By Ravi Kant
Saudi Arabia – an oil based economy has a strong monopoly power all over the world for its oil and petroleum products. Its whole economys major revenues come from this natural resource. The oil in Saudi Arabia is so much that they do not have to worry for earning enormous revenues from it for 200-300 years. However the sad part is that its whole economy is only dependent on oil and its economic structure is not diverse in nature. Most of the Saudi Arabian citizens are migrating to UK, US, etc. for educational and employment purposes as there is no good educational institutions and robust investment activity. Hence one of the things Saudi Arabia could do is developing a robust private sector that would employ large youth population of Saudi Arabia. Therefore Saudi officials should focus on creating an environment of educational and technical skills that the private sector needs for its youth population. One of the branches of private sector which Saudi Arabia can start is developing a robust Retail industry which can provide employment to numerous citizens (Saudi Arabian) that will invite less training costs.
Consumer goods demand in Saudi Arabia has increased consistently over the last five years. Rapid growing population, growing urbanization, solid household consumption, young demographics and high level of disposable income are the key drivers for the retail industry to grow in Saudi Arabia. People here are brand loyal and the consumers are prepared to pay more for well-known brand. The development of retail sector will lead to job creation at home (Saudi Arabia) as there is a large labor-force to work for retail industry plus less investment and cost in training of employees. And because of rapid expansion of real estate business, it will help its retail sector by establishing malls, buildings and offices for running the retail businesses.
Furthermore, Tourism industry act as an engine to growth for retail sector in Saudi Arabian Economy because Saudi Arabia is a major global pilgrimage destination and these pilgrims can take time to enjoy days out at the country’s increasingly eminent shopping malls. Also Dubai shopping festival and numerous flight options which also promote retail trade helps in development of retail industry in Saudi Arabia. Even a well developed transport industry and logistics network not only helps in sales but also ensures better functioning of big hypermarket chains. The economic and cultural environment is conducive for large stores to thrive. Apart from the strong growth scenario, large malls act as the only source of entertainment in the form of shopping and dining, which is culturally acceptable in the country. Supermarkets and hypermarkets with in-house facilities such as restaurants and theme parks are ideal locations for the Saudi Arabia population to relax along with their families. This cultural connection coupled with the healthy income of a young population, will keep boosting the sector.
However to develop this sector more, some of the things which Saudi Arabian Economy could do – The sales team should be given regular training programmes to ensure consistent quality of the services. This would lead to customer loyalty, higher sales, and stronger financial performances. The ability of retailers to import goods into the country and distribute them efficiently to their stores is currently a challenge. While there have been improvements in these areas in recent years, the supply chain infrastructure in Saudi Arabia remains less advanced than in other markets in the region. Hence Saudi Arabia should work towards its logistics and supply chain management for the development of Retail sector.
Online retail sales still remains under-developed in the Kingdom, restricted to sales of consumer electronics and home appliances, booking air tickets, and hotel reservations. Hence proper infrastructure should be developed in order to develop e-commerce retailing. While the fundamental economic and demographic drivers within Saudi Arabia remain attractive and suggest the overall retail market will continue to expand over the coming years, retail stakeholders need to consider the unique characteristics of the Saudi Arabia market. Their ability to adapt to these factors will, to a large extent, determine the success of specific brands as well as specific shopping centres in the increasingly competitive market. Hence if they take these recommendations and work upon it they will be able to develop a thriving and robust retail industry for its economy.
Ravi Kant holds Economics Honors degree from Ramjas College, University of Delhi. He likes researching in the areas of Economics, Strategy, Politics, English Literature and Social Issues. Besides that he loves watching Parallel and offbeat Cinemas of Bollywood. He aspires to be a well-known and an eminent Consultant in the area of Economics and Strategy. Presently he is doing his MBA from Institute of Management Technology (IMT), Hyderabad.