STRONG SALES GROWTH GIVE SAUDI RETAIL REASON TO CELEBRATE

Saudi Arabia’s retail companies are reporting strong sales in the first quarter, as the non-oil economic activity picks up and consumers feel more confident to open their wallets.

Savola Group, for example, noted that the first quarter clocked in revenues of SAR 2.7 billion, a year-on-year growth of 12.3%, driven primarily by double-digit growth in food segment and high single-digit growth in customer count and basket size.

Altayyar Travel Group recorded positive growth in the first quarter, thanks to 44% growth in online business, 41% in car rental, 33% in hospitality, and 13% in corporate ventures, and is building seven new hotels.

Al Hokair Group also saw a 2.4% increase in sales revenues in the first quarter on the back of new opened entertainment centres and hotel sites.

Wholesale and retail trade, restaurants and hotels segment grew 1.86% during the first three months of the year to reach SAR 58.86 billion, according to the General Authority for Statistics (GAStat). The increase is impressive, considering Saudi consumers are absorbing the cost of value added tax and levies on other products.

Despite VAT, consumer prices index declined 0.2% in February, compared to the previous month, according to GAStat. Food and beverages prices saw a 0.2% decline, recreation and culture were down 0.2%. Retail sales will also be driven by wage growth and higher government spending.

Other economic indicators suggest retail activity is picking up. Point-of-sales transactions have been steadily rising, with the first quarter witnessing a 24.7% jump to 64 billion, compared to the same period last year.

Sales transactions continue to rise in the second quarter, with May posting SAR 27.8 billion in sales, compared to SAR 23.05 billion during the same month last year.

The Saudi retail sector is also expected to get a big boost with the launch of the Qiddiya Investment’s Company’s ‘giga project’ Qiddiya, a multi-faceted entertainment destination, home of inspiration, discovery and engagement, near the capital city of Riyadh.

The project will feature five areas, with the underlying theme of entertainment and hospitality.

A key component is The Resort Core, representing the heart of Qiddiya where four gated-attractions surround a central specialty retail, dining and entertainment district along with a portfolio of distinctive resort hotel offerings.

“Adjacent to the 15-hectare retail, dining and entertainment district, is a major outdoor entertainment venue capable of hosting events from 5,000 to 40,000 visitors siting as a park like setting and punctuated with active skating and skiing facilities,” according to Qiddiya.

Six Flags Qiddiya, a family-oriented theme park, will be completed by 2022, while a second feature park is a water-oriented sports and entertainment attraction, which includes an integrated resort hotel, along with dining and retail options.

“A range of additional retail, residential, community services and commercial support facilities are distributed throughout the property for ease of access and utility that support the modern lifestyle Qiddiya is designed to deliver,” the company said.

Another sub-development overlooking the Resort Core from its perch 200 metres above on the edge of the Tuwaiq escarpment, the City Centre is a mixed-use village dedicated to sports and the arts.

“Coupled to the entertainment core below by a funicular transportation system, residential, retail and workplace environments are organised around two intersecting pedestrian circulation spines linking a portfolio of feature facilities,” according to the company.

The new multi-billion project, coupled with the liberalisation of the retail sector, which allows 100% foreign ownership, is expected to give more impetus and generate more activity.

“The initiative will not only facilitate the entry of large multinational retail and wholesale companies but also bring about best practices, technological advancement, enhance customer experience and create new jobs. The law will also help the regional players expand their base and increase service offerings, thus intensifying competition that may lead to cut-down on prices and increase in consumption,” said research house Alpen Capital in a new report on the region’s retail sector.

The acceleration in retail sector activity will ensure the kingdom remains the largest retail market in the region.

According to research firm TechSci Research, Saudi Arabia’s retail market is projected to exhibit a compounded annual growth rate of around 6% during the forecast period of 2019-2024, growing from USD 112.9 billion in 2018 to USD 159 billion by 2024, “on account of increasing personal disposable income, change in consumption pattern from staple food towards healthier food, and shifting focus from dependency on fuel to other sectors.”