KSA Retail Industry Report

EXECUTIVE SUMMARY

DEMAND POTENTIAL FINANCING OPTIONS

Healthy economic growth, changing

demographic profile, increasing disposable
Interest rates are just 2% in KSA
incomes, changing consumer tastes are
It will boost the retail development in the area
driving growth in organized retail market in
KSA.

WHY KSA ?

INCREASING INVESTMENTS GOVERNMENT SUPPORT

Retail accounts for 13% of GDP.

Government has eased the laws to boost FDI
Government vision 2030, supports
for development on Retail sector
development of retail sector as a way to
Government eased ownership rule to 100%
diversification from oil based economy
from previously 75%
It will also help in creating jobs which is one
of the agenda of the vision
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Recent Event and Government steps
4 Benchmarking of Key Players
Future Outlook
5
Appendix Growth Drivers
6

3
Kingdom of Saudi Arabia has the largest Retail market in whole GCC..

KSA SHARE IN GCC RETAIL MARKET GROWING KSA RETAIL MARKET

100% = USD 253 Billion Sales (USD Billions)

160
136
Rest of GCC 140 7.3 %
21% 119
120
103
KSA 100
47% 76.5
80
UAE
32% 60
Retail Market Size and GDP Contribution 40
20
0
2010 2014 2016 2018 E

KSA and UAE accounts for almost 80% of the Retail revenue in GCC region
KSA market is expanding at a yoy rate of 7.3%

4
 and it is growing because of the positive demographic and economic
factors
RECOVERING REAL GDP GROWTH POSITIVE POPULATION DEMOGRAPHIC
100% = 51,467,147 People 100% = 30,770,375 People
6%
5% 45%
4% 40% 60%
3% 51%
3%
2%
1%
1% KSA (0-14 Years) KSA (15 - 59 Years)
0% KSA (60+ Years) Rest of GCC
2010 2012 2014 2016 2018E 2019E
Source: https://knoema.com/ Source: http://www.populstat.info ; http://gulfmigration.eu

HIGH DISPOSABLE INCOME POPULATION GROWTH

Population (in Million People)
Disposable Income (in Mn USD) 40
31.74
Per Capita Disposable Income (USD) 35.06
30
67772
20
38925 34391 29695 26786
10
11700 10234 12543
4062 3002 0
Riyadh Jeddah Tehran Dubai Cairo 2010 2012 2014 2016 2018E 2020E

Source: http://www.zawya.com (2014) Source: https://tradingeconomics.com

5
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

6
Competitive Analysis Market Attractiveness

SUPPLIERS BARGAIN POWER NEW ENTRANT THREAT

Comparatively low supplier Government reducing barriers

concentration to encourage private sector
Low cost of switching supplier investments.
NEW ENTRANT Low interest rates to fulfil
THREAT capital requirement
High Sector is largely un-organised

SUPPLIERS CUSTOMERS
BARGAINING RIVALRY BARGAINING
POWER POWER
Medium
Medium High

THREAT OF SUBSTITUTE THREAT OF CUSTOMERs BARGAIN POWER

SUBSTITUTE
Many options with customers Low switching cost for customers
High
(Bakalas) Price sensitive market
Low substitution cost Many options with customers
(Bakalas)

7
Competitive Analysis SWOT Analysis

STRENGTH WEEKNESS

Increasing young population and KSA consumers are price

good macro-economic factors
High average disposable income
Large Expatriate population
Good proportion of women
population
conscious compared to UAE
Private sector dependent on
expats labor force
H Weak agriculture sector and large
N GT
RE dependence on imports

WE
ST

AK
N
ES
S
TH

TY
RE

NI
AT

U
RT
THREAT PO OPPORTUNITY
OP
Government rule of not allowing Rising education level, internet
women to drive penetration, and disposable
Ease of entry would lead to income making consumers brand
increased competition in the conscious
market Extreme weather of KSA support
air conditioned organized retail

8
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

9
On the basis of distribution channel, Retail sector is largely un-organised

59% 11.9%
The top five players
Hyper markets hold 11.9%
market share,
which is lower than
Specialty Stores developed markets
like the UK, wherein
the top five players
Chain Stores have a 59%
market share.
ORGANISED Savola, Al Othaim,
Malls Al Hokair and Jarir
Marketing are key
players in KSAs
retail sector.
E-Retailing
RETAIL
Super markets

Street Vendors and

Hawkers
UN-ORGANISED
Mom & Pop Stores
Classification of Retail Sector on the basis of product offerings.

