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1、12024THE STATE OF FASHION SECTOR IN SAUDI ARABIA2024THE STATE OF FASHION SECTOR IN SAUDI ARABIA2ContentForeword CEO Message Introduction:The Role of Fashion in Shaping Vision 2030 Saudi Arabia,the Regions Fashion Powerhouse Demand The Demographic Advantage:Driving Saudi Arabias Fashion Growth The In

2、fluence of Young Saudi Shoppers on Luxury Spending Leakage Reduction Consumers Increasingly Engaging with Omni-Channel Experience Destination Saudi Arabia:Cater to Tourists Diverse Retail and Entertainment Needs Supply Fashion in Saudi:A Mall-Driven Market,Now and Beyond Activation of Massive Retail

3、 Pipeline:Developers Search Brands to Bring Retail Areas to Life Global Brands Penetration:Opportunity to Lead the ChangeBrands Big Bet,Direct Entry:Opportunity for Local Facilitators in JVs and Franchises Harnessing Saudis Passion for Fashion:How Brands Are Engaging Local Consumers The Rise of Vibr

4、ant Saudi Homegrown Fashion Tap into Saudi Potential:Unlocking Capacity and Nurturing Talent Designing a Sustainable Future for Saudi FashionDeep Dive Apparel,Footwear&Accessories:Mirroring Saudis DynamismSportswear:A Bright Spot in the Fashion Market Luxury Jewelry:A Staple for Affluent Saudi Women

5、 Beauty:A Growth Accelerator in the Fashion Market AppendixGlossary References 0304071418 21273237414548535966717581859192010203 04050607080910111213141516173Burak Cakmak CEO of the Saudi Arabia Fashion CommissionCEOMessageAs we reflect on our journey,it is with great pride that I share the strides

6、we have made in developing Saudi Arabias fashion industry.Our nation has embarked on a profound transformation across multiple sectors,ushering in a new era for our rich local culture.The fashion sector has significantly contributed to this progress.As a result,we now stand on the brink of a USD 33

7、billion opportunity within the Saudi Fashion and Luxury market,further solidifying our position as a regional leader.At the Fashion Commission,we are driven by our commitment to developing local talent and brands at key stages of the fashion value chain.Through our initiatives,we promote and support

8、 the growth of Saudi Arabias dynamic fashion industry by collaborating with key partners to develop educational programs and funding opportunities.Starting from the basis,we have initiated educational programs and mentorship opportunities to equip emerging designers with the skills they need to succ

9、eed and unleash their creativity.When it comes to investments and funds for brands and SMEs,we create a direct link between investors,funding entities such as Ministry of Investment for Saudi Arabia(MISA)and the Cultural Development Fund(CDF)and local entrepreneurs.In addition,we empower local entre

10、preneurs by enhancing their business strategies and operations,while also offering platforms such as Riyadh Fashion Week,Red Sea Fashion Week and yearly Saudi 100 brands showrooms in Paris to showcase their talents on local,regional,and international stages.Through these efforts,we are cultivating a

11、 more independent and flourishing fashion industry with the talent and potential to emerge as a global leader and competitor in the fashion world.We are also pleased to observe the blending of our rich traditions with contemporary lifestyles in Saudi,resulting in diverse product offerings by both lo

12、cal and international brands and enhancing retail experiences.As Saudi Arabias retail pipeline of more than 20 retail projects takes shape in the coming years,we anticipate the retail penetration of the top 50 international brands in each category to surpass the current 75 percent average.As we look

13、 to the future,we are confident that Saudis fashion industry will continue to thrive,fueled by our young,and fashion-savvy population.Additionally,the burgeoning tourism sector,bolstered by significant investments in leisure infrastructure and renowned entertainment events,is set to add dynamism to

14、our country.The key challenge that lies ahead of us is keeping pace with the rapid development observed in Saudi.We are determined to ensure that the right resources and skills are available across the value chain to orchestrate growth in harmony with the rest of the country.With a USD 42 billion ma

15、rket opportunity projected for 2028,we are dedicated to making this potential a reality.Burak Cakmak4Vision 2030 is driving a transformative shift across Saudi Arabias socio-economic landscape,with fashion emerging as a key player.Since its launch in 2016,this strategic initiative has reshaped vario

16、us sectors,and as of 2023,the fashion industry contributes 2.5 percent to Saudis GDP*and creates 320,000 jobs.1 An essential factor in this success is the sectors strong focus on gender equality,with women making up 52 percent of the workforce,confirming the trends observed in 2022.2Beyond economic

17、contribution,the industry plays a seminal role in enriching quality of life,with fashion brands and retail experiences bringing new leisure and entertainment offerings.Fashion also plays a central role in enriching cultural heritage,with local designers highlighting Saudis traditional craft techniqu

18、es and design language in their collections,and a wide supporting ecosystem of government organizations,writers,influencers,and communication agencies,showcasing Saudi talent and developments on a global stage.Introduction:The Role of Fashion in Shaping Vision 2030*Note:Analysis adopts a broad defin

19、ition of fashion,which is in line with international research and aligns with the Fashion Commissions strategy.It includes activities that contribute to the fashion industry as well as elements that are broader than a cultural definition.5Supporting Economic Growth and Jobs CreationGrowing at a seve

20、n percent CAGR since the introduction of Vision 2030,Saudi Arabias GDP has expanded from USD 647 billion in 2016 to surpass USD 1 trillion in 2023.3 In the past five years,from 2018 to 2023,almost two-thirds of the economic growth has been fueled by non-oil sectors,with the non-oil GDP growing at fi

21、ve percent and accounting for 50 percent of GDP in 2023.4 The economic diversification agenda,which prioritizes sector growth and job creation,includes retail and fashion as a key strategic priority and is producing its effects year by year,also thanks to successful Saudi Arabia initiatives to attra

22、ct new investments,build capabilities and facilitate business execution along the value chain(as detailed in Chapter 12).The fashion industry contributes 2.5 percent to the overall GDP,a significant increase compared to the 1.4 percent in 2021-2022.5 The majority of this GDP share still comes from d

23、omestic final consumption,at retail and wholesale segments of the value chain.As 56 percent of fashion consumption relies on imported goods,there is a large opportunity to boost domestic production to improve balance of trade,and the industrys economic impact.6As of 2023,the fashion industry in Saud

24、i Arabia accounts for three percent of the countrys employment,providing a total of 320,000 jobs.7 This represents a significant increase of 90,000 jobs,up from the 230,000 reported in The State of Fashion in the Kingdom of Saudi Arabia,2023.Of these,170,000 positions(53%)are in core fashion occupat

25、ions,while 150,000(47%)are in related roles that support the industry,such as finance,HR,warehousing,delivery,and public relations.8 The growing number of expats filling non-core roles highlights the industrys expanding workforce,yet the Saudization initiative,a key component of Vision 2030,continue

26、s to prioritize reducing unemployment and boosting private sector participation among Saudi nationals.In 2023,48 percent of all core fashion jobs in Saudi Arabia were held by Saudi citizens,consistent with the data observed in 2022.9 The Visions mission of enhancing womens participation in the workf

27、orce reaches its most successful results in the fashion industry.While approximately 20 percent of the labor force overall is comprised of women10,Saudi fashion shows constant equal gender representation,with women making up 52 percent of the workforce since 2022.11 Introduction:The Role of Fashion

28、in Shaping Vision 2030The fashion industry contributes 2.5%to the overall Saudi Arabias GDP,a significant increase compared to the 1.4%in 2021-2022.320,000total jobs in Saudi Fashion industry in 2023,of which:53%in core positions52%held by women47%in related roles48%held by men6Enriching Quality of

29、Life and Showcasing Saudi CultureVision 2030 also seeks to enrich the social landscape in Saudi,improving quality of life for both citizens and expats.Enhancing livability of cities is a priority,with the Vision targeting Riyadh to be in the worlds top ten cities by 2030.Fashion brands,offering elev

30、ated assortments and experiences to the Saudi population,play a key role in bringing these new lifestyles and social developments to life.The introduction of new high-quality brands,both local and international,is also enriching the opportunity for self-expression,as Saudi citizens and expats style

31、themselves in their evolving daily social and professional lives.Alongside economic and infrastructure evolution,preserving and showcasing Saudi Arabias cultural heritage is key for the country.The emergence of the new homegrown fashion brands,supported by the Fashion Commissions Saudi 100 brands pr

32、ogram,plays a key role in this.New brands such as Yataghan Jewelry,APOA,and Abadia,have a strong Saudi DNA,drawing inspiration from Saudi Arabia:its craft techniques,expansive terrains,architectural styles,and distinctive iconography.Beyond pure designers,a rich ecosystem,comprising government organ

33、izations,investors,writers,influencers,educators,communication agencies,is emerging to support and showcase talent.Fashion Commissions high resonance events,such as Riyadh Fashion Week in October and Red Sea Fashion Week in May,featured over 20 established and emerging Saudi brands across couture,re

34、ady-to-wear,resortwear and jewelry categories,showcasing Saudi talent to both a local and a global audience.Employing thousands,fashion is a rapidly growing and integrant part of Vision 2030.It contributes both directly and indirectly to the economic diversification agenda,supporting other major sec

35、tors such as entertainment,and showcasing Saudis heritage,cultural identity,and creativity to millions.Introduction:The Role of Fashion in Shaping Vision 20307Valued at USD 80 billion today,the GCC(Gulf Cooperation Council)Fashion and Luxury market stands as a promising frontier of opportunities,con

36、sidering all relevant segments from apparel to beauty.With an average GDP per capita twice that of Asia and approaching the European average,a rich cultural heritage,and a burgeoning interest in fashion,this market is projected to grow by approximately USD 20 billion by the end of the decade.Saudi A

37、rabia is poised for significant growth in its Fashion and Luxury market,driven by unique structural advantages and Vision 2030 initiatives.Expected to rise from USD 30 billion in 2023 to USD 42 billion by 2028,Saudi Arabia will outpace its GCC counterparts,commanding 45 percent of the market expansi

38、on.12This growth is fueled by a robust economy,favorable demographics,and transformative social reforms.A young,tech-savvy population with increasing disposable income,combined with a booming tourism sector,underpins the markets expansion.Saudi Arabia,the Regions Fashion Powerhouse018Saudi Arabia,at

39、 the Forefront of the GCC Fashion and Luxury Market Growth Saudi Arabia is primed to foster industry growth,supported by structural tailwinds that are unique to the country,and that will benefit all relevant segments from apparel to beauty.Accounting for 41 percent of the total Fashion and Luxury ma

40、rket in GCC,Saudi Arabia is poised to grow by USD 12 billion from USD 30 billion in 2023(in line with the State of Fashion in the Kingdom of Saudi Arabia,2023,report estimates)to reach USD 42 billion in 2028.This growth rate will surpass that of other countries in the region,making Saudi Arabia resp

41、onsible for 45 percent of the Fashion and Luxury market expansion in the GCC.13 Exhibit 1 GCC Fashion and Luxury represents a USD 80 billion market,of which Saudi Arabia accounts for 40%share14 Fashion and Luxury market in GCC,USD B Saudi Arabia is poised to grow from USD 30 B in 2023 to USD 42 B in

