-developed in Saudi Arabia
Source: GOSI, National Statistics Center
Consumer spend by object (SARB)
2.1m jobs
(2nd largest in
private sector)
3Retail trends in Saudi ArabiaIST
Back to growth
YoY evolution of ATM cash withdrawals and debit card spend (%)
Source: SAMA
VAT
2019 +4.7%
4Retail trends in Saudi ArabiaIST
Expectations are increasingly positive
Growth expectations of FMCG companies in KSA However significant headwinds remain
• Subsidy cuts will continue till 2023, though more slowly
• Expat levies will rise from about $26 to just over $100
• Tax including excise and VAT may increase over time
• Greater employment of Saudi, notably women
• Lower interest rate
• Repatriation of some of the Saudi spend abroad thanks
to modernization of retail infrastructure (mall, brand…)
• Growth of entertainment
• Tourism target 30M visitors p.a. vs 8M today
-
+
Source: Middle East Advisor survey of CFO, Dec 2019
5Retail trends in Saudi ArabiaIST
Five major retail trends in Saudi Arabia
1. Re-definition of value
5. Cost & profit pressure
2. Experiences
3. Modernization of
traditional trade
4. Digital
Retail
trends
6Retail trends in Saudi ArabiaIST
Shoppers are redefining value, creating demand for both “good deals” and “worth it
premium”
Value
means…
Luxury
Goods
Quality
Experien
ce
Personal-
ized
Fast
Fashion
Promo
Low
price
Pre-owned
Source: Litsearch, Bain analysis
SHOPPERS IN CONSTANT
SEARCH OF A GOOD DEAL…
…BUT ALSO WILLING TO PAY A PREMIUM
WHEN IT MATTERS
V A L U E
Fastest growing
fashion brand
Luxury Fashion growing
at +7% in 2018
Promo intensity
reaches 55%Premium Grocers
performing well
Extreme value
trends in QSR
Fine dining
explode in
Riyadh
7Retail trends in Saudi ArabiaIST
Appeal for ‘deals’ is especially strong in Saudi
Source: Bain research on apparel purchase online, 2019, N=3000
V A L U E
8Retail trends in Saudi ArabiaIST
Experiences outgrow goods in the USA and Saudi Arabia
Experiences are the highest growing categories in the
United States
Source: Bureau of Economic Analysis USA; Bain Analysis
E X P E R I E N C E S
In last 2 years, restaurant expenditures on debit
card has grown at 2X grocery
9Retail trends in Saudi ArabiaIST
The quest for experiences open many new opportunities in Saudi
E X P E R I E N C E S
Under-developed categoriesMega-malls Innovative concepts
Saudi spent twice
as much time
shopping vs
Western
counterparts
10Retail trends in Saudi ArabiaIST
Modernization of retail under way as TT lost 6pts of market share in last 5 years
although share seems to stabilize in 2019
Grocery channel share in Saudi Arabia Beyond grocery
• Independent telecom stores
– From 60% share to less than 36% in 3 years
• Independent garages
• Independent eateries
• Independent jewelry stores
• …
Elimination or modernization? How to best modernize independent stores across categories?
M O D E R N I Z A T I O N
11Retail trends in Saudi ArabiaIST
Ecommerce is booming in the region
29%
Note: e-commerce categories extrapolated for ‘Other MENA’
Source: Expert interviews; Forrester; eMarketer, Euromonitor; Bain experience
MENA e-commerce market Key insights
• E-commerce market grew at 29%
p.a. 2017 to 2019 to reach $14.3B
• Electronics is the biggest
category followed by Fashion,
grocery and beauty
• Market quite concentrated (top 3
> 50%)
• Pure play won the first battle for
ecommerce with 85%+ share
67%Share of ecommerce
in total retail growth
in KSA (17’-19’)
D I G I T A L
12Retail trends in Saudi ArabiaIST
Shoppers are happy with online promotions but still feel gaps in delivery experience
D I G I T A L
13Retail trends in Saudi ArabiaIST
Online Food delivery is also booming with a high penetration rate
Note: for non-KSA markets, assumed 20% increase in penetration rate between 2016 and 2017
Source: Euromonitor; company data; World Bank; UBS; Bain analysis
Mature market
Emerging market
D I G I T A L
14Retail trends in Saudi ArabiaIST
The cost inflation combined with subdued growth and price pressure have affected
corporate profitability both in retail and CP, with increasing volatility
Given continued price pressure, companies need to manage cost AND/OR innovate to go back to higher profitability
Note: Include all listed retailers in KSA (Fawaz Al Hokair, Jarir, eXtra, Othaim plus Panda…) and UAE (Foodco, Marka, Dubai refreshment plus MAF Retail), Database of 52 listed food companies in GCC
,Source: Capital IQ
PROFIT MARGINS OF LISTED GCC RETAILERS LISTED GCC FOOD COMPANIES PERF. 2016-18
P R O F I T P R E S S U R E
15Retail trends in Saudi ArabiaIST
There are opportunities to catch up with the NTP target for the retail sector
Gap between NTP growth target and actuals Four priorities to bridge the gap
• How to accelerate the modernization of the traditional
trade sector?
• How to make the sector more attractive for investment?
– Sector specific rules, transversal rules, opening hours…
• How to activate major retail destinations for tourists and
residents and develop missing specialty retail segment?
– Mega-malls, shopping festivals, price convergence
• How to transform Saudi Arabia into a ecommerce hub?
– Convert cross-border into local ops, turn KSA into exporting hub
R E G U L A T I O N S