Fashion Retail

Cosmetics

Furniture
NON - GROCERY
Electronics

Sports and Music

RETAIL
Books

Food Items
GROCERY
Non-Food Grocery
Retail revenue has almost 50-50 split between grocery and non grocery
products

100% = USD 119 Billion

G
8%

( N 10%
on
-F
24%

oo
) d
Non-Grocery 23%
52%
Grocery (Food)
38% 17%

12%
8%
8%

G(Food) G (Non-Food) N G (Books) N G (Entertainment)

N G (Electronics) N G (Fashion) N G (Health) N G (Sports)
N G (Rest)

12
Growth trends of Non-Grocery Retail

RETAIL CLOTHING SALES TREND RETAIL FOOTWEAR SALES TREND

INTERNET PENETRATION SMARTPHONE PENETRATION

13
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

14
Benchmarking of Key Players
RATIOS COMPARISONS MARGINS COMPARISONS
https://www.investing.com https://www.investing.com

0 10 20 30 40 0% 5% 10% 15% 20% 25% 30%

P/E P/B Gross Margin Operating Margin

ROA COMPARISON ROE COMPARISON
https://www.investing.com https://www.investing.com

0% 5% 10% 15% 20% 25% 30% 35% 0% 10% 20% 30% 40% 50% 60%

15
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

16
Based on historical evidence, the winning combination in KSA Retail is

BUSINESS MODEL BUSINESS LOCATION

TIO
Franchisee business Jeddah, Riyadh are Al

EL
model Khobar are major

A
D

MO
Government eased norms business region of KSA

LO
to 100% ownership from Pilgrimage destination of

SS

ESS
previous 75% Mecca and Madina

I NE
Local business receives millions of

SIN
S
understanding tourists annually
BU

BU
Existing distribution
network and logistic chain

MARKETING STRATEGY Tesco entered with

business ties with
various local
heavyweights such as
Spinneys Group entered MARKETING STRATEGY Fawaz Abdulaziz Al
the UAE it inked a Hokair & Co in the
franchise agreement with Digital Media and Social KSA, Choithrams in the
the Al-Bawardi Group Media UAE, MegaMart in
Promotional events, Bahrain and Saveco in
contests, discount Kuwait
coupons etc

17
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

18
Future Outlook
Large Nationals
and Expats
population

Market is Huge inflow of tourists

underpenetrated (Mecca)
FIFA Worldcup2022
by organized (Qatar)
players World Expo 2020 (UAE)

Strong
growth with
market Size
$ 140 Billion
Diversified growth by 2018
(Oil and retail) will Government
lead to sustained initiatives
growth in per favorable for the
capita income sectors growth
High internet
penetration and
Source: AT Kearney rising E-commerce 19
Table of contents

1 KSA Retail Industry Snapshot

2 Market Analysis
3 Classification of the Retail Sector
4 Benchmarking of Key Players
Winning Combination
5
Future Outlook
6
Appendix Growth Drivers
7

20
Retail Industry growth Drivers

Demand Side Supply Side

Rising income level New entrants

Increased urbanization
Growing aspirational level and
appetite to experiment
Large disposable income
Tourism (mecca)
FIFA Worldcup2022 (Qatar)
World Expo 2020 (UAE)
Increasing expats and nationals
population
Expansion plans of existing
players
Infrastructure augmentation
Increase in product offerings
Rise of E-Commerce
KSA Ease of doing business
Retail Industry Regulations by government
Growth Drivers

21