42、 2028.This represents a 6.8%CAGRLuxury segment is set for a 9.5%CAGR in 2023-2028.Reaching a value of circa USD 7 BNon-luxury fashion segments represent 86%of total market.With a 6.3%CAGR in 2023-2028,it will reach USD 35 B A solid economy,favorable demographics,culture-reshaping social reforms and

43、leading-edge infrastructural development are coming together to nurture Saudi Arabias fertile ground for fashion.With both international brands grasping the potential to expand their presence and local emerging brands growing and entering the global stage.20237531302024F8033332028F110424220226829286

44、1202126256.1%CAGRRest of GCCUAESaudi Arabia01.Saudi Arabia,the Regions Fashion Powerhouse 9Demographic Dividend and Tourism Ramp-Up to Drive GrowthDomestic demand is set to drive the majority of growth in the Fashion and Luxury market,fueled by a rising population,increasing GDP per capita,and a gro

45、wing appetite for fashion among dynamic demographic groups unique to Saudi.As the most populous country in the GCC,with approximately 37 million people in 2024,Saudi Arabias population is expected to keep expanding,topping 40 million by 2030.15 Part of the growth will be bolstered by the mounting in

46、flux of expatriates attracted by the employment opportunities from Vision 2030.Around a quarter of the projected three million population increase by the end of the decade will be from expatriates seizing the employment opportunities generated by Vision 2030,with about 15 percent targeted to be high

47、ly-skilled,high-earning professionals.16Fashion retail spending per capita in Saudi Arabia,currently at USD 800 annually,is expected to outpace growth in disposable income(22%vs.4%CAGR by 2028)and align with GDP growth.17 This upward trend is already evident,with per capita fashion spending increasi

48、ng by 15 percent between 2022 and 2024.Driving the growth in fashion demand is Saudis dynamic demographic:a predominantly young population(60%under 30),18 increasingly educated and connected,with rising workforce participation,the growing influence and purchasing power of women,an influx of cosmopol

49、itan expats,and an expanding base of affluent consumers willing to spend more on fashion(see Chapter 2 for details).As fashion appeal increases among Saudi Arabias population,the substantial enhancements in retail stores and brands offerings in the coming years will create fertile ground for this de

50、mand to flourish.Exhibit 2 Most populous country in the GCC,Saudis population is expected to keep expanding,topping 40 M by 203019Saudis population growth projections,Million2020202120222023E2024F2025F2026F2027F2028F2029F2030F45400MenLocalBelow 30 yearsWomenExpatAbove 30 years57%58%43%42%60%40%01.Sa

51、udi Arabia,the Regions Fashion Powerhouse 10Tourism will also impact the Fashion and Luxury market,especially after 2028,when giga-projects across Saudi will reach completion.Inbound tourism is projected to grow from 27 million visits in 2023 to over 75 million by 2030,driven primarily by leisure to

52、urism,which targets 30 million visits by 2030.20 Inbound religious tourism also targets a sizable 30 million visits by 2030.21 Beyond infrastructural efforts,Saudi Arabia is stepping onto the international stage by hosting high-profile events with strong global resonance:from the Red Sea Film Festiv

53、al,F1 races,and Expo 2030 attracting internationally renowned figures to fashion-centric events like Riyadh Fashion Week and Red Sea Fashion Week,Saudi Arabia is creating a vibrant and appealing destination for global visitors.Additionally,an increasing number of international brands are entering th

54、e Saudi market,and existing players are expanding their store footprint and strengthening their product offerings to align with Western standards.This trend,combined with the rise of promising local brands,is expected to partially reduce the so-called spend leakage phenomenon currently observed in S

55、audi Arabia(the portion of local demand addressed through out-of-country shopping,mainly in Dubai,London or Paris).2/3of the Saudi F&L market growth fueled by domestic demand growthExhibit 3 Two-thirds of the Saudi Fashion and Luxury market growth fueled by domestic demand growth22Fashion and Luxury

56、 market in Saudi Arabia,USD B Domestic growth+6.4%CAGR56B 2033FTourism growthLeakage reduction42B 2028F30B 202301.Saudi Arabia,the Regions Fashion Powerhouse 11Non-Luxury Fashion Segment:Poised to Benefit from Sizeable Population of Young SaudisThe non-luxury fashion market in Saudi currently stands

57、 at USD 25.9 billion,representing approximately 86 percent of the total Fashion and Luxury market in Saudi Arabia as of 2023.A 6.3 percent growth is expected from 2023 to 2028,primarily driven by domestic spending(accounting for circa 80 percent of the gain by 2028).23 This growth is fueled by incre

58、ased demand from a sizeable young population(i.e.,individuals below 30 years old)of around 20 million.24 The rising participation of women in social life further accelerates the markets expansion,benefiting both international and local,homegrown brands.The supply of mall-based retail space and offer

59、ings is evolving to create fertile ground for fueling consumer demand.Historically,retail space per capita in Riyadh and Jeddah has lagged behind regional counterparts like Doha and Dubai.However,mall space in Saudi is set to double by the end of the decade,supported by more than 20 private sector a

60、nd government-backed development projects implying a significant retail component(over 20,000-250,000 m2 of retail GLA each).25Exhibit 4 Non-luxury fashion market in Saudi Arabia stands at USD 26 B,projected growth of 6%by 202826 Non-luxury market in Saudi by product segment,USD BIn terms of product

61、 segments,beauty,a longstanding favorite in Saudi Arabia worth USD 4.4 billion in 2023,will continue to experience robust growth(11%CAGR through 2028),fueled by increased disposable income for women,as well as tourism inflow and the trend of gifting Saudi-inspired products,especially fragrances.Appa

62、rel(including footwear and accessories)and sportswear are set for accelerated expansion in the coming years.Valued at USD 22 billion in 2023,the apparel and sportswear segments are expected to grow at a five percent CAGR,reaching USD 29 billion by 2028.27 The growth in sportswear is driven by rising

63、 health consciousness and interest in sports,supported by government efforts to enhance population wellness and direct investments in sporting infrastructure and events.Luxury Fashion Segment:Set to Gain from Inbound Tourism and Domestic SpendingThe luxury fashion segment28 is set for significant gr

64、owth,projected to outpace the non-luxury segment with a 9.5 percent CAGR from 2023 to 2028.By 2028,this market is expected to reach a value of USD 6.8 billion,mostly driven by inbound tourism and domestic spending.29 Major giga-projects and flagship developments with high-end retail components are u

65、nder construction,with partial openings already planned,for most of them,in 2025.For some of these sites,shopping will be a cornerstone of the value proposition,if not one of the main reasons to visit.Elevated retail experiences,alongside an enhanced assortment of international and local brands at k

66、ey destinations such as Diriyah and Qiddiya,which are expected to account for circa 60 percent of retail offering from giga-projects,will drive substantial growth in the mid-term.The over one hundred million visits,both domestic and international,forecasted across these sites by 2030 are expected to

67、 contribute an additional USD 0.9 billion to todays USD 4.3 billion market by 2028 and USD 1.5 billion by 2030,once retail offerings at all sites are fully open.30SportswearApparel,Footwear,AccessoriesJewelry and WatchesBeauty212021202220232024F.2028F24262835111122521194571841641111101.Saudi Arabia,

68、the Regions Fashion Powerhouse 12Saudi Arabia is home to nearly 130,000 millionaires(Dubai,in comparison,has approximately 72,000 millionaires).31 However,over 60 percent of the luxury spending by this demographic cluster is done abroad in fashion capitals like London,Paris and Dubai.As brand presen

69、ce and retail experiences improve,affluent Saudis are bound to increase their luxury shopping in Saudi.This leakage is expected to be reduced by seven percentage points by the end of the decade,equating to an additional USD 0.8 billion worth of luxury shopping retained within Saudi Arabia by 2028.32

70、Beyond leakage reduction,the overall increase in wealth will bolster the domestic demand for fashion.Estimates project that the number of total millionaires in Saudi Arabia will rise by over 95,000 by 2030(see further details in Chapter 2).33 Apparel,footwear,and accessories dominate the luxury mark

71、et,accounting for 56 percent,followed by premium and prestige beauty at 23 percent,and jewelry and watches at 21 percent.This distribution is expected to remain fairly stable,with all categories projected to grow at a 7-10 percent CAGR from 2023 to 2028.34 The apparel segment is set for substantial

72、growth,as changing lifestyles and an interest in Western brands encourage Saudi consumers to invest more in contemporary ready-to-wear fashion.Meanwhile,the premium and prestige beauty sector will continue to thrive,driven by Saudi consumers strong passion for fragrances and cosmetics,as well as the

73、 planned growth in duty-free channels.Three new airport projects in the pipeline(King Salman International Airport,NEOM International Airport and Jeddah Airport)will imply a duty-free play,with opportunities starting from 2026-2027.Underpinned by favorable demographics and significant investments en

74、hancing the retail infrastructure,Saudi Arabias Fashion and Luxury market is on a robust growth trajectory.As Saudi continues to evolve,the market presents lucrative opportunities for both international and local brands to cater to a diverse and growing consumer base.Apparel,Footwear,AccessoriesJewe

75、lry and WatchesBeautyExhibit 5 Luxury market in Saudi Arabia is dominated by the apparel,footwear and accessories category,accounting for 56%35Luxury market in Saudi by product segment,USD B3.84.04.32021202220232024F.2028F4.86.81.30.91.01.11.60.90.90.80.83.92.72.42.22.21.001.Saudi Arabia,the Regions

76、 Fashion Powerhouse 13Underpinned by favorable demographics and significant investments enhancing the retail infrastructure,Saudi Arabias Fashion and Luxury market is on a robust growth trajectory.As Saudi Arabia continues to evolve,the market presents lucrative opportunities for both international

77、and local brands to cater to a diverse and growing consumer base.01.Saudi Arabia,the Regions Fashion Powerhouse 14Saudi Arabias fashion landscape is harnessing the power of its demographic dividend,fueled by the rising influence of women,youth,high-skilled expatriates,and an expanding base of afflue

78、nt consumers.With 60 percent of the population under 30,36 young Saudis are not only digitally savvy and socially engaged but are also reshaping Saudis fashion preferences,seamlessly blending global trends with a deep respect for cultural heritage.As they expand their presence in the workforce,they

79、are set to drive new fashion demands.Meanwhile,Saudi women are rapidly narrowing the economic gap,with their increasing purchasing power boosting demand for a diverse range of fashion products.Saudi Arabias high-skilled expatriate population,expected to rise significantly by 2030,is adding to the co

80、smopolitan nature of Saudi cities,increasing the demand for sophisticated fashion options.Moreover,with nearly 130,000 millionaires37(a number expected to nearly double by 2030)the luxury fashion market is poised for substantial growth.These dynamics are creating a perfect storm of opportunity for b

