Saudi retail sector forecast to grow to SAR 596 bln by 2024, biggest market in region: Chairman of RLC

Panos Linardos, Chairman of Retail Leaders Circle (RLC)

Panos Linardos, Chairman of Retail Leaders Circle (RLC), expected Saudi Arabia’s retail sector to grow to SAR 596 billion by 2024, backed by e-commerce and luxury.

Saudi is by far the biggest retail market in the region and is receiving the benefits of the country’s transformation, especially the growth of tourism and the emergence on new lifestyle destinations and entertainment offers, Linardos told Argaam on the sidelines of the RLC Summit.

He also spoke about the major trends that will play an important role in the region’s retail development this year, as these, combined, will have a big impact across all sectors and as a result, the economies of the GCC.

Here’s the full interview with Panos Linardos:

1) Why did you decide to host this year’s edition of the Retail Leaders Circle MENA Summit in Saudi Arabia again?

Saudi Arabia is transforming at an incredible rate and is probably the most exciting retail destination in the region right now. Apart from its sheer size, the Kingdom has a young, digitally connected consumer base with highly sophisticated retail tastes.

Saudi is by far the biggest retail market in the region and is receiving the benefits of the country’s transformation, especially the growth of tourism and the emergence on new lifestyle destinations and entertainment offers.

Our decision to host the Summit in Riyadh underlines the Kingdom’s significant growth potential to retail business leaders and brands from across the region and around the globe. We recognize the challenges and opportunities of this new era for the industry. Our goal is to elevate the industry narrative by leveraging our collective power and expertise to drive positive industry change.

2) What do you think of Saudi Arabia's retail market and the competition?

Mall investment, especially in Saudi Arabia, continues to expand with a heavy focus on entertainment to drive footfall – around 50 percent of space in new mall developments is devoted to entertainment.

To enhance their competitive appeal, though, new retail spaces should be seeking to integrate more digitally-enabled, immersive experiences into their offer to attract consumers and retain loyalty.

Retail companies entering this market need to take time to understand and meet consumer demands for an integrated retail experience to build and maintain a competitive advantage. This requires investment not only in retail floorspace but also in implementing and integrating the right technologies to meet the needs of highly discerning consumers.

We’re also seeing a significant rise in conscientious consumerism, especially among Generation Z consumers, which makes it more important that brands are open and transparent about their ESG initiatives.

3) Which retail sector will have the biggest impact on the Saudi and GCC economies?

I believe there are three major trends that will play an important role in the region’s retail development this year, as these, combined, will have a big impact across all sectors and as a result, the economies of the GCC:

Integrating physical and digital retail

As consumer habits and expectations change, retailers are exploring new ways to bridge the physical / digital divide. While most major retailers today have incorporated digital technologies like e-commerce and app-based shopping and loyalty programs, few have designed the entire customer journey around digital integration. We expect to see emergent technologies like AI and Augmented Reality to play an increasingly central role in retail planning for 2023 and beyond.

Conscientious consumerism

As consumers become more aware of the impact their decisions have on the environment and on local communities, we have already seen an increasing focus on the ESG practices of retailers, especially those with multi-national supply chains. We expect to see this trend continue as customers, regulators and investors pay closer attention to the retail industry’s public commitments to ESG and how those commitments are reflected in actual operations. Transparent reporting and independent auditing of sustainability claims are going to become increasingly important to retailers hoping to protect and grow market share.

Evolution of physical stores

Retailers are increasingly seeking ways to make in-store shopping a richer experience by using store-space to showcase key product lines and incorporating brand activations and in-store technologies to replace the traditional inventory-driven model.

The ability of retailers to allow customers to order products from the entire product line in-store and have them delivered quickly and seamlessly reduces the need to keep large, comprehensive product inventories on-site and instead devote space to more creative product displays and in-store promotion activities.

This requires not only integration at the retail end but also a heavy reliance on infrastructure to manage delivery, especially to areas outside major urban centers.

4) Given the prevalence of online purchasing, how do you think malls can still draw crowds?

Malls in the Middle East are more than just retail outlets, they are social and entertainment hubs. The climate in this part of the world significantly affects the ability of customers to enjoy the traditional ‘high street’ retail model common in more temperate regions. Middle Eastern malls already incorporate high-end dining, entertainment areas and experiential activities into their mix.

Mall investment, especially in Saudi Arabia, continues to expand. To enhance their competitive appeal, new retail spaces should be seeking to integrate more digitally-enabled, immersive experiences into their offer to attract consumers and retain loyalty.

There is huge potential in digital retail and how it integrates with the physical space in Saudi Arabia. Advances in artificial intelligence open many opportunities for retailers and Saudi has always been a technologically sophisticated market. We expect a greater uptake of AI-enhanced operating models among retailers in the future.

We also see an opportunity for commercial use of immersive technologies like augmented reality. I think retailers in Saudi will come to see that immersive technologies are not just for fun – they are integral to providing standout customer experiences.

The question retailers should be asking is not “Shall we invest in immersive technology?’ but rather ‘How long will it be before immersive technology is a basic cost of entry?’

5) What are your expectations for the performance of the retail sector this year?

The Saudi Arabian retail sector is forecast to grow to $159 billion (SAR 596 billion) by 2024. Retail accounted for 22.8 percent of Saudi’s non-oil GDP as of the third quarter of 2022, according to the General Authority for Statistics. A lot of this growth is being driven by e-commerce and luxury. We see a huge opportunity for retailers to integrate their digital offers into their physical spaces to offer consumers a more seamless experience that draws on the best of both worlds – the convenience of e-commerce with the personal interaction that only a physical store can provide.