Saudi on a Retail high

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Place:Saudi Arabia

Story: Retail sales in Saudi to cross $37b by 2015

New data from Business Monitor International noted that retail sales in Saudi Arabia are expected to grow from just under $27bn this year to more than $37bn in 2015 on the back of strong economic growth in the kingdom.

BMI said in its Q2 2011 Saudi Arabia Retail Report that nominal GDP in 2011 was predicted to be $414.2bn, with growth of 3.9 percent expected.

Average annual GDP growth of 3.6 percent is predicted by BMI between 2011 and 2015.

Its report added that with the population increasing from 26.5m in 2011 to an estimated 28.6m by 2015, GDP per capita was set to rise 21.4 percent to $18,961 by the end of the forecast period.

“The retail sector benefits from the large number of Muslim tourists visiting the country to take part in the hajj and umrah pilgrimages every year,” BMI analysts said.

US clothing retailer Gap is among the latest international brands to enter the market. It plans to open 44 Gap stores (and variations) and 10 Banana Republic stores in Saudi Arabia by 2012, BMI added.

Retail sub-sectors that are predicted by BMI to show strong growth over the forecast period include the consumer electronics market, which is one of the largest in the Gulf, accounting for about 40 percent of regional spending.

Sales in this sector are forecast to increase from an estimated $4.03bn in 2011 to $5.01bn by 2015, a rise of nearly 25 percent.

“Consumer electronics spend will be driven by youthful demographics, a regional economic boom and a buoyant real estate sector,” BMI said.

High business confidence and increased disposable incomes also provide a favourable background for the automotives sector, BMI added.

Vehicle sales are forecast to rise 31 percent by the end of 2015, from an estimated 652,769 units in 2011 to 857,242 units.

Overview

To help cater to this increased spend, most of Saudi Arabias major cities are expected to see a strong increase in retail space in the coming years, with the capital, Riyadh, alone expecting an additional 600,000 sq metres or more on top of the existing 2.3m sq metres of leasable area by 2014.

Much of this space will come through developments in the suburban areas of the city, reflecting the focus on decentralised living and the governments efforts to improve residential stock, trends that are being mirrored in some of the Kingdoms other large urban centres.

Saudi retailers have benefitted from the increasing urbanisation of society, with some 90% of the nations population now living in cities, meaning that large-scale sales outlets, like malls, typically have a sizeable customer pool within their catchment area. Moreover, shopping malls and their associated food courts and recreational facilities play a larger role in the Kingdom than that of simply commercial outlets they are also focal points for social activity.

Ripples

Spending in the richest nation of the gulf has always been at its highest.

Increased disposable income, along with higher consumer confidence, should flow directly into the sector, with analysts predicting the total retail spending in the nation to increase many folds.

With such promising spending figures, Saudi will soon become a hotspot in the shoppers’ list, as the number one shopping nation in the Gulf.

Sources: arabianbusiness, sachaorloff.wordpress

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