JEDDAH, 8 March 2004 — Day one of the first-ever Jeddah Retail Forum heard that the sector faces huge challenges as Saudi Arabia prepares to enter the World Trade Organization and grapple with a changing environment.
The two-day conference, organized by the Jeddah Chamber of Commerce & Industry (JCCI) and the Jeddah Marketing Board (JMB) in conjunction with Middle East Economic Digest (MEED) reviewed trends and the potential prospects of Saudi Arabia’s retail sector, the largest in the Arab world.
“The Saudi economy is the largest in the Middle East with a GDP which expanded by 11 percent last year to about $210 billion,” said Edmund O’Sullivan, MEED editorial director.
In a presentation, JCCI Chairman Adel Faqeeh examined the retail landscape for current and future opportunities in Saudi Arabia. “There are worldwide trends that have impacted the retail industry in Saudi Arabia, like increase in customer focus and increased efficiency, as well as globalization,” he said. “But there are additional local trends. Consumers have become more sophisticated, customer profile is becoming younger, and there has been a change in traditional shopping behavior and channels.”
Faqeeh said the development pace of the retail industry is uneven. “Fashion, restaurants and services, for example, are at different levels of efficiency and customer focus.” Homegrown success stories include Jarir bookstore and the Al-Herfy fast food chain.
Improving the retail sector can benefit the Saudi economy, particularly in terms of job creation. Tens of thousands of Saudi jobs could be created, particularly for college graduates. By 2010 Saudi supermarkets will need 300 college-level graduates, and the restaurant industry will require around 2,000.
Another major challenge would be the question of women in the retail industry, Faqeeh said. Women have already been accepted in the medical services sector but are yet to be accepted in retail.
The forum was haunted by the specter of inventory shrinkage, a combination of employee theft, shoplifting, vendor fraud and administrative error.
According to Bryan McDermott, a business development director in the Kingdom, it is a “problem all retailers face”. “People on both sides of the sales counter start helping themselves to things they aren’t supposed to help themselves to....” Technology has been able to provide some answers, he said. “Open merchandising is a way of marketing your product where a customer gets to touch and feel the merchandise. But that also means it can be stolen. In 2002 the EU estimated a loss of 18 billion euros because of shrinkage. Combating that will take training technology and management. After surveying stores in the Kingdom I think we need a lot of work,” he concluded.
Saudi businessman Majid Batterji agrees. Shrinkage and Saudization linked, he feels. “Because companies are struggling to meet the Saudization quotas, so many unqualified people are hired, and that leads to shrinkage, which could be detrimental to the retailer.”
“There are so many challenges meeting the retail industry. It’s a question of priority,” said Mohammed Hassan Ali Abudawood, vice chairman Abudawood Trading. “The biggest challenge for Saudi Arabia is to give reasons to non-Saudis to invest in Saudi Arabia. The second challenge is for Saudi retailers to be competitive and create real growth in the sector so that they can compete with the global players that might enter the Saudi market.”
The Saudi Retail Forum is the first event arranged in Saudi Arabia by MEED, which will organize about 20 conferences on various business topics throughout the Middle East in 2004.