81、oth local and international brands,positioning Saudi Arabias fashion industry to emerge as a powerhouse in the global market.The Demographic Advantage:Driving Saudi Arabias Fashion Growth0215Reality is surpassing expectations,as Vision 2030 goal to achieve 30%female participation in the labor force

82、by 2030 is already a fact.Women and Youth:Driving Forces Behind Saudi Fashions RiseSaudi women are growing their relevance as financially independent consumers,actively participating in Saudi Arabias economy across several industries.Female labor participation rose from 22 percent in 2018 to 34 perc

83、ent in 2022,rapidly narrowing the gap with male counterparts.In the same timeframe,the proportion of women in managerial positions grew from eight percent to almost 20 percent.38 Women employed in Saudi Arabia are experiencing the strongest momentum,supported by several initiatives from Saudi,includ

84、ing educational programs and leadership trainings.Reality is surpassing expectations,as Vision 2030 goal to achieve 30 percent female participation in the labor force by 2030 is already a fact.The Saudi fashion sector is bound to benefit from the increased purchasing power of Saudi women,fueling dem

85、and for a diverse range of fashion products,from professional attire to luxury and casual wear.A transformed landscape of female consumers is consolidating,with women empowered to dress with different attires,proud to elevate their traditional clothes,and fascinated by global trends on social media(

86、50-60%of Saudi women use Instagram and Snapchat as sources of inspiration).Local and international brands willing to benefit from increased demand will have to cater for Saudi womens unique preferences.At the same time,the dominant share of Saudi population is young and on the rise of economic well-

87、being.Unlike many European counterparts,where only 30-35 percent of the population is under 30,a substantial 60 percent of Saudis,nearly 20 million people,fall into this age group.39 Recognizing them as the consumers of today and tomorrow,Saudi Arabia has launched initiatives like the Vision 2030 Hu

88、man Capability Program to equip young Saudis with skills for active economic participation.Beyond their sheer size,their increase in spending power makes young Saudis pivotal for Saudi fashion sector,as signaled by the 30 percent drop in unemployment rates from 2019 to 2023.40 These fashion consumer

89、s are also highly digital,connected,educated,and socially engaged,making them key drivers of change in Saudi lifestyle and fashion.Drawn to global trends,they increasingly seek modern,high-quality products,spending around 30 percent of their annual income on international brands.This has resulted in

90、 a unique fusion of Western styles and traditional elements at the core of Saudi identity.Despite their embrace of casual styles,young Saudis remain deeply proud of their cultural heritage,a sentiment particularly strong when compared to their counterparts in the UAE,where 45 percent of yearly spend

91、ing goes to international brands.41 Exhibit 6 Saudi female labor participation on a steady rising path Female labor participation,%of working age women in Saudi Arabia+12 p.p.34%22%2018202202.The Demographic Advantage:Driving Saudi Arabias Fashion Growth16Saudi Arabias Next Fashion Demographic:Highl

92、y Skilled ExpatsRepresenting five percent of the over ten million expats in Saudi Arabia,the growing number of highly skilled expatriates is set to create an expanding consumer base for the fashion market within Saudi.The Labor Market Strategy implemented by the Ministry of Human Resources and Socia

93、l Development aims to increase the proportion of highly skilled expatriates to seven percent of the total expat population by 2025 and to 15 percent by 2030.42 This strategic shift underscores the expected rise in the share of skilled expatriates over the coming years.As these professionals relocate

94、 to Saudi Arabia,often attracted by increasingly competitive expatriate packages and the rapid development of Saudi Arabias cities,their presence is likely to have a substantial impact on the local fashion market.While they may continue to shop internationally for specific occasions or luxury items,

95、the need for everyday apparel,childrens clothing,beauty products,and sportswear will likely drive them to make more purchases locally.The convenience and availability of global and local fashion brands within Saudi Arabia will play a crucial role in encouraging this shift toward domestic spending.Fu

96、rthermore,the influx of highly skilled expatriates,accustomed to global standards of fashion and with a preference for high-quality,branded clothing and accessories,contributes to the growing cosmopolitan nature of Saudi cities,driving demand for diverse and sophisticated fashion options.As a result

97、,the fashion industry in Saudi Arabia can expect a sustained increase in sales,fueled by this expanding and affluent customer base.02.The Demographic Advantage:Driving Saudi Arabias Fashion Growth17Rising Tide of Millionaires to Fuel Domestic Fashion and Luxury DemandHome to nearly 130,000 millionai

98、res,a number projected to increase by 96,000 by 2030(reaching 226,000),Saudi Arabia is an attractive market for luxury fashion.43 These young,luxury-savvy,and well-traveled customers are ready to outspend their counterparts in other countries,both domestically and internationally.Notably,30 percent

99、of them are likely to increase their spending in the future,44 a rate that is seven percent higher than the global average and closely follows the spending patterns of affluent consumers in China(34%)and the US(32%).This heightened spending appetite of Saudi affluents is reportedly driven by strong

100、financial confidence,increased time spent browsing luxury brand websites and e-commerce platforms,and most importantly,spending diversification fueled by luxury brands expanding their presence across new retail stores and product offerings in the country(see Chapter 7 for reference).While this afflu

101、ent demographic is expected to satisfy a larger portion of its fashion demand locally,Saudi consumers will continue to be global players in the luxury market.Therefore,the challenge for international brands operating in Saudi Arabia lies in creating a seamless,interconnected experience across intern

102、ational locations.Ensuring that the enhanced Saudi shopping experience and fashion offering resonate with the global luxury landscape is key,particularly for those high-demand fashion items that cannot wait until the next international trip.10,000 millionaires in Saudi Arabia 96k new millionaires10,

103、000 new millionaires in Saudi Arabia Exhibit 7 Growing affluent consumer base in Saudi to boost domestic luxury marketNumber of millionaires in Saudi Arabia+76%130K 2023226K 2030F02.The Demographic Advantage:Driving Saudi Arabias Fashion Growth18During the high-season,Bond Street,Harrods,and Selfrid

104、ges in London come alive with affluent Saudi shoppers.Together with Dubai,Paris and Milan,these popular shopping destinations attract Saudis who explore opulent luxury boutiques offering personalized service and exclusive collections.For years,Saudi consumers travelled internationally for shopping,w

105、ith more than 60 percent of the over USD 7 billion national expenditure of luxury goods occurring abroad,also fueled by their rooted tradition of gifting.Saudi is now poised to capture a greater share of this market domestically,with the percentage of luxury spending abroad expected to decrease from

106、 60 percent to approximately 50 percent by the end of the decade.45 Driven by the national pride of the young,luxury-savvy population,demand is set to soar.As consumers sophistication levels evolve,enhancing local luxury shopping experiences,as well as the quality and variety of assortments,is key i

107、n unlocking the full market potential.This will require combined efforts from both international and local brands,alongside the development of new retail spaces.The Influence of Young Saudi Shoppers on Luxury Spending Leakage Reduction 0319Key Destinations for Luxury Spending LeakageLocal traditions

108、 of gifting and purchasing habits,along with the usually lower availability of exclusive products in local stores,push affluent Saudis to shop internationally,driving demand for ready-to-wear clothing,high-end watches and handbags,and footwear.“Almost 50 percent of Saudi luxury shoppers look for ele

109、gant,high-quality and on-trend characteristics in the brands,”explains an Executive at a large European retailer.Despite the anticipated growth in local spending,the tradition of gifting will continue to be a central aspect of the Saudi shopping experience,particularly when traveling abroad.Historic

110、ally,London has been a prime destination for Saudi luxury shoppers.Shopping in London is about more than acquiring goods;its a lifestyle choice.Many Saudis,particularly those with substantial wealth,own properties in London and have established business interests there,a city highly welcoming of dif

111、ferent cultures.The education system in the UK is another significant factor,as many of their children attend British private schools and prestigious universities.Moreover,the cultural and linguistic familiarity with English and the allure of British traditions,such as high tea and aristocratic cult

112、ure,contribute to their frequent visits.“Saudi high-value shoppers in London are the epitome of luxury and exclusivity,”says a Sales Manager for Private Shopping at Harvey Nichols in London,and they are often traveling with their entire family.These wealthy clients seek customized services and luxur

113、y retail immersion,and,for the ultra-wealthy,it is not uncommon to see groups of as many as 20 people,including personal assistants and security personnel.“No doubt,we put our best efforts into providing exceptional treatments for these clients,including expedited shipment of their purchases back ho

114、me.They particularly enjoy receiving packages from the UK,”the Sales Manager adds.“Mature shoppers flock to timeless icons like Louis Vuitton,Dior,Chanel,and Herms,while the younger generation is drawn to the bold allure of Celine,Saint Laurent,and Valentino.”The key difference between a Saudi shopp

115、er and a European shopper is that they love shopping for shoppings sake and enjoy it as part of their experience in Europe.These clients favor exclusive and up-and-coming collections,relishing the satisfaction of owning pieces that evoke fond memories of their European travels,and are not available

116、in their home country.Typically,Saudi luxury shoppers visit London during summer,end of year holidays,and Ramadan.“Ramadan and Eid are such an important part of our commercial calendar,”points out the Head of Sales of a luxury department store,“We will prepare merchandise according to their Saudi cu

117、stomers taste,sizes,and preferences and it takes up to four months.”Dubai is another top destination for Saudis seeking luxury shopping abroad.Besides the 10 percent lower VAT for the end customer,its cultural and geographical proximity,top-notch customer experience,and extensive shopping malls with

118、 a broad selection of brands and products make it highly attractive.Indeed,“The personable and warm approach of its shopping assistants,the implementation of engaging customer experiences utilizing CRM tools comparable to those in Europe,and the presence of larger flagship stores for luxury brands b

119、eyond the top five,surpassing even those in Europe,are key factors making UAE a premier destination for Luxury shopping,”according to the Retail Manager of a luxury group.Paris and Milan are also popular destinations,especially after UK forfeited the tax return policy(Saudi shoppers can no longer re

120、claim the over-16-percent VAT).As a result,many are now opting for Paris or Milan for high-value purchases to benefit from duty-free shopping.03.The Influence of Young Saudi Shoppers on Luxury Spending Leakage Reduction20A New Era:Young Luxury Shoppers Going LocalSaudis luxury market is rapidly expa

121、nding,with almost USD 1 billion of the anticipated over USD 2 billion growth from 2023 to 2028 expected to result from an increase in in-country spending.46Spurred by the pandemic,Saudi luxury spenders reverted to their home country to satisfy their interest in fashion and connect with local stores,

122、witnessing the ongoing improvements.Due to the changes in recent years,every aspect of the shopping experience in Saudi Arabia has improved,and the availability of international brands locally and the level of their assortment is growing.“While many people are traveling and shopping on holiday this

123、year,the majority of their Ramadan purchasing is still happening within Saudi Arabia,”the expert adds.“We used to have a dedicated shopping occasion for Saudi customers during the back-to-school season.Now it doesnt exist anymore because they can find those brands and products in their country,”also

124、 says the Merchandising Director of a Dubai-based retailer.Beyond luxury brands presence and retail expansion,the maturation of local fashion talent is another factor contributing to the growing interest in local shopping.On the one hand,international brands operating in Saudi Arabia are prioritizin

