Over the last few years, rapid digitization has made a significant impact on the Saudi consumer’s lifestyle. Today, a whopping 88% of Saudis use the internet at least once a day and 59% of the population are now present in at least one social media platform. While the growth in digital usage in Saudi Arabia wasn’t really a surprise, what has befuddled even the experts is the absolutely staggering growth rate.
While the level of internet penetration and smartphone usage in Saudi Arabia is comparable to other countries in the GCC, the country is an outlier when it comes to consumer demographic. With a GDP per capita of USD 20,028 and a median age of 29 years, the typical Saudi consumer is wealthy and extremely tech-savvy. It’s also the sole country in the GCC where the locals account for 72% of the population.
This young, tech-savvy and wealthy population in Saudi Arabia serves as the perfect substrate for eCommerce growth, and the number of online shoppers in the region is expected to reach 17.1 million by 2020.
From a business perspective, the region is not without its share of challenges. Socio-economic shifts in the region like fall in oil prices, the introduction of Value Added Tax, and an exodus of expats have had a negative impact on consumer sentiment in the last few years. Amongst these, the biggest impact was from the introduction of 5% VAT. While a relatively low rate, it resulted in a significant shift in consumer behaviour. The average Saudi consumer became more cost-conscious than ever before and the trend is expected to continue at least for some more time. However, there are positive signals that the situation is being reversed.
Customer confidence levels in the Kingdom for the month of June 2019 was 62.1; placing it at the top 3 next to China and India (the global average is 43.3). The economic recovery, supported by higher oil prices and other internal social changes like expanded women’s rights, are further expected to have a positive impact in shaping consumption and market dynamics in the coming years. Brands that can crack economies of scale, and provide value-add or greater convenience, will reap the rewards.
Key Takeaways for Brands :
1. Localization is critical to survive and grow in the region
2. There is a growing interest for western apparels, both for online and offline shopping
3. Consumer spending has slowed; brands will have to innovate using personalized promotions and provide value-add to stay ahead
4. The new breed of GCC consumer expects a highly personalized experience.
5. The shift towards price-consciousness is expected to lower brand loyalty among consumers
6. Ecommerce will continue to grow at a steady pace; especially from mobile devices
7. Offline customer engagement will be a critical factor in influencing purchase decisions and brand loyalty
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