OVERVIEW OF THE RETAIL SECTOR IN SAUDI ARABIA
In Saudi Arabia, the retails sector is set for expansion due to several factors including:
- Growing population: The population is expected to reach 35 million by 2030 creating a substantial consumer market to the retail business.
- Young, tech-savvy population: As the youth generation below the age of 30 years old makes a significant portion of the population, there is a strong inclination toward digital retail shopping and online services, driving demand in this sector.
- Demand for e-Commerce: As more consumers seek online shopping, this creates a thriving opportunity for e-commerce solutions to rise in Saudi Arabia.
- Government support: Saudi Vision 2030 initiative further invests heavily in the retail sector, providing infrastructure support, including ports, airports, logistics facilities and transportation that facilitates efficient and smoot supply chain management, as well as creates an attractive environment for investors and consumers. Additionally, Saudi Vision 2030 focuses on promoting digital transformation, supporting innovation in the retail and e-commerce sector.
- Increasing urbanization: The transformative environment of the Kingdom has led to the urbanization rate in Saudi to steadily increase, leading to the growth rate of retail business sector in urban areas.
- Free Trade Agreements: The KSA have several free trade agreements (FTAs) in place with many countries, which further makes the Kingdom an ideal location for retail investors, providing reduced tariffs, streamlined custom procedures and enhanced access opportunity to the regional market further strengthened by the Kingdom’s strategic location on the Red Sea.
DIGITAL TRANSFORMATION IN RETAIL
According to the Public Investment Fund (PIF), Saudi Arabia plans to invest approximately USD 6.4 billion in technology-driven innovation, aiming to position itself as one of the top 10 countries in AI and future technologies. This initiative focuses on optimising business operations and unlocking new sectors such as e-commerce through digital transformation. As a result, the retail sector in Saudi Arabia is increasingly embracing digital solutions to enhance the shopping experience. Data from the Saudi Central Bank (SAMA) revealed that the transaction volumes via digital cashless payment methods, online shopping, in-app purchases, and e-wallet transactions jumped 33.65 percent. Consumer spending in the retail sector was highest in:
- Restaurants and cafes.
- Beverage and food outlets.
- Miscellaneous goods and services, including personal care, supplies, and maintenance.
AI-POWERED SHOPPING
Further driven by post-pandemic digital adoption, more consumers are leveraging AI powered solutions, which is transforming traditional shopping habits shifting the retail experience from physical stores to online platforms, offering more personalized and efficient shopping experiences.
FUNDING AND INVESTMENT in E-COMMERCE
Substantial investments in online platforms are pouring into the e-commerce sector, with both local and international players recognizing Saudi Arabia’s growing role as a digital commerce hub.
These investments are:
- Driving innovation.
- expanding online platforms.
- Fuelling growth across the industry promising a dynamic and competitive future for e-commerce businesses.
MOBILE PAYMENTS GAIN TRACTION
Mobile wallets and digital payment methods are receiving significant traction amongst the youth generation, as the Kingdom delves towards a cashless community. The growth of digital payments and financial technologies (fintech) have been supported by a series of regulatory and robust cybersecurity measures, including:
- SAMA Cybersecurity Framework introduced in 2017.
- Personal Data Protection Law (PDPL) in 2022.
These frameworks aim to:
- Support the growth of digital payments.
- Safeguard the Kingdom’s financial infrastructure.
- Strengthen both the retail businesses and consumers confidence.
IMPORTANCE OF CORRECT LICENSING
While Saudi Arabia’s retail landscape presents a wealth of opportunities for foreign firms, establishing your firm requires careful planning and understanding of the licensing process. Securing the proper licenses is crucial for two key reasons:
- Compliance and Legality: Obtaining the necessary licenses ensures your firm adheres to the established licensing guidelines; hence avoiding potential penalties and allows the firm to operate legally within the Kingdom.
- Smooth Operations: Holding the correct licenses overlays the path for your firm to operate smoothly; without the worry of compliance issues.
UNDERSTANDING THE REGULATORY LANDSCAPE
In Saudi Arabia, the licensing of trading activities for foreign firms involves several steps:
EXPERT CONSULTATION
It is crucial to consider consulting with business professionals specializing in foreign investment in Saudi Arabia when establishing your retail business. With proper consultation, your business will be provided with tailored advice based on the dynamics of its business operations, ensuring a smooth Saudi business set up journey.
TAKEAWAY
By following the established registration process and obtaining the necessary external licenses, retail businesses with foreign ownership can avoid any non-compliance risks and operate legally and smoothly in Saudi Arabia.
If you are interested in learning more about the retail and e-commerce business setup in Saudi Arabia, reach out to our team of consultants to reserve your complimentary expert consultation.
Our team will guide you through entire process and regulations to help you avoid potential compliance issues, while assessing your eligibility for setting up you retain business in Saudi Arabia.
Take the lead in your industry – contact us via email i[email protected] or call Saudi Arabia +966 56 865 2329 UAE +971 4 878 6240 today.