125、g the search and training of local talent to provide an exclusive retail experience comparable to other luxury destinations.“These consumers expect international brands to provide exclusive,region-specific merchandise,personalized VIP services,and exclusive in-store events and experiences that match

126、 international standards,”says Brand Director at a leading fashion group,“and our first worry when deciding to operate and grow in Saudi,is to find and retain the best talent in our stores,”the expert adds.Alternatively,while the luxury Saudi consumers desire to lead in fashion trends and make bold

127、style choices,they are also becoming increasingly nationalistic and culturally proud,which significantly influences their shopping behaviors.Unlike the previous generation,these young Saudis prefer to shop closer to home and are more inclined to purchase local brands.An impressive 95 percent of affl

128、uent Saudis aged 18-34 believe its important to support and engage with Saudi-first businesses,celebrating local craftsmanship and design.47 And the growing pool of rising and established local brands is set to cater to these preferences(see Chapter 11 for reference).Beyond luxury brands presence an

129、d retail expansion,the maturation of local fashion brands is also contributing to growing interest in local shopping.03.The Influence of Young Saudi Shoppers on Luxury Spending Leakage Reduction21Consumers Increasingly Engaging with Omni-Channel ExperiencesIn Saudi Arabia,shopping malls have become

130、bustling microcosms of public life where families and individuals can relax,socialize,and shop in comfort.While offline retail remains strong and is still expected to account for the majority of fashion and luxury sales in the coming years,the digital exposure of the young population is driving the

131、change.A remarkable 98 percent of the population is equipped with smartphones,influencing new preferences in how they engage with brands and the retail space,blending the physical and digital to create a seamless,interconnected lifestyle.Supported by robust government initiatives and a growing digit

132、al economy,the future of online fashion retail in Saudi Arabia looks promising.Currently underpenetrated with respect to international standards and valued at almost USD 4 billion in 2023,the Saudi e-commerce market has experienced remarkable growth in recent years and is expected to reach over USD

133、7 billion in 2028.0422The young generation of Saudis is increasingly turning to the digital world for entertainment and social interaction.With nearly 98 percent of the population equipped with smartphones,Saudi Arabia boasts a penetration rate higher than most advanced markets:France at about 75 pe

134、rcent,the UK over 80 percent,and the US at 90 percent.48Spending an average of five hours daily on mobile devices,Saudi youth seamlessly transition from physical malls to limitless digital realms.In the eyes of consumers,online and offline are getting more and more intertwined and part of a single e

135、xperience(e.g.,from simple in-store returns of online purchases to more advanced features like virtual try-on).This trend applies everywhere in the world,but considering the Saudi digital engagement,this is taking hold at a faster pace in Saudi.An interesting 75 percent of their fashion buying behav

136、ior is influenced by digital channels.Specifically,25 percent make pure online purchases,12 percent research offline and purchase online,while a significant 38 percent research fashion products online and buy offline.49 This underscores the relevance of brand websites,social networks,and e-commerce

137、sites as crucial inspirational touchpoints and drivers of sales.For women in Saudi Arabia,social media comes first when asked about the main source of inspiration in their fashion purchases,followed by friends and family.For men,social media comes second,after family suggestions.The same ranking for

138、 social media is observed in the UAE.The rush of fashion brands and retailers to employ the right influencers on the right social platforms is soon explained.Instagram and Snapchat are particularly influential for Saudi women,with 50-60 percent leveraging these as primary sources of fashion inspirat

139、ion.YouTube leads as the discovery channel for men,used by more than 50 percent.50 This pattern holds true for luxury purchases as well;a survey conducted in 2023 by BCG-Altagamma found that social media predominates as the main source of information for luxury purchases(50%),followed by brand websi

140、tes(20%).51This level of digital engagement highlights the critical role of an effective online presence for fashion brands aiming to capture the Saudi market.By strategically leveraging digital channels,brands can influence purchasing decisions and expand their reach within this tech-savvy demograp

141、hic.Exhibit 10 Fashion buying behaviourFamily is the main source of inspiration for meninfluenced by digital channels Pure offline purchasesPure online purchasesResearch offline and purchase online Research online and buy offlineuse YouTube as a source of inspiration50%75%Exhibit 8 Population with a

142、 smartphone%Exhibit 9 Inspiration sources in fashion purchasesSaudi ArabiaSocial Media is the main source of inspiration for womenUKUSAFranceuse Instagram and Snapchat as a source of inspiration98%80%90%75%50-60%WOMENMEN38%25%25%12%Digital-Savvy Youth Embracing the Online World04.Consumers Increasin

143、gly Engaging with Omni-Channel Experiences23The fashion e-commerce market in Saudi Arabia,valued at almost USD 4 billion in 2023,remains relatively underpenetrated,leaving substantial room for growth.The market has experienced a remarkable growth close to one hundred percent from 2018 to 2023 and is

144、 projected to reach over USD 7 billion by 2028,accounting for 17 percent of the total Fashion&Luxury market.52 This double-digit growth,estimated at a 14 percent CAGR from 2023 to 2028,will be fueled by combined efforts from the government and retailers to align with international standards in deliv

145、ery,return services,and digital payment enablement,mirrored by the increased readiness of young consumers to endorse pure online purchases.E-commerce penetration in Saudi Arabias Fashion and Luxury sector currently stands at 13 percent,which is significantly lower than international benchmarks:39 pe

146、rcent in the UK,32 percent in the US,and 29 percent in China.53 The primary reasons for this lower penetration include customer hesitancy toward online shopping due to concerns about size and fit,a challenging return process,distrust in online payments,and a preference for in-store fashion discovery

147、.“Around 40 percent of Saudi consumers report that not knowing the right size and fit of the purchased product is the main reason discouraging online purchases,”comments the Head of E-commerce at a large fashion brand.Despite these challenges,there is clear potential,with over 80 percent of Saudi co

148、nsumers indicating the importance of being able to shop for fashion products online.54Investment in logistics infrastructure by Saudi and retailers are set to benefit both international and local brands.Key challenges in the e-commerce business in Saudi Arabia include delivery lead times,return proc

149、ess management,and last-mile logistics.Around 30 percent of Saudi consumers expect to receive their online purchase in two or three days,55 a demand that can only be met through local fulfillment.Historically,most brands and retailers shipped products from warehouses in the UAE or even from Europe f

150、or international retailers,like Net-a-Porter,resulting in over a week of waiting time for customers and high delivery-and-E-Commerce:Unlocking Full Market Potential30%of Saudi consumers expect to receive their online purchases within 2-3 days 40%of consumers state not knowing right size and fit is t

151、he main reason discouraging online purchasingOnly 7/30top e-commerce sites specialize in Fashion&Luxury 80%of consumers indicate the importance of shopping for fashion products online Exhibit 11 Saudi Fashion e-commerce market still relatively under-penetratedFashion e-commerce market penetration ac

152、ross countries,202313%32%39%29%Saudi ArabiaUSAUKChina04.Consumers Increasingly Engaging with Omni-Channel Experiences24return fees.As brands come to realize that localized operations stand as a source of competitive advantage,the situation improves thanks to the Saudi governments support.A notable a

153、nd successful example is the establishment of the Special Integrated Logistics Zone(SILZ)in Riyadh,Saudi Arabias first Special Economic Zone(SEZ),designed to house fulfillment centers and streamline distribution.Regional retailer Chalhoub has opened a local fulfillment center in this area,alongside

154、other local players,like Mocamilla and Shorages,and international giants,such as Apple and Amazon.Results of these enhancement efforts are clear in the eyes of industry experts:“We have witnessed significant improvements from international e-commerce players like Farfetch,who have managed to reduce

155、delivery times significantly,”explains the Brand Director at a European luxury maison.On the payment front,government efforts led to the creation of a comprehensive regulatory framework to govern e-payments in 2018,with the primary objective of enhancing consumer trust.The target is to increase digi

156、tal payments to 70 percent in the coming years,56 shifting consumers away from the long-prevalent cash-on-delivery toward online payments.This transition is supported by the gradual adoption of services like Buy Now,Pay Later(BNPL)and mobile wallets such as Apple Pay.Tabby and Tamara are two success

157、ful BNPL providers,covering the majority of retail stores in Saudi and partnering with prominent brands like Nike,Farfetch,and IKEA,as well as emerging local brands like Jayla.While the foundations for growth are in place,no clear winners have emerged in Saudi Arabias e-commerce market yet.The marke

158、t remains fragmented,with the top three sites accounting for a combined total of approximately 22 percent of traffic share:S(12%),N(7%),and C(3%).57 A noticeable trend is that most online players cater to non-luxury fashion,leaving opportunities for luxury brands to gain market share.Currently,only

159、seven of the top 30 e-commerce sites specialize in luxury fashion,including local and regional players such as Level Shoes and Ounass,and international entrants such as Farfetch,YNAP and StockX.The fashion e-commerce market in Saudi Arabia,valued at almost USD 4 billion in 2023,remains relatively un

160、derpenetrated,leaving substantial room for growth.04.Consumers Increasingly Engaging with Omni-Channel Experiences25Brick-and-Mortar Meets Digital:Blending In-Store and Digital ExperiencesThe rise of e-commerce does not signify the end of the offline shopping experience.Malls are expected to remain

161、the preferred shopping destination and account for over 80 percent of fashion and luxury sales in 2028.However,their format and offerings are continuously evolving to meet consumers desire for entertainment,blending with digital touchpoints to offer an enhanced experience.“For people in Saudi Arabia

162、 and in the GCC region at large,the mall is a special place for family and friends to get together,and it will always be there,”observes a Marketing Director of a local retailer.“Especially for high-end clientele,the tailored service and exclusive treatment,such as personal shoppers and stylists,val

163、et parking,concierge services,and various VIP events,are still going to be at the core of their preferences and cannot be replicated online yet,”the expert adds.With the rise of new advanced retail spaces,interactive experiences and the ambiance of physical stores significantly influence customer pu

164、rchases.There are new expectations from consumers regarding the integration of their online activities with in-store experiences:77 percent of Saudi consumers find it crucial for stores to provide interactive and engaging in-store experiences,and over 80 percent of shoppers are more likely to visit

165、stores offering immersive experiences.5880%+of fashion and luxury sales will take place in malls in 202880%+of shoppers are more likely to visit stores offering immersive experiences77%of Saudi consumers find interactive and engaging in-store experiences crucialTo meet evolving consumer demands,stor

166、es in Saudi Arabia are gradually adopting new formats and embracing global retail trends,before moving into tech-advanced in-store experiences.Examples include Click-and-Collect services from eXtra and Centrepoint,and innovative apps like Mallers that offer a holistic shopping experience across mult

167、iple malls in Saudi Arabia,such as Riyadh Park,Panorama Mall,and Red Sea Mall.Click-and-Collect,in particular,is a key feature of an omnichannel strategy and a potential growth driver of online shopping,as it addresses a few customer concerns.According to the KSA Voice of Consumer Survey conducted b

