Over 80 percent of profits in retail sector go to foreigners

Updated 03 July 2013

Over 80 percent of profits in retail sector go to foreigners

Although Saudi Arabia now ranks as the 16th most attractive retail market in the world, this is not benefiting the national economy because most of the profits end up in the pockets of retailers owned by foreign multinationals and individual expatriates, according to a local economist.
Essam Khalifa, a fellow of the Saudi Economics Society, told Arab News that about 80 percent of retail stores in the Kingdom are owned by expatriates. He estimates that Saudis only get 10 to 20 percent of the sector’s profits.
Khalifa was responding to the A.T. Kearney Retail Apparel Index released recently. The Kingdom ranks third among Arab countries following the United Arab Emirates and Kuwait with an attractiveness rate estimated at 71.4 and a risk rate of 79.2.
“Many expat retailers try out their trade operations in the Kingdom before expanding to other countries. This is due to the increasing phenomenon of Saudis registering shops under their names, while the original owners are expats,” said Khalifa.
“The position that we’re ranked is not a positive one, since we import almost 90 percent of our products. In contrast, we don’t export any products apart from the petrochemical industries.”
Asked about the reasons for the country’s weak exports, Khalifa said this was influenced by various factors including the labor system, fake visas, high cost of workers, weak infrastructure, and recently imposed taxes on expatriates.
Khalifa said Saudis should not be happy or optimistic about the ranking because most retail profits go to other countries. “The national economy is harmed by the current retail market,” he said.
Saudis get between 10 to 20 percent of the profits in the retail sector, while the rest is transferred to the retailers’ original countries, he said.
According to the index, the Saudi market is becoming more sophisticated, demanding differentiated products and retail formats, with trends such as fresh food taking hold as young consumers strive for healthier lifestyles. Saudi Arabia is also a largely untapped market, with major development showing great potential and increased retail space availability. Online sales are gaining popularity but remain a miniscule share of retail sales.
Mohammed Baqader, a retailer who imports Chinese baby toys, said that the Saudi market is still attractive for traders.
“Despite the fact that Saudi Arabia is trying to make it difficult for expat business owners to manage these businesses, especially with the recent raids, the Saudi market is still attracting retailers. This is because of the stability, absence of taxes and the diversified community,” he said.
“I expect more retailers in the next few years, due to the unstable trade in the Middle East North Africa (MENA) region.”
The newly released index showed that consumer confidence levels are among the highest in MENA, and that Saudis are among the most eager consumers in the world. Retail sales are expected to increase by 11 percent in 2013. Retail sales per capita and disposable income remain lower than some of the neighboring locations, so there is plenty of room for growth.
The index linked the growth in the retail sector to other factor such as religious tourism. Saudi Arabia currently hosts more than 12 million religious tourists a year.

Home alone: Saudis and expats try to beat the holiday blues

Updated 27 min 26 sec ago

Home alone: Saudis and expats try to beat the holiday blues

  • People celebrating Eid alone or abroad find ways to stay positive

JEDDAH: For different reasons many people living in the Kingdom have found themselves alone for the holidays due to the coronavirus disease (COVID-19) pandemic, their spirits dampened as they are forced to stay home alone, away from loved ones.

As the pandemic enters its third month in Saudi Arabia, flights have not yet resumed, strict social distancing and safety measures are still in place and curfews have been reimposed to curb the spread of the virus during the Eid holidays.

Many families are stranded in cities across the Kingdom, while Saudis studying and working abroad are either stuck or have chosen to spend summer where they are out of fear they will not be able to return and start their new semesters.

Some people were able to move in with their families and quarantine together, while others were deprived of that chance.

A number of Saudi nationals, including students, have been repatriated in the past couple of weeks while others are still waiting for their turn.

Yousef Al-Ayesh, a 21-year-old senior student at Arizona State University, has been at home since late March as a precautionary measure.

He said that Eid with his family in Jeddah was one event that everyone looked forward to all year long. Under normal circumstances the first three days of Eid would be filled with events — family dinners at night and beach excursions during the day. Although he would be sleep-deprived, he would still make the most of the little time he spent with his family due to his studies.

“With all that’s going on, it doesn’t even feel like it’s Eid,” he told Arab News. 

“It most probably would have been different if I was back in Saudi Arabia but I still wouldn’t have been able to celebrate it the same way. It’s not that bad here (in the US) now since restaurants have reopened and my friends and I have the outdoors to enjoy, have a barbecue, or just hang out. I would have felt worse if I was alone. Ramadan was already odd enough, I don’t think I would have been OK if it were the case without them.”

Although his family lives 8,000 miles away he did not feel alone as his group of friends decided to celebrate together, even without the perks of new clothes and eidiyas from aunts and uncles.

It’s an exceptional year for us and one that is teaching us a lesson on various levels, but we must adapt either way.

Fareed Abdullah Fareed

Al-Ayesh hoped to be repatriated to the Kingdom soon and spend some time with his family after his mandatory quarantine.

Fareed Abdullah Fareed, a 29-year-old expat working and living in Riyadh, said this year’s Eid was tough without his family.

Although he is used to living alone because of his job, Eid was the one occasion he looked forward to the most every year because he got to travel to Cairo and be with his family.

“My family moved from Jeddah to Cairo about four or five years ago and Eid is a significant occasion in the family, Eid Al-Fitr is significantly more special than Eid Al-Adha even,” he told Arab News. “I look forward to traveling to see them every year since moving to Riyadh but wasn’t able to with the lockdown, so we all got together on FaceTime video call and spent the whole day speaking to family members.”

Like many expats, Fareed has spent the past months at home and said it was hard for him and his family but that communication had made the ordeal slightly easier.

“It’s an exceptional year for us and one that is teaching us a lesson on various levels, but we must adapt either way,” he added.