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The Future of Retail in Saudi Arabia

The global COVID-19 pandemic has changed the way the world does business. Shifts in consumer behavior have prompted different industries to accelerate digitalization, but none more so than the retail sector as the e-commerce boom continues worldwide.

This boom is felt even more in countries with young populations, such as Saudi Arabia, with reports stating that over two-thirds of its people are age 35 and under. Strong purchasing power and growing digital economy awareness in the country have brought the future of retail into the online space, from clothing retailers to pharmacies, restaurants, and even supermarkets.

E-Commerce in the Saudi Retail Sector

Market research reports state that Saudi Arabia’s retail market size is projected to grow by 20% by 2022, driven primarily by the e-commerce boom.

The COVID-19 pandemic has accelerated consumer preference towards online marketplaces, a shift that has seemed inevitable pre-pandemic in Saudi Arabia as its people, particularly the youth, embraced the internet economy. Currently, 96% of the total population are internet users—around 33 million people.

When it comes to e-commerce, Saudi Arabia currently ranks in the global top 26 largest e-commerce markets, with 70% of its population considering themselves online shoppers. The current market leader is, considered the largest online marketplace in the Arab world, which was acquired by tech giant Amazon in 2017.

Retail Business in Saudi Arabia for 2022

Souq, which now operates under the Amazon name in Saudi Arabia, has popularized features that customers now expect when it comes to online orders. Expectations of same-day delivery, instant order tracking, and cashless payment options have made the e-commerce space in the country very competitive as businesses continuously innovate to edge out competitors.

For businesses and entrepreneurs wanting to enter the e-commerce space, the sectors of Food & Beverage, Fashion, and Pharmaceuticals are expected to show remarkable growth, even as the world eases its COVID-19 restrictions. Pharmaceuticals and F&B, in particular, are projected to show a CAGR growth rate of 10% and 6% until 2025.

For F&B specifically, retailers are now establishing their own “dark stores,” which are large warehouses or centers catering specifically to online customers. Retailers and other businesses wanting to break into the market must keep these sectors in mind as spaces to innovate and grow to work within the future of the Saudi retail sector.

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