168、y BCG in 2021,88 percent of interviewed Saudi consumers reported that the ability to check product quality and the speed of availability would encourage the use of such services.Looking toward truly future-facing shopping experiences,the Mukaab is a proposed cube-shaped skyscraper in downtown Riyadh

169、.By incorporating physical elements of the metaverse,it promises an experiential and digitally enhanced shopping environment with advanced technologies,such as holographic experiences and augmented reality product displays.These developments highlight how the traditional shopping experience in Saudi

170、 Arabia is being transformed,blending the physical with the digital to create enriched and interactive environments that cater to modern consumer expectations.04.Consumers Increasingly Engaging with Omni-Channel Experiences2604.Consumers Increasingly Engaging with Omni-Channel ExperiencesMalls are e

171、xpected to remain the preferred shopping destination and account for over 80%of fashion and luxury sales in 2028.27Destination Saudi Arabia:Cater to Tourists Diverse Retail and Entertainment NeedsAs part of Vision 2030s ambitious diversification efforts for the Saudi economy,tourism has been identif

172、ied as a pivotal sector for growth.A dedicated tourism strategy aims to develop this nascent sector into a major economic driver,contributing a substantial 10 percent of GDP by 2030.In alignment with this ambition,Saudi Arabia plans to attract over 75 million international visitors by 2030,with most

173、 growth expected from an influx of leisure tourists enjoying new retail and entertainment experiences in the country.59Retail expansion will play an integral role in this transformation,with high-end tourism assets and shopping opportunities expected to flourish.Riyadh aims to become a key shopping

174、destination in the GCC region,with the Diriyah giga-project accelerating this process.Covering 14 km2,the project will feature a high-end shopping district and more than 400 stores.60Beyond significant infrastructural investments,strategic marketing campaigns in prominent tourist and shopping destin

175、ations worldwide,along with high-profile events,are enhancing Saudi Arabias global visibility.0528The target of circa 75 million international visits will be fueled by both leisure tourism,accounting for about 40 percent,and religious tourism,also at approximately 40 percent.61 Additionally,as Saudi

176、 Arabias high-skilled expatriate population continues to grow,visits from friends and family are projected to contribute to the tourism base,making up eight percent of the total visits.Leisure tourism is set to be the primary driver of retail spending during visits,contributing the most significant

177、share.Currently,the average daily spending from inbound tourism in Saudi Arabia is significantly lower than international benchmarks,at USD 117 compared to USD 557 in the UAE.62 Recognizing this opportunity,a transformative roadmap has been developed to boost the number of leisure travelers to 30 mi

178、llion by 2030,representing an approximate 27 percent CAGR from an estimated base of five million in 2023,and to double the spending per traveler.Over the last half-decade,the Saudi government has been actively removing barriers and easing restrictions to welcome more visitors to Saudi Arabia.Until 2

179、019,non-religious tourist visas were not granted,but now tourist e-visas,applicable to 63 countries,64 are issued within minutes.Additionally,the recently launched unified GCC tourist visa is expected to boost tourism by leveraging the substantial inflow of visitors to other markets such as the UAE

180、and Oman.Beyond policy changes,a landmark USD 800 billion has been allocated and is actively being deployed to build and market the tourism infrastructure across the country.65 This investment includes giga-projects,resorts,airports,museums,and restoration projects,all aimed at enhancing travel expe

181、riences and allowing visitors to explore Saudi Arabias rich heritage,culture,and diverse landscapes.A landmark USD 800 billion has been allocated to transform leisure tourism and is actively being deployed to build and market the tourism infrastructure across the country.Exhibit 12 Inbound tourism f

182、orecasted to grow from 27 million visits in 2023 to over 75 million visits in 203063Saudi inbound tourism visits,Million,2023-2030FVFR(Visiting Friends and Relatives)BusinessReligiousLeisure20232030F.2028F2575608%12%40%40%Transforming Saudis Leisure Tourism with Ambitious Investments05.Destination S

183、audi Arabia:Cater to Tourists Diverse Retail and Entertainment Needs29Giga-projects,large-scale and ambitious developments,are central to Saudi Arabias tourism strategy.Among these tourism-related developments,which aim to attract over a cumulative one hundred million national and international visi

184、ts by 2030,66 Diriyah is expected to be the standout destination for retail tourism.While some sites are anticipated to open by 2025,most of the offerings will be delivered toward the end of the decade.Retail Playing an Integral Role across High-End Tourism Assets Exhibit 13 Tourism-related giga-pro

185、jects expected to receive 100 million cumulative visits67Visits(domestic and inbound tourism)by 2030,MillionDiriyah Gate,a USD 63 billion cultural restoration project,is targeted to attract approximately 50 million visitors by 2030.Diriyah Square,which is the heart of the retail offering at Diriyah,

186、is set to open by 2028.Featuring an expansive 180,000 m2 open-air scheme,the project is set to boast over 400 stores,including flagships for the worlds top 50 luxury brands.68 Diriyah Square will also house emerging homegrown brands.(See Chapter 7 for more information on the project).Other high-end

187、destination projects,such as the Red Sea Project and Amaala,target a smaller visitor pool(half a million to two million by 2030)but provide alternate tourism experiences such as sun and sea,and wellness.While fashion retail will be an element at these sites,the offerings will be more niche,focusing

188、on resortwear and lifestyle products offered through smaller boutique stores lining the coast.Eased by their natural terrain,these destinations will also serve as ideal venues for luxury brands to host VIP events and experiential pop-ups and generate traffic in main cities like Riyadh and Jeddah.Bey

189、ond Diriyah and the giga-projects,Riyadh is expanding its offer of emerging best-in-class retail destinations in the region.One example is the recently opened Via Riyadh,a luxury shopping mall,located near the Diplomatic Quarter in Riyadh.The complex houses over 20 boutiques,ranging from renowned fa

190、shion houses to local designers,indexing more on jewelry segments,and couture/formal wear.Notable brands include Charles Oudin,Elie Saab,Dolce&Gabbana,David Webb,Artfeeni,Ashi,Bellucci,LAtelier Nawbar,Sergio Rossi,Westerly,and Zegna.69Tourism-related developments aim to attract over a cumulative 100

191、 million visits by 2030 (from national and international tourists),with Diriyah as the expected standout destination for retail tourism.Airports will serve as another crucial component of tourism infrastructure incorporating retail elements.Duty-free retail in Saudi today is still marginal,compared

192、to Dubai Duty Frees USD 2 billion revenue.70 With three new airport projects,in Riyadh,Neom and Jeddah in the pipeline,and the incoming inflow of international visitors,there will be new opportunities for duty-free shopping starting from 2026 to 2027 to capture visitor spending.4850522111QiddiyaDiri

193、yah GateNeomAl UlaAl SoudahAmaalaSalwanRed Sea05.Destination Saudi Arabia:Cater to Tourists Diverse Retail and Entertainment Needs30Engaging High-Spending Tourists through Strategic Marketing InitiativesA key focus of these giga-project developments is attracting high-spending travelers from China,I

194、ndia,and Europe.“We want to focus on countries where the GDP per capita is higher than others and that are within a six-hour flight in a strategic geographic location,”says HE Ahmed Al Khateeb,Minister of Tourism.To increase global visibility on the new offerings,the Ministry of Culture and other go

195、vernment entities are organizing a series of high-profile events throughout the year.For example,the Red Sea Fashion Week features piecework from Saudi designers,establishing the Red Sea as a burgeoning fashion destination.Winter at Tantora,a cultural festival in Al Ula,includes music concerts,art e

196、xhibitions,historical tours,and culinary experiences,spotlighting the city as a cultural tourism hub.These events aim to build a robust fashion and cultural ecosystem in Saudi,showcasing local talent to a global clientele from European and Asian markets.Global marketing campaigns and strategic spons

197、orships are also being curated to attract leisure tourists.In February,Al Ula launched the Forever Revitalizing campaign,targeting key markets including the UK,France,Germany,Italy,the US,China,India,and the GCC.These markets are notable for their high-spending tourists,with travelers from the UAE,C

198、hina,and Japan leading in terms of spending per trip.Banners and campaigns for key assets,such as the Red Sea project,are strategically placed in prominent international shopping destinations,such as La Rinascente in Italy,to attract high-spending tourists visiting key European fashion destinations.

199、The July 2024 Diriyah campaign at Harrods in London is another notable example.This immersive exhibition aims to highlight the 350 luxury residences that are part of the project,capturing the attention of the 450,000 visitors expected at Harrods throughout the month.71Beyond fashion-based marketing,

200、Saudi Arabia is broadening its appeal to potential visitors through an array of sports and entertainment events.The annual F1 race in Jeddah,for example,attracts a massive global audience,with the 2022 race drawing over 75 million viewers.72 There are even plans to potentially move the event to Qidd

201、iya later in the decade,highlighting Saudis ongoing developments and Exhibit 14 UAE,Chinese,and Japanese travelers are the highest spenders on shopping73Average spend per tourist by source market,USDambitions.The Red Sea Film Festival is another significant attraction,welcoming over 4,000 film profe

202、ssionals and students.74 This event not only features participation from international stars but also garners extensive media coverage,showcasing Saudi Arabia as a burgeoning hub for entertainment.Other events like Leap(focused on technology)and Soundstorm(dedicated to music),further enrich Saudi am

203、usement opportunities.By leveraging high-profile events and targeted campaigns,Saudi Arabia aims to enhance its global presence and welcome a significant inbound of tourists,further contributing to the broader goals of Vision 2030.As the tourism infrastructure and supporting retail offering comes to

204、 fruition over the next five years,there is a golden opportunity for brands to tailor their experiences and assortments to serve incoming travelers.TotalUAE2,740673(25%)China2,373742(31%)Japan2,185372(17%)India1,977381(19%)USA1,428287(20%)UK1,231129(10%)ShoppingTotalGCC1,807606(34%)Asia Pacific1,755

205、368(21%)Western Europe1,207137(11%)Shopping05.Destination Saudi Arabia:Cater to Tourists Diverse Retail and Entertainment Needs31As the tourism infrastructure and supporting retail offering comes to fruition over the next five years,there is a golden opportunity for brands to tailor their experience

206、s and assortments to serve incoming travelers.05.Destination Saudi Arabia:Cater to Tourists Diverse Retail and Entertainment Needs32Fashion in Saudi:A Mall-Driven Market,Now and BeyondSaudi Arabia is expansive.Stretching across the Arabian Peninsula,Saudi encompasses 13 provinces,each with its own i

207、ndustrial footprint,architectural makeup and social fabric.Economic activity is led by three cities:Riyadh,the political and commercial heart of the nation;Jeddah,the port city with a flourishing arts scene;Dammam,the fulcrum for oil and gas activity.Accounting for approximately 40 percent of Saudi

208、Arabias population and over 50 percent of fashion spending,these cities serve as the main retail centers,supplying close to 7 million m2,almost 60 percent of Saudis total retail GLA(Gross Leasable Area).Riyadh alone accounts for almost 30 percent of the countrys organized retail supply,with over 3 m

