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Saudi Rides the Retail Boom

Posted by vmsalama on June 17, 2008

by Vivian Salama

The National


Just a few minutes walk from the Great Mosque of Haram, a shiny new mall will soon open, featuring the likes of Tiffany and TopShop.

To many, this is just another example of rampant globalisation. To others, it is a simple business opportunity.

Brands as diverse as Hugo Boss and Juicy Couture are jostling for a foothold in Saudi Arabia, leaving the kingdom caught in a dilemma between commerce and reverence.

“Some people see it as McDonaldising the world, putting a KFC or a Starbucks a few metres from [Masjid] al Haram, but we are traders and for us, Saudi Arabia offers a great opportunity,” said Khalid al Sehaibany, the leasing director for Mohammad al Habib, a Riyadh-based developer.

As the religious centre for 1.2 billion Muslims and home to over 20 per cent of the world’s proven petroleum reserves, Saudi Arabia has long trod a fine line between its desire for prosperity and attachment to tradition.

Now the kingdom is striving to foster an improved business climate as, like many oil-producing countries, it seeks to decrease its oil dependency. As with other GCC countries, retail has the potential to become a significant contributor to the economy.

While much attention has been focused on the UAE, analysts say that Saudi Arabia is on its way to becoming a regional retail leader. Worth US$6 billion (Dh22bn), the sector in Saudi Arabia holds second place regionally after Dubai’s.

Some seven million square metres of new retail space are due for completion in the kingdom by 2010. Fuelled by these projects and a rapid population growth, sales are forecast to increase at a healthy five per cent per year until the end of 2012.

“This is a country with a lot of potential,” said Naeem Ghafoor, the chief executive of Skyline Retail Services. “The people have money, are well travelled and well cultured.”

As in most countries in the region, malls function as entertainment centres, providing people of all ages with a safe and culturally acceptable gathering place. The retailers reap the benefit of this guaranteed footfall. However, the enormous spending power of Saudi Arabia’s 21 million citizens is the real force behind the sector’s massive potential.

“Saudi consumers have the strongest purchasing power in the GCC,” said Mr Sehaibany. “They have money and they like to shop. What more can the [retailers] ask?”

According to government estimates, the average Saudi per capita income has grown 10.6 times, from about 5,083 Saudi riyals (Dh4,978 ) in 1971 to about 55,216 riyals in 2006. As a result, the kingdom finds itself in a mad rush to meet the demand for bigger and better residential complexes and shopping centres.

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