SECTOR ANALYSIS. Saudi Arabia: Retail Sector. Sector: Furniture, Clothing & Design. By the Royal Danish Embassy, Riyadh

Transcription

1 SECTOR ANALYSIS Saudi Arabia: Retail Sector Date: Sector: Furniture, Clothing & Design By the Royal Danish Embassy, Riyadh Keywords: Mellemøsten, the Middle East, Den Arabiske Halvø, the Arabian Peninsula, GCC-lande, GCC countries, Saudi Arabien, Saudi Arabia, Kuwait, Bahrain, Oman, Riyadh, Jeddah, Ambassaden Riyadh, Royal Danish Embassy Riyadh, forbrugsgoder, consumer goods, møbler, tekstiler, design, furniture, textiles, clothing, tøj, kosmetik, cosmetics. Abstract: This report provides an insight into the reatil sector of Saudi Arabia mainly focusing on furniture, jewelry, clothing and design including an analysis of market indicators, market trends and finally an evaluation of the industries. The sector is charactized by a young and fashion-conscious consumer based area. The cosmetics sector is characterized by a female consumer base, which is very beauty- conscious. The furniture industry is characterized by increasing housing formation. All three sectors are expected to grow in the nearest future supported by a growing and wealthier consumer base.

2 Introduction to the furniture, clothing and cosmetics industries in Saudi Arabia Saudi Arabia's retail market is the largest among the Gulf States and is the 2 nd largest in the MENA region. The young and growing population is showing an increasing demand, especially for more high-end brands, when it comes to furniture, jewelry, textiles and cosmetics. The majority of textiles, furniture and cosmetics are imported. This report provides an insight into the Saudi market for furniture, jewelry, textiles and cosmetics by looking at the following: Market Size Indicators Market Trends Market Evaluation Market size Indicators Saudi Arabia has several underlying factors that support the continued growth of the detail market. Demographically, the country is favored by a very young and growing population. The population is expected to grow from 28 million in 2011 to app. 36 million in In 2011 the median age was 26 years and app. 30 percent of the population was 14 years of age or below, compared to 34 years and 18 percent in Denmark. The young and growing population will support an expanding consumer base going forward. A rising oil price and a steady production of app million barrels per day have supported growth given that the oil revenue constitutes percent of fiscal earnings. Fixed investments and government expenditure is presumed to continue raising per capita income, which will support discretionary income per capita going forward. Compared to other GCC countries, Saudi Arabian discretionary income per capita is low, but with GDP growing faster than the population it is expected to grow in the medium term. The retail sector is also supported by the tourism sector. Saudi Arabia wants to make tourism an important part of its growing non-oil sector. In 2009, the tourism authority announced that Saudi Arabia aims to attract 88mn tourists and generate more than USD 30bn by Religious tourism at Mekkah and Medinah is an, The Royal Danish Embassy, Riyadh Page 2 of 6

3 essential part of the tourism sector in Saudi Arabia, generating app. USD 7bn and more than 12mn visitors in Market trends The Saudi consumers generally have a high brand-consciousness, which supports the market for more high-end brands in clothing & footwear and cosmetics & toiletries. The fact that a large part of the population is under the age of 15, only strengthens this brand consciousness going forward. A survey from the real estate firm CB Richard Ellis in 2011, Saudi Arabia attracted more than 40 percent of all the 326 top retailers that were surveyed. The main place for Saudis to do shopping is malls. Malls are not only viewed as a place for shopping, but also a place for leisure and socializing as well as entertainment centers, which have cafés, playgrounds, restaurants, fitness centers and so forth. There are app. 30 malls in Riyadh and 26 malls in Jeddah. In the Eastern Province Khobar and Dammam have app. 10 malls in total. Online-retailing has a lot of potential in Saudi Arabia and in 2010, Saudis spent app. USD 3bn via e-commerce of which electronics is the most popular category. Low credit-card usage is current constraint, which is expected to diminish as broadband access is spread throughout the Kingdom. A young population indicates that potential lies within the mobile commerce as 3.5G and 4G network is expanded and its speed improved. Furniture The furniture sector is positively influenced by the continuously development of new housing units, which partially has to do by the young and growing population. It is estimated that 1.65mn homes needs to be built over the next five years. The Government has met this challenge partially by allocating USD 66.7bn for the construction of 500,000 housing units. Recently the Government passed a new mortgage law that will strengthen Saudi citizens' capability to buy houses and real estate properties. The law seeks to turn Saudis from home renters to home owners, and to help spur housing formation in Saudi Arabia. Growing population, increased urbanization, strong demand for housing and rising income supports the market for sales of residential furniture, which is estimated to be USD 1.7bn in 2011 and expected to rise 10 percent annually until Commercial furniture sales were estimated to be USD 216mn last year. App. 70 percent of Saudi furniture sold are imported partially due to the gap between the rising demand and lack of local production., The Royal Danish Embassy, Riyadh Page 3 of 6