209、illion m2 of existing GLA.75 The top five mall operators,including Cenomi and Al Othaim,account for a third of the organized retail space,focusing their retail offering heavily on global fast fashion brands.Local brands are still limited in number,with many only established post-2010s and yet to est

210、ablish themselves as anchor tenants at malls.Luxury retail occupies a small three percent portion of the total GLA,with a greater emphasis on mono-brand boutiques,as opposed to multi-brand shopping.76 Recognizing the room for growth and modernization,new mall projects are aiming to enhance the overa

211、ll shopping experience through better design and quality.0633Unlike European capitals,where the majority(90%)of the retail supply is concentrated in high streets or shopping districts,organized retail infrastructure in Saudi cities is primarily concentrated in malls.Modern retail development had a l

212、ater start in Saudi Arabia,gaining traction in the 1990s,following the post-oil boom.Malls became the preferred format,aligning with the expansive city planning and serving as a one-stop destination for both shopping,dining,and spending leisure time as families.In more recent projects,malls often ta

213、ke the form of districts,with a combination of outdoor and indoor spaces.Mall-based retail supply is driven by five main operators(Cenomi,Al Othaim,Hamat,Alandalus and Kinan)who collectively account for a third of the organized GLA in Saudi Arabia.The 50 shopping centers from these operators have a

214、high-street positioning,offering most global fast fashion names such as H&M,Zara,and regional names such as Max Fashion.International brands see high penetration as the expansion of malls in Saudi coincided with a period,in the late 1990s and early 2000s,during which regional retail conglomerates we

215、re bringing global names to cater to the expanding middle class.It also helps that the top two mall operators(Cenomi and Al Othaim)are also retail conglomerates,with their own brands portfolio.Cenomi is the franchise partner for Inditex brands,whilst Al Othaims portfolio includes a few names such as

216、 Parfois,Kiabi,and OVS.Global mass market names will continue to be a staple in malls,as they serve as anchor tenants,bringing the footfall and attracting smaller retailers.Exhibit 15 Retail GLA(Gross Leasable Area)supply driven by three cities:Riyadh,Jeddah,and Dammam77Retail GLA per city(Million m

217、2)Dammam1.2M m22.1M m23.5M m2The top 5 mall operators,including Cenomi and Al Othaim,account for 1/3 of the organized retail space,focusing their retail offering heavily on global fast fashion brands.RiyadhJeddahMalls Take the Retail Center Stage in Saudi Arabia06.Fashion in Saudi:A Mall-Driven Mark

218、et,Now and Beyond34Local brands are still yet to secure significant representation within malls in Saudi,currently occupying only about five percent of floor space,79 and often in areas with lower foot traffic.The limited presence is a function of where Saudi fashion brands are in their growth journ

219、eys.Homegrown brands are still few and at the beginning of their journey,with many only emerging post-2010s,as they are not yet able to afford mall rentals.As these brands expand their operations and capabilities,supported by enabler programs,such as Saudi 100 brands,they are anticipated to take up

220、a stronger position in regional as well as community malls targeting specific local catchments.Luxury retail in Saudi Arabia occupies a lower three percent share of total commercial GLA in main cities,equivalent to around 200,000 m2.Supply is concentrated in seven premier malls:Kingdom Center,Centri

221、a Mall,Mode Mall,and the recently opened Via Riyadh in the capital;Al Khayyat Center and Boulevard Mall in Jeddah;and Avenue at Al Rashid Mall in Dammam.While most mainstays such as Louis Vuitton,Chanel,Burberry,and Tom Ford are represented through mono-brand boutiques in these malls,a few notable b

222、rands from the top 50,such as Herms and Celine,are yet to make their entry,still on the search for the perfect locations that meet internal brand specifications.Multi-brand retail or department stores are also an integral part of the luxury retail landscape.In mature markets,the share of multi-brand

223、 retailers,typically ranges from 40 percent to nearly 70 percent.However,as Saudi Arabia is still a developing retail market,this percentage is currently at 20 percent,81 with only one international chain,Harvey Nichols,present with its store in Al Faisaliah Mall.Most department stores in Saudi have

224、 a relatively stronger presence in the beauty segment,while fashion-focused multi-brand stores remain underrepresented,presenting an opportunity for growth.As Saudis luxury market evolves,it is reasonable to anticipate a rebalancing in the future.Alongside serving as fashion shopping destinations fo

225、r a wide demographic,malls have evolved into social venues for families.Hence floor space allocation within malls reflects their multifaceted role in urban living,with approximately 60-75 percent dedicated to retail stores and 25-40 percent allocated to food and beverage outlets and entertainment of

226、ferings.82 With fewer alternative entertainment options in the past,malls became the go-to destination for a wide range of needs:enjoying a meal,watching a movie,attending an art class or getting in a workout,to name a few.Looking at the upcoming future,new destinations like Qiddiya Mall and Avenues

227、 Riyadh are set to play a central role in Vision 2030 ambition of building a vibrant society.A new pipeline of projects will elevate malls established role in Saudi social life to major destinations with fantastic architecture and innovative entertainment options(see Chapter 7).Exhibit 17 Luxury ret

228、ail in Saudi driven by mono-brand boutique stores80Retail offering by store typology (%of total commercial GLA)Riyadh85%Jeddah75%Dubai78%Istanbul74%Hong Kong73%Paris74%London61%Singapore55%Milan53%New York51%Tokyo51%Seoul31%Mono-brand stores in Saudi citiesMono-brand storesMulti-brand stores/Departm

229、ent storesExhibit 16 Top retail developers account for 29%of retail GLA,with leader Cenomi capturing 11%of share78Commercial GLA share(%)by player,20236%5%4%3%11%OthersRemaining 70%composed of street retails and small-scale mall operators06.Fashion in Saudi:A Mall-Driven Market,Now and Beyond35While

230、 Saudis mall-based retail share of total GLA surpasses Western counterparts,it still trails behind regional counterparts,indicating room for expansion.The retail space per capita in Riyadh and Jeddah,at roughly 0.35 m2,is a third of the 1.2 m2 per capita found in Dubai.83 The quality of malls in Dub

231、ai,such as Mall of the Emirates and Dubai Mall,is also best-in-class,bringing an extensive assortment of brands,world-class entertainment attractions,and luxurious interiors.Acknowledging the gap,both state-owned and private sector companies are actively developing new projects to align and even sur

232、pass benchmarks.Exhibit 18 Riyadh and Jeddah are behind comparable GCC cities in terms of supply of mall-based retail space84Mall GLA per capita(m2),2022The goal is not just to expand the retail space,but also enhance the quality of malls.Projects built in the 1990s and 2000s can feel outdated today

233、,in terms of design and planning.New developments aim to amend this.“Every detail has been accounted for.Right from the parking access to the tenant selection.even the indoor plants,”explains a Real Estate company Director.Al Faisaliah Mall,which completed a major renovation in 2021,featuring a slee

234、k new architectural design,an expanded selection of high-end retail stores,and the addition of modern amenities such as gourmet dining options,a luxury cinema,and interactive digital directories,exemplifies the developer ambition.Malls are the epicenters of Saudi Arabias retail and fashion industry.

235、Offering more than just shopping,they are social and cultural hubs that cater to the wide demographic of the country.As the retail landscape continues to evolve,with ongoing investments in infrastructure and a strategic focus on enhancing the shopping experience,Saudi Arabias mall culture is poised

236、for a dynamic future.Doha1.3Abu Dhabi0.8Riyadh0.4Europe Average0.3Dubai1.2Manama0.6Jeddah0.3Opportunity for Expansion and Innovation06.Fashion in Saudi:A Mall-Driven Market,Now and Beyond36Mall-based retail supply is driven by 5 main operators(Cenomi,Al Othaim,Hamat,Alandalus and Kinan)who collectiv

237、ely account for 1/3 of the organized GLA in Saudi Arabia.The 50 shopping centers from these operators have a high-street positioning,offering most global fast fashion names such as H&M,Zara,and regional names such as Max Fashion.06.Fashion in Saudi:A Mall-Driven Market,Now and Beyond37Activation of

238、Massive Retail Pipeline:Developers Search Brands to Bring Retail Areas to LifeSaudi Arabia is witnessing a transformative retail expansion,with over 20 new projects set to redefine the shopping landscape and add eight million square meters of GLA.Riyadh and Jeddah are the primary beneficiaries,captu

239、ring 55 percent and 25 percent of the new developments,respectively.85 The Public Investment Fund(PIF)is a key driver,significantly contributing to the retail pipeline,especially in Riyadh.Most new projects will cater to the mass-to-mid-market segment,incorporating strong entertainment elements to a

240、ttract visitors amid the rise of e-commerce.Selected projects will feature luxury offerings,blending high-end and high-street brands.Fashion brands are keenly assessing these developments for flagship stores,with mass-market brands participating broadly and luxury brands taking a more selective appr

241、oach.Anchor tenants like LVMH and Kering are crucial for the success of these projects as they would generate traffic and footfall for the whole development,hence putting the malls in the condition to become attractive for smaller brands that may not otherwise be interested.The government is also ea

242、sing market entry,aiming for Saudi Arabia to host 72 percent of the worlds top brands by 2030.860738A massive eight million square meters of retail space is estimated to become operational by the end of the decade,doubling the organized retail supply across Riyadh,Jeddah,and Dammam from almost 7 mil

243、lion m2 to just above 15 million m2 by 2030.87 Among the more than 20 new projects publicly announced,the majority of retail space will feature enclosed,modern retail formats.These developments will primarily be in super-regional,regional and community mall formats,88 but will also include some stre

244、et-retail areas with Diriyah and Roshn Front.Riyadh and Jeddah are set to be the primary beneficiaries,with approximately 55 percent and 25 percent of the new pipeline,respectively.Central to this retail expansion is the significant role played by the states Public Investment Fund,which is contribut

245、ing 40-50 percent of the new retail pipeline in Saudi.In Riyadh,the PIFs impact is even more pronounced,accounting for a notable 70-80 percent of the pipeline.89Exhibit 19 Saudi mall/organized retail supply expected to reach 15 Million m2 by 203090Saudi mall space pipeline by city,2023-2030F(Million

246、 m2)While the eight giga-projects in pipeline are set to cater for a medium to high-end offering in fashion,the majority of other new projects(such as Jeddah City Mall,Roshn)will cater to the mass-to-mid-market segment,aiming to reach the broadest audience.All these new developments will include str

247、ong entertainment components to attract footfall,particularly in light of the anticipated growth in e-commerce.Qiddiya Citys theme parks assets and Roshn Fronts arcade development are examples of developers indexing on entertainment.Exhibit 20 Most Saudi giga-projects in the pipeline have mid/high-e

248、nd positioning,with a relevant shopping component91Saudi giga-projects by tourist segment,shopping relevance and number of visits by 2030#of visits by 2030In line with the existing GLA split between high-street and luxury retail,less than five percent of incoming GLA supply will be dedicated to luxu

249、ry retail.A select few projects,such as Diriyah,Solitaire,Avenues,and Jawharat Arriyadh,will bring a strong luxury offering,seeking to attract top brands through high-end developments in prime areas.However,to ensure critical mass of visitor footfall and support incidental shopping,these projects to

