Analyst Insight by Fatemah Sherif - Senior Research Analyst
The retail market in Saudi Arabia has become a strong focus for the government, primarily driven by a desire to boost and maintain ongoing economic success in the country. The Saudi Arabian retailing market was worth SAR374 billion in 2013, 12% growth from the previous year, according to Euromonitor International. A large part of this interest comes from the government’s desire to diversify beyond the oil industry. This is seen as a means to reduce unemployment and increase average disposable income. Already, better living conditions and higher income levels are having a positive impact on retailing.
Tourism Drives Retailing
One key factor is tourism, primarily religious tourism, as Makkah, the birthplace of the prophet Muhammad, is considered the holiest city in the religion of Islam. International arrivals increased in 2013, reaching 18 million trips, following the massive expansion of projects at the holy mosques in Makkah, which has expanded its capacity for visitors. Furthermore, the Ministry of Haj recently gave approval to 62 travel companies to offer low-cost Hajj (pilgrimage) packages, following strong demand. As a result, the program was expanded to accommodate 41,000 pilgrims in 2014, up from 17,000 the previous year. Moreover, the Saudi Commission for Tourism and Antiquities (SCTA) is trying to drive tourism by deregulating air travel by breaking the monopoly of Saudi Arabian Airlines, inviting local and foreign airlines to operate in the country.