High growth potential for Kingdom’s retail sector

The retail sector in the Kingdom has significant potential for growth and will continue to post solid returns with strong prospects for expansion in the medium-to-longer term although retailers will have to factor in the higher costs as they hire more local staff, says an international report.

Oxford Business Group (OBG) – a global publishing and consultancy company producing annual investment and economic reports on more than 30 countries – in its report on the retail sector in the Kingdom cautioned that last year’s decision by Riyadh to reduce the number of expatriates in the workforce under Nitaqat policy is expected to have an on-going effect on the sector for at least part of this year, with retailers having to recruit Saudi employees to fill the gaps left by expatriate workers.

According to the OBG report, the Kingdom’s retail sector had significant potential for growth, thanks to high levels of disposable income, a relatively young and upwardly mobile population and an expanding tourism trade. The report also asserted that the sector, which saw sales expand by around 11% in 2013, would increasingly be dominated by large-scale developments such as hypermarkets with shopping centres spreading beyond the major cities. It said major international retail brands are also moving to step up their presence in the Kingdom, joining established chains such as H&M and Bershka. It added that Burberry, The Children’s Place and Tesco have signalled interest in the market too, or have recently entered the Kingdom.