250、o will feature high-street brands such as H&M and Sephora.6.8Existing supply(Riyadh,Jeddah,Dammam,2023)New supply RiyadhNew supply JeddahNew supply other cities2030F Supply4.52.0BudgetLowHighLuxuryTargeted tourist segmentRelevance of shopping in the sites value proposition+122%1.815.18.36.854%24%22%

251、QiddiyaDiriyah GateNeomAl UlaAl SoudahAmaalaSalwanRed SeaOrganized Retail Supply to Double in Main Cities07.Activation of Massive Retail Pipeline:Developers Search Brands to Bring Retail Areas to Life39New Retail Supply:Expanding Flagship LocationsWith numerous projects in the pipeline and growing i

252、nterest in being part of Saudis retail fabric,fashion brands are carefully assessing in which developments to house their flagship stores.Mass-market brands,often part of regional retail conglomerates and involved in developing malls,will be present in most new projects.Luxury retailers,to maintain

253、exclusivity,will be more selective,and,in line with the global practice,will open a maximum of two to four stores per city.As such,brands are closely monitoring new developments and awaiting the completion of the retail transformation before finalizing long-term flagship locations.As Saudi Arabias r

254、etail footprint is rapidly evolving,even luxury brands that have entered Saudi are still in the exploratory phase.Many leases for these brands today are short-term(around five years),serving as a potential temporary home while they await the completion of the next generation projects.Whether new pro

255、jects will represent an opportunity to extend their presence into the Saudi market or move into new exclusive locations,most brands are meeting with developers,and doing roadshows to find the perfect fit for their brand.While new projects are transformative,in terms of their scale and design,a large

256、 part of their success will hinge on the anchor tenants that lend credibility and drive footfall.As such,LVMH which typically rents a significant share of luxury retail complexes,will have first pick on spaces.A clustering effect is likely to follow,with smaller brands gravitating toward malls or pr

257、ojects where anchor tenants,such as LVMH brands and H&M and Zara,choose to set up shop.Many mall developers may choose to abandon a project if they fail to secure key anchor tenants early in the process.They will only proceed with construction if they are confident that prominent brands will draw si

258、gnificant foot traffic.Without this assurance,they are likely to cancel the project.“Naturally,its a pecking order,from Louis Vuitton,Dior,Chanel they can pick the top locations,and the rest follow,”explains an Executive from a mall developer.This dynamic underscores the importance of strategic plac

259、ements and collaboration over direct competition among brands.As such,the government has dedicated initiatives and targets through entities like the Quality-of-Life Vision Realization Program(QoL VRP),Ministry of Investment,Ministry of Culture to facilitate market entry into Saudi Arabia.By 2030,the

260、 QoL VRP is targeting Saudi to house 72 percent of the worlds top brands across retail,dining,and entertainment categories.92 Department stores can also play an anchoring role in retail spaces.While their penetration in Saudi has been about half of the 40-50 percent seen across benchmarks like Londo

261、n and New York,there is an opportunity for both global leaders and local upstarts to establish anchor department stores to complement mono-brand boutiques at new projects.Department stores can bring a hyper-curated assortment to the well-traveled Saudi consumers and tourists,while simultaneously pro

262、viding a testing ground for smaller brands to understand the Saudi market before expanding into mono-brand stores.By 2030,the Quality-of-Life Vision Realization Program is targeting Saudi Arabia to house 72%of the worlds top brands across retail,dining,and entertainment categories.07.Activation of M

263、assive Retail Pipeline:Developers Search Brands to Bring Retail Areas to Life40Riyadh,Saudi Arabias retail capital,is on the cusp of a major transformation.While existing retail hubs are concentrated in central areas such as Olaya and King Fahd Road,new developments are expanding outward to location

264、s like Diriyah,the King Abdullah Financial District,and the northern and western regions.The development of Diriyah Gate,one of PIFs giga-projects,along with eight new malls(including Avenues Riyadh and Jawharat Arriyadh)and one outdoor retail complex will elevate the city to a premier retail destin

265、ation in the region.Diriyah Gate is an expansive restoration and development project set in the birthplace of Saudi and the ancestral home of the Al Saud Royal Family.Once completed,the project will span 14 km2,(approximately six-and-a-half times the size of Monaco),featuring premier retail,hospital

266、ity,residential and commercial offerings.93 The retail centerpiece,Diriyah Square,is set to open by 2028.This 180,000 m2 open-air complex will house over 400 stores,including flagships for the worlds top 50 luxury brands and emerging homegrown brands,and also feature an avenue reminiscent of the Cha

267、mps-lyses.94 While luxury shopping in Saudi Arabia has historically been a mall-based experience,with Diriyah,developers are crafting a leisure experience that integrates street and mall-based retail with dining and entertainment offerings.Brands have already expressed interest,with many committing

268、to open flagships.“There is major interest for brands to be in Diriyah because they see it as a showcase for their brand.The entire pitch with Diriyah is its ability for brands to connect emotionally with the Saudi community.Brands have never before had the opportunity to represent themselves in the

269、ir true essence.While other locations may have more commercial roles or perform better(per m2),Diriyah will be an emotional home,”explains a retail expert.Owned by Cenomi Centres,the leading developer in Saudi,the upcoming Jawharat Arriyadh is another major Riyadh project.Set to open in 2025,the mal

270、l will offer 150,000 m2 of retail space and will host more than 350 stores.Luxury will also have its own dedicated space,with a dedicated building wing spanning over 25,000 m2 and set to host more than 60 high-end stores.The entertainment offering will span across roughly 40,000 m2(circa a quarter o

271、f the total planned GLA),including top attractions and concepts from the US,Dubai,and Asia.The mall is expected to create 4,000 jobs,drive tourism,and align with Vision 2030 by attracting over 20 million visitors annually.95Avenues Riyadh,set to open in 2026,will feature an expansive 400,000 m2 of r

272、etail space and house 1,300 stores.This joint venture between Shomoul and Mabanee,a Kuwait Bourse-listed real estate firm,will also feature four-star and five-star hotels,entertainment options,including cinemas,gaming arcades,indoor amusement parks,and medical facilities,providing a comprehensive ex

273、perience for visitors.With its extensive offerings,Avenues Riyadh aims to become a premier destination for both shopping and leisure,significantly enhancing the citys retail and entertainment landscape.96Cordoba BoulevardRiyadh ParkHayat MallSahara MallCenomi Al Nakheel MallAtyaf MallLocalizer MallC

274、enomi The View MallOthaim MallRimal CenterKAFDExisting developments 137592486New developmentsDiriyah SquareThe EsplanadeJawharat Arriyadh1364AHSolitaireNajd MallCapital MallAvenues MallQiddiya MallRoshn Front137592486101011Exhibit 21 10 new retail projects to come online by 2030 in Riyadh(non-exhaus

275、tive)97106514932111378879104562Riyadh:Saudi Arabias Retail Capital07.Activation of Massive Retail Pipeline:Developers Search Brands to Bring Retail Areas to Life41Global Brands Penetration:Opportunity to Lead the ChangeInternational brands are continuously expanding across the GCC,with varying matur

276、ity stages by country and product category.The Saudi Arabian market is attracting increasing attention due to its robust local demand and high growth potential,as the pipeline for new malls,retail spaces,and other infrastructural projects broadens.Despite this,global brands retail presence in Saudi

277、Arabia remains less saturated compared to neighboring countries,primarily due to delayed market entry,the need for successful partnerships with local distributors,and challenges in accessing high-quality retail spaces.The continuous search for advanced retail offerings also affects brands store capi

278、llarity,which still lags behind the UAE and Qatar.However,the depth and quality of product assortment,particularly among non-luxury brands,are catching up with other GCC and Western countries.Luxury brands are also adjusting their strategies to fully capture Saudis potential,working to align their a

279、ssortments with those in the UAE while continuing to cater to the historical preference for accessories.0842The retail penetration of the top 50 Brands in Saudi within each Fashion and Luxury product category is around 60-75 percent(except for beautys 90%).98 As an example,famous international brand

280、s such as Chanel,Givenchy,Dior are included in the top 50 list in luxury apparel,footwear&accessories,based on their international revenues,and brands like Van Cleef&Arpels and Rolex,are in the top 50 list of luxury jewelry&watches category.Observed penetration levels are slightly behind the rates i

281、n the UAE and Qatar,which have historically been the first entry points for international brands willing to enter the region.With recent notable entries in the beauty segment,such as Aesop and Charlotte Tilbury,Saudi Arabia has surpassed Qatar,now covering 90 percent of the top 50 beauty brands,seco

282、nd only to the UAE at 98 percent.99 This highlights Saudi Arabias enduring allure in the beauty market,and the steady expansion of both international and local multi-brand retailers like Sephora,with 18 stores in Riyadh and 10 in Jeddah.In the non-luxury apparel,footwear&accessories segment(includin

283、g sportswear),Saudi Arabia ranks third with a penetration rate of 76 percent,following the UAE at 90 percent and Qatar at 78 percent,while Kuwait trails with 72 percent.100 Saudi is currently missing 11 of the top 50 non-luxury apparel and sportswear brands,including Patagonia,Lee,and Uniqlo.Beyond

284、individual business choices,this difference may be due to heritage-rooted preferences for formal-wear in Saudi Arabia,differing from Western casual-wear standards.Yet,renowned sportswear brands like Nike,adidas,and Puma are well-represented in Saudi Arabia,aligning with the growing engagement of Sau

285、di consumers in sports and their appeal for international styles.In the luxury apparel,footwear&accessories segment,Saudi ranks third with a penetration rate of 72 percent,trailing behind the UAE at 88 percent and Qatar at 78 percent.Among the top 50 luxury brands,14 key players,including iconic nam

286、es such as Herms(whose presence is still limited to the beauty segment),Celine,Chlo,Max Mara,and Roger Vivier,are yet to establish a full presence in Saudi.101 The disparity with the more advanced UAE market widens further when considering store coverage.For instance,Gucci operates 12 stores in the

287、UAE compared to just three in Saudi Arabia,and Dior boasts 15 stores in the UAE versus three in Saudi.This capillarity gap is attributed to delayed market entry and the need for more representative retail spaces in Saudi Arabia,both concurring in signaling the significant potential for growth and ex

288、pansion in Saudis luxury market.The luxury jewelry and watches market in Saudi Arabia is relatively mature,yet it retains a significant presence of local unbranded craftsmanship.Demand for international brands in this sector is lower compared to other product categories,with market penetration in Sa

289、udi Arabia at 58 percent,close to the levels in the UAE and Qatar,(64%and 60%,respectively).However,store capillarity is not yet on par:Qatar has slightly more than 60 stores for the top 50 luxury jewelry and watch brands concentrated in Doha,the UAE has circa 170 stores across Dubai and Abu Dhabi,w