4 Clothing Clothing & footwear is the biggest non-food retail sales industry and was worth app. USD 9,7bn in Going forward the market is expected to rise 6 percent annually in According to sources, women s clothing accounts for app. 45 percent of the market. Although women have to wear the abaya 1 in public, clothes are bought for wearing in private or in environments solely for women. A market for designed and styled abayas is also emerging. Women in Saudi Arabia also tend to focus more on buying clothing and footwear that is special, customized or personal. In general, Saudi women have enough money to buy expensive dresses by Chanel or D&G. So in order to express their wealth, they differentiate themselves from their female friends by purchasing highend cloth and footwear. The leading clothes retailer is Fawaz al-hokair, which has more than 50 franchises of international brands and operates 750 fashion stores. Cosmetics The market for skin care products is estimated to grow app percent annually and is expected to reach USD 480mn by Skin whitening products and anti-ageing creams as well as lotions are traditionally high selling items. Last year Saudi women spent app. USD 2.4mn on cosmetics, and it is projected that the market will grow by 11 percent this year. Saudi women are viewed as being one of the most beauty-conscious in the Middle East region. It is estimated that Saudi women spend more money in cosmetics and hair products per capita than no other women in the world. Beauty products focused on men have traditionally been deodorants, shaving creams and hair gels, but a new trend suggests that a more beauty conscious man might be emerging, requiring a new and broader spectrum of beauty products. The market is dominated by high-end brands such as Chanel and Christian Dior as well as Proctor & Gamble and Unilever. Anwal United Trading is a leading retailer of cosmetics with 125 stores. The market for hygiene products, such as soap and cleaners, is estimated at USD 4.2bn and is expected to grow by more than 8 percent annually until This sector is also represented by multinational corporations such as Proctor & Gamble and Unilever. Jewelry The Saudi Arabia jewelry market is characterized by two sales segments. One segment is the international retailers that have franchises and shops in malls. The 1 An outer garment worn by women. It is long-sleeved, floor-length, and is worn from either the shoulder or the top of the head., The Royal Danish Embassy, Riyadh Page 4 of 6

5 other segment is the local goldsmiths that craft jewelry. In the first quarter of 2012, Saudi Arabia consumed app. 10 tons of jewelry, which ranks it among the top 10 consumers of jewelry in the world. This should be compared to the US and UAE, which consumed respectively 17.6 tons and 15.9 tons of jewelry in the same period. Market evaluation All four areas of furniture, jewelry, clothing and cosmetics are expected to show strong growth going forward. The possibilities for Danish companies lie in the high-end brands, because the low-end market is primarily fulfilled and dominated by products from East Asia or local production. Focus should in general be on unique, diversified and customized products, since Saudis in general can afford more dear products. The way the Saudis show their wealth is through buying products that has been personalized or originate from smaller unknown producers of good exclusive quality products., The Royal Danish Embassy, Riyadh Page 5 of 6

6 is a part of the Ministry of Foreign Affairs and is the official export and investment promotion agency of Denmark. benefits from around ninety Danish Embassies, Consulates General and Trade Commissions abroad. advises and assists Danish companies in their export activities and internationalisation process according to the vision: Creating Value All the Way. The work in the Trade Council follows specific procedures and quality guidelines. In this way our customers are secured the best possible quality under the varying working and market conditions at any given point of time. Ministry of Foreign Affairs of Denmark Eksportrådet, Danmarks Ambassade i Riyadh Tlf: Fax: The Royal Danish Embassy, Riyadh Page 6 of 6