The Al Futtaim Group plans to quadruple its stores in Saudi Arabia, the focus of its regional expansion.
The group, which operates in more than 30 countries, will be expanding its 70 shops in the kingdom to 300 over the next five years.
It will be targeting the clothing and sportswear sector.
In the coming year, the group plans to add four brands to its existing 15 brands in the kingdom as it develops new food and beverage concepts.
Despite the steep decline of oil prices which could threaten infrastructure investment in the kingdom, retailers see opportunities in view of the young population and high income levels.
“As a group we were late into Saudi Arabia, we began trading there only two years ago,” said Richard Morley-Kirk, a country manager for retail at the Al Futtaim Group.
“The retail climate we have encountered is such that the problem we face is controlling the growth. It’s not just Riyadh and Jeddah, it’s across the country in cities and towns.
“Our biggest performing Stadium outlet is in a town called Ta’if, it’s incredible. We did have a problem with the Saudisation programme at first and saw a 100 per cent churn in staff, but now we have an academy that teaches, trains and promotes talent, so we have 42 per cent Saudi staffing, who are eager to work.”
With a population of 27 million (including about 20 million Saudis), Saudi Arabia is the most populous country in the Arabian Gulf.
The population is expected to grow at an annual pace of 1.6 per cent from this year until 2020 – one of the highest rates globally.
Indeed, Saudi Arabia’s population demographics are particularly appealing to retailers: the median age is 29 years old, and more than 66 per cent of the residents are between 15 and 59 years of age.
The biggest mall operator in the kingdom is Arabian Centres, which runs 17 malls with a collective gross leasable area (GLA) of 1 million square metres.
Arabian Centres plans to open 19 malls over the next five years, which would effectively double its shop floor space.
“For retailers, Saudi Arabia is a hugely attractive country,” said Simon Wilcock, the chief executive of Arabian Centres.
“Clothing and apparel [C&A] is one of the fastest-growing retail sectors in the world, growing 11 per cent per annum.
“The spend per capita on C&A is only 20 per cent less than the United States where there is three metres of GLA per person, in Saudi Arabia there is only 30cm per person.
“The growth is not just in C&A, overall consumer spending rose 18 per cent year-on-year in August. The need for malls and modern centres is obvious, as the mall trade still only accounts for 50 per cent of the total market, with street and souq vendors making up the other 50 per cent.”
The yearly influx of millions of Haj pilgrims has also stoked demand for more shops and hotels.
“Saudi Arabia has more tourists than Dubai ever will with religious tourism,” said David Macadam, the chief executive of the Middle East Council of Shopping Centres.
“The Mothercare branch in Mecca is the busiest in the world,” he said.
“Millions of people visit the city each year and the government is building a high-speed train link between Jeddah and Mecca to spread the tourist visitors between cities and encourage tourist spending outside the holy cities.
“The infrastructure development is adding to retail growth, however there is still some way to go before Saudi Arabia is an easy place to do business.”
The Al Futtaim Group owns and operates Dubai Festival City, and Al Futtaim Motors is the exclusive distributor for Toyota and Lexus in the UAE.
ascott@thenational.ae
Follow The National's Business section on Twitter