290、hile Saudi Arabia has close to 100 stores spread across three to four cities in the country.102 Brands like Rolex,Montblanc,Omega,Van Cleef&Arpels and Swarovski are well-represented store-wise in Saudi,each holding between four and 10 stores in Saudi Arabia.High-end brands like Patek Philippe,Mikimo

291、to and Baume&Mercier are still missing from Saudi Arabia as well as from the rest of the GCC region.Exhibit 22 International brands penetration in Saudi Arabia ranging between 60-90%103Share of international brands selling in Saudi out of top 50 for each product segment.Illustrative brands icons rep

292、resentationPremium&prestige beauty90%76%72%58%Non-luxury apparel,footwear&accessories(including sportswear)Luxury apparel,footwear&accessoriesLuxury jewelry and watchesCatching Up with UAE and Qatar:Luxury Brands Stretching to Saudi Arabia08.Global Brands Penetration:Opportunity to Lead the Change43

293、Creating the Right Environment for Global Brands to ThriveGlobal brands entering or eyeing the Saudi Arabian market must navigate its unique landscape to achieve success.The end-customer VAT,which is 10 percentage points higher than in the UAE and 15 percentage points higher than Qatar,has potential

294、ly led to some hesitation among global brands.104 Additionally,current regulations in Saudi Arabia require that a business must either have a local partner holding at least 25 percent of the companys shares,or,if opting for full foreign ownership,the foreign investor must commit to investing SAR 300

295、 million(approximately USD 80 million)within the first five years.105 While these requirements can be subject to negotiation in certain cases,they may influence some companies decisions when considering entering the Saudi market,like fashion companies that retain full control over their local retail

296、 operations as part of their global business strategy.However,these regulations mark an evolution from previous,more restrictive policies.This trend toward a more open business environment is also reflected in recent changes to duty-free laws,which now allow duty-free shops in airport arrivals and p

297、otentially in downtown locations,and in several initiatives launched by the Ministry of Investment in Saudi to ease business entry.The Regional Headquarter Program(RHQ),for example,aims to encourage multinational companies to set up their regional headquarters in Saudi Arabia by offering various inc

298、entives from tax deduction to priority access to government contracts.As social reforms reshape consumer culture and enhance womens participation in social and professional spheres(with 34 percent labour participation in 2023 across sectors and 52 percent in fashion industry only),106 the main chall

299、enge for global brands entering and expanding their retail presence in Saudi Arabia is twofold:managing the current extent and advancement of the retail footprint,and navigating the rapid evolution of the market.As thoughtfully stated by the Commercial Manager of a French luxury brand:“The key succe

300、ss factor for international fashion brands is to strategically target key doors,ensuring focused growth and avoiding the pitfalls of random expansion.”Luxury Brands Set Sights on Saudi ArabiaPrestigious international brands like Herms are still seeking the ideal retail set-up in prime Saudi location

301、s,which will most likely materialize in one of Saudis advanced retail projects,to offer the same exclusive experience found in other countries and justify the substantial capital investment per square meter that their presence demands.Meanwhile,Herms opened its first perfume and cosmetics boutique s

302、tore in Riyadh in 2022,partnering with Al Malki,as a steppingstone into the country.This stands out as the only second beauty store in the GCC region after Dubai.08.Global Brands Penetration:Opportunity to Lead the Change44On average,luxury brands in the US offer approximately 10-15 percent more var

303、iety in womenswear and menswear compared to Saudi Arabia,107 where luxury offerings still lean more toward accessories than apparel,influenced by dressing habits and climatic conditions.Another historical factor is the partnership model brands used to enter the Saudi market or,in general,the GCC reg

304、ion.Franchise models,which have been the most common for brands first entry,tend to favor higher profitability levels in accessories over apparel.“We strive to offer the same best-selling pieces across countries,including in Saudi Arabia,even though we know that not all international brands in Saudi

305、 have reached this level,”explains Merchandising Director at a luxury fashion maison.“As foreseen retail expansion materializes,we see potential to stretch breadth of offering,”the expert adds.Differences with neighboring UAE are narrowing,at least in terms of product assortment,if not yet fully in

306、the retail experience.While VAT differences might affect end-customer prices,some luxury brands(like Balenciaga,Bottega Veneta,Gucci,and Fendi)showcase an even larger assortment in Saudi compared to the UAE.However,the in-store assortment can still differ between the two countries and across brands.

307、For example,Prada stores are more numerous and relatively closer to each other in the UAE than in Saudi Arabia.Consequently,large UAE stores offer the full spectrum of womens and mens product categories,alongside stores specializing in footwear and accessories.In Saudi Arabia,both existing Prada sto

308、res typically offer a full range of products for women and men,except for mens bags.Louis Vuitton,on the other hand,maintains Saudis traditional focus on accessories and footwear over apparel,with only one of its two Riyadh stores showcasing womens apparel.“As social events and occasions diversify a

309、nd grow,especially among the numerous youth consumers,luxury and non-luxury brands are expected to intensify their focus on apparel,striving to find the right balance between cultural heritage and casual appeal,”observes the Head of Buying and Merchandising at a leading GCC retail group.For non-luxu

310、ry apparel and sportswear,international mass market brands in Saudi offer circa 5-10 percent less assortment in womenswear and menswear compared to the US,mostly due to seasonal variations,such as the limited availability of fall/winter clothing,rather than Saudi clothing preferences.108Looking at m

311、ain non-luxury brands(like Zara,H&M,Mango and Bershka)product assortment is slightly higher in UAE than in Saudi Arabia,both for women and men.Yet,both countries show same split across categories,with apparel accounting for more than 80 percent of offerings for women and men.This should come as less

312、 of a surprise,considering that in both countries Zara falls in the top three of consumers favorite brands.109Beyond Retail Potential,Tapping into Brands Assortment 08.Global Brands Penetration:Opportunity to Lead the ChangeDifferences with neighboring UAE are narrowing,at least in terms of product

313、assortment,if not yet fully in the retail experience.Some luxury brands,like Balenciaga and Bottega Veneta showcase even larger assortment in Saudi Arabia.45Brands Big Bet,Direct Entry:Opportunity for Local Facilitators in JVs and FranchisesThe Saudi Arabian fashion market is evolving,influenced by

314、new dynamics between local retailer groups,developers,and international brands.Historically,international brands entered through joint ventures(JVs)or franchises due to local regulations and the need for local expertise.Established partners like Chalhoub,Al Malki,Al Tayer,and AlShaya have been instr

315、umental in market entry.While franchise models were initially the standard,as it usually happens in emerging markets,JVs are now preferred,offering brands ownership while leveraging local knowledge.With easing regulations,some brands explore direct entry,but local partnerships remain crucial for nav

316、igating specificities of the Saudi market,including its regulations and opportunities.0946International brands entered the Saudi market through joint ventures or franchises,primarily due to local regulation requiring at least 25 percent of local business participation.110 Beyond legislation,Saudi Ar

317、abias market entry and business operations benefit from the unique regional insights that local expertise brings.These include supply chain management(from customs management to efficient logistics and distribution networks),evolving access to retail space and knowledge of significant opportunities,

318、understanding of business etiquette and cultural sensitivities,and access to a developing pool of skilled workforce in the fashion sector.Indeed,following the typical expansion path of brands entering new markets,international brands established local partnerships to navigate the Saudi market.Well-e

319、stablished regional partners such as Chalhoub,Al Malki,Al Tayer,Alshaya,and Saudi Jawahir have played a crucial role in helping international brands establish their presence first in the UAE and Qatar,and subsequently in other GCC countries.Usually covering the GCC region at large,these Groups are d

320、iversified,spanning across fashion,beauty,entertainment and hospitality.Fashion Executives Perspective Faysal Al Malki,CEO of Al MalkiLocal distributors and partners play a pivotal role in facilitating the entrance into the Saudi market for international brands.Our in-depth knowledge of local consum

321、er and cultural preferences,market evolutions and legal,administrative requirements allows us to align the needs of international principals with the dynamics of the Saudi market.Additionally,being locally based means the Saudi partner is aware of the latest evolutions of the competition,the retail

322、scene and the real estate projects and can act fast.Our added value extends to providing essential operational skills,including logistics and warehouse services as well as e-commerce-related operations and back-office services.By joining forces with a Saudi partner,international maisons benefit from

323、 local expertise and presence.One of the key success factors for Saudi partners in their relationships with international brands is adopting a flexible mindset,customizing their level of support to meet each brands unique needs and expectations of the business in Saudi Arabia.Local Partners:Traditio

324、nal Gateway for International Brands in the Saudi Market09.Brands Big Bet,Direct Entry:Opportunity for Local Facilitators in JVs and Franchises47With most international brands opting for partnerships with local distributors,brands typically relied on franchise models for a phased entry into the GCC

325、region.Historically,Saudi Arabia was often the third or fourth market of entry,but it is now increasingly common to see Saudi Arabia as the second market after the UAE,reflecting its growing relevance.While isolating brands from the profits and losses of franchises,the franchise model proved to be t

326、he safest strategy for international brands in the early 2000s,enabling them to navigate market uncertainties effectively.Examples of franchise models still in place include Azadea working with Gap,Mango,Massimo Dutti,Pull&Bear,Oysho,Quiz,Twist,Bershka,Stradivarius,and Alshaya with American Eagle,Vi

327、ctorias Secret,H&M,&Other Stories,and New Balance.Luxury brands like Jimmy Choo also follow a franchise model in Saudi.“We will transition into a joint venture model when we reach significant size,I see it as a two-step approach.But even with franchise model,we still decide on approximately 80 perce

328、nt of our business and guarantee same brand standards internationally,”says the Brand Manager of a large fashion group.As 2010s kicked in,joint ventures became more popular,and they are the current prevalent form for international brands operating in Saudi Arabia and the GCC in general.For example,B

329、vlgari entered the UAE with Al Tayer in 1991 and formed a JV in 2014,with which the company then entered Saudi.While retaining majority of ownership of their brand business,international players can still benefit from distributors local knowledge and potential economies of scale generated by the vas

330、t brand portfolio across warehouse,delivery services and marketing.17 Other prominent existing collaborations include Chalhoub(e.g.,OTB Group,Louis Vuitton,Dior,Sephora,Fendi,Louboutin,Berluti)and Al Malki(e.g.,Prada,Valentino and many others in the beauty segment,brands with the caliber of Alexande

331、r McQueen,Saint Laurent,Gianvito Rossi on apparel and footwear).“We have established a 15-year long partnership with our distributor across GCC countries,guaranteeing access to malls and prime locations we would not be able to enter ourselves,”observes the Head of Retail Operations of a notable spor

332、tswear brand.Joint Ventures Becoming the StandardOpportunities for Direct Operations?Ongoing development of Saudi Fashion market will eventually see an evolution of joint ventures models into direct presence for brands.Luxury brands,in particular,and other giant international companies strive to own

333、 thorough control of the customer experience and related data,both leveraged to succeed across countries of presence.Few brands have so far tried to enter directly in the GCC region and in a dynamic market like Saudi Arabia.Beyond the fashion sector,Apple is one example.Yet,taking advantage of eased regulations,now allowing foreign investors to find solutions to retain one hundred percent of busin