Saudi Apparel Retail Market Continues to Grow Strongly

July 28 2008 Global : Saudi Apparel Retail Market Continues to Grow Strongly Global House Investment- Kuwait- Saudi Apparel Retail Market- The Saudi apparel retail industry is one of the high-growth markets in the Arab region especially in the women and children segments. The apparel business grew rapidly over the last several years as people became more fashionoriented. The growth in the sector is attributed to high young population and increasing purchasing power in the backdrop of recent economic boom. Growth of this sector is evidenced by the growth of fashion retailers. In fact as per Colliers International, Riyadh has 2.5 million square meters of gross leasable shopping mall space in Riyadh vs. 1.1 million in Jeddah and 1.7 million in Dubai as of 2007. Considering the clothing style in Saudi Arabia, men mostly wear the traditional white thobes along with the red shemaghs. Women on the other hand, wear the black abayas and tarhas for everyday use. Despite the fact that all women wear the traditional Abaya on top of their clothes, underneath the abaya, Western dress is most common. Western dress is adopted more by the younger Saudi generation outside of school. Non-Saudi adults usually wear the Western dress code. The market for apparel sales in Saudi Arabia are made up of varied products not representing global brands in addition to unbranded items, which are generally imported from Asia. However, with the maturing of the market, there has been a shift towards branded apparel sold through international retail chains. Sales of braded apparels are estimated to be around 25-30% of total apparel sales. Its share continues to increase as evidenced by the expansion of the number of outlets and the number of malls specialized in international retail chains. The market share of branded apparel has witnessed a steady increase in the last decade due to changes in consumer tastes and converging global fashion trends. Saudi consumers have become increasingly sophisticated, demonstrating brand awareness and brand loyalty, demanding quality service and value for money and carefully looking out for new product lines from their preferred brands. Saudi Arabian Apparel market is heavily reliant on imports especially when it comes to fabric, cloth, accessories and ready-made Western style clothes. These imports come from all over the world depending on price range and quality. There is a noticeable distinction and a clear line between the high-end and low-end types of clothes. European and American clothes are usually classified as high-end and targeted towards the upper social class, whereas, garments imported from the Far East especially from China offers much lower prices and quality and is geared towards the lower social class, which represents the largest section of the pie. Saudi manufacturers, on the other hand, mainly supply military uniforms and traditional abayas. Apparel outlets in Saudi Arabia range from exclusive boutiques carrying true haute couture and top international designer labels to souq stalls. In Saudi Arabia, Riyadh is currently the largest market for retail apparel in Saudi Arabia accounting for around 40% of total apparel sales, and is followed by Jeddah (around 30%) and Dammam/Khobar (around 20%). Growing presence of international branded apparel in these big cities has contributed to growth in branded apparel sector. Jeddah is

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larger on the mid-tier due to the large number of pilgrims it receives during the Hajj and Umrah seasons, while Riyadh being more important for the top end of the market due to the presence of a larger base of wealthier consumers. Dammam/Khobar comes in the third place, although it does gain some seasonal importance during Hajj and Umrah seasons when pilgrims coming from Bahrain and Kuwait stop over for shopping on their way back form the pilgrimage. Though going forward the smaller cities are expected to grow at a higher rate, the larger cities like Riyadh, Jeddah and Dammam will continue to contribute bulk of the sales. Market Segments The major market segments in retail apparel include Womenswear, Footwear, Childrenswear, Menswear and Eyewear. Some segments of the market like Womenswear are more developed whereas other segments are yet to catch up. Menswear represents a small segment of the ready-made clothing sector in comparison to Womenswear and Childrenswear. Women and children are the majority shoppers in the apparel market. They are mainly targeted by providing excellent service, wide variety and quick turnover of products and regular promotional campaigns to win their loyalty and regular visits. The smaller segments are expected to grow at a higher rate in the coming years relative to the mature segments due to their lower base. This growth will stem from the effective targeting of hitherto underdeveloped sectors, namely eyewear and Menswear, while the more mature areas of Womenswear and Childrenswear will remain the backbone of the market and continue to experience healthy growth. Saudi Arabia is a major market for women and children's clothing. The market is segmented between the high-end branded sector, the mid-market branded sector and the lower-priced market. The high-end and mid-market sectors of the apparel market are dominated by imports from Europe and the United States. The lower end of the market is characterized by imports from the Far East and South East Asia, some of which are styles copied from European and American brand names. Economic growth an important driver of retail sector The Saudi economy has witnessed an economic boom over the past few years thanks to the high crude oil prices, which have risen from US$25 per barrel in 2003 to exceed US$130 per barrel in 2008. This oil boom led to the increase in government revenue and expenditure, which in turn boosted the economy. Furthermore, the government is investing revenue surplus in building infrastructure and growing the manufacturing and services sectors in the long term. This in turn will help in preserving the countrys economic strength for the upcoming years. The impact of a healthy economy on clothing spending is notably positive. With higher levels of disposable income, and consumer confidence, Saudi consumers are spending more money, particularly on non-necessities such as mass market branded clothing. Continued growth in GDP for the short to medium term will have a positive affect on the growth of purchasing power for consumers. Government initiatives like Saudization are expected to have a positive impact on retail sector. Saudization will impact the composition of workforce and therefore will increase income levels for Saudis nationals. This in turn may increase expenditures on consumer products as a whole and primarily expenditure on clothes and accessories. Shopping Malls Growth Enabler The construction boom of residential, commercial, and leisure projects, which has taken place all over the kingdom in the last few years, has led to the availability of large retail space. The rise of

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the modern shopping malls in Saudi Arabia has been taking place at a fairly steady rate over the last ten years, with malls becoming increasingly sophisticated. Opening of numerous shopping malls and the ease and convenience this has provided shoppers with has contributed to growth in branded apparel sector. This trend is expected to continue in the near future with the openings of new shopping malls, providing retail companies with thousands of square meters to do more business in Saudi Arabia. Mall development is likely to be extremely important to the future of the branded fashion market. Mall development is expected to spread to smaller cities during the forecast period. Click Here! Competitive Scenario The branded retail apparel market is quite competitive in Saudi Arabia. The competition is further set to as more business families who were quite successful in other retailing areas are actively seeking to enter this potentially lucrative market. The big players in this sector focus on acquiring franchise agreements with well-known international suppliers. Currently there are four large companies dominating the branded apparel market, each representing a considerable number of international franchises: Al Hokair, Al Shaya, Al-Sawani and Nesk Group of Trading Projects (Al Jedaie). In addition to these, there are a few smaller companies with just less than five international franchises. Brands offered by Al Hokair include Marks & Spencer, ZARA, PROMOD, MONSOON and others. Brands offered by Al-Sawani include Guess, Esprit, Levis, Fossil, Benetton etc. Brands offered by Al Shaya include Bhs, Debenhams, Mothercare, River Island and NEXT. Well-known brands of Nesk include MANGO, Gerry Weber, OUI, Taifun and Okaidi. Additionally, an important segment in this market is the small retailers who own one or more shops. With their low overheads, these retailers are able to offer very competitive pricing on their products especially in the medium to low category. Source: Al Bawaba

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