Saudi Arabia’s retail market ranked third out of 44 developing markets in the 2023 Global Retail Development Index (GRDI), up from 12th place rank in 2021, according to data from Kearney.

The local retail sector received a final score of 62.7 in the index last year, up from 50.6 in 2021. This is attributed to the sector’s total sales volume increasing to USD 249 bn, up from USD 119 bn. Market attractiveness has soared to a score of 81.7 last year, up from 75.8 in 2021, while market saturation has increased to a score of 26.7, up from 16.9. We scored an optimum country risk score of 100 in 2023, up from 98.6 in 2021.

Digitization contributed heavily to the sector making up 12% of the total output of the economy, the survey found. This figure increases to 23% when measured against the makeup of the non-oil economy, said Minister of Municipal and Rural Affairs and Housing Majed Al Hogail at the Retail Leaders Circle MENA Summit in Riyadh, Arab News reports. The sector is expected to grow to SAR 460 bn by the end of this year, Al Hogail added.

About GRDI: The every-two-years survey assesses the retail prospects of 35-40 developing markets by considering factors like economic stability, consumer prosperity, and regulatory environment. Retailers use the survey as a point of reference for the prospects of the retail sector and spot opportunities in EMs.

The share of e-commerce in the overall retail market is expected to rise to 8% in 2027, up from the current 6%, while cross-border e-commerce is projected to slide from the current 50% share of digital retail revenues on the back of an influx of local players. E-commerce and AI-enabled experiential retail are amongst the primary growth drivers of the sector with young consumers attracted to services such as virtual fitting rooms, self-checkouts, paperless transactions, shop online pick up from store, and click-and-collect.

Non-cash retail transactions rose to 62% in 2022, up from 16% in 2016 on the back of an increased customer familiarity with cashless payment methods.

The MENA region has emerged as the next big hot spot in the global retail space, according to the index: Egypt ranked in sixth place, followed by Jordan with a rank of 12, Morocco (17), Algeria (29), and Tunisia (36).

Growth KPIs: The sector had an occupancy rate of 88% in 2023 with 70k licenses offered to market players annually.

Regulation + private sector partnerships: The government has been drafting and producing the regulations along with building partnerships with private sector players to boost the sector with a focus on the segments of restaurants, cafes, entertainment and public areas, the minister added.

On localization: “We are working to incentivize private sector establishments and provide an attractive environment for Saudis to work,” said Al Hogail.