The Millenials & Generation Z Destined To Drive Physical Retail in Saudi

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With seventy percent of the Saudi population below the age of 40, a profoundly different demographic structure is emerging within the Kingdom. This new ‘internet dwelling’ cohort of Saudis has begun mirroring the consumption behaviour of its global peers, best exemplified by the retail sector.

Footfall continues to be strong in Saudi malls. Arabian Centres portfolio of shopping centres had over 100 million visits across nineteen shopping centres last year. These robust traffic counts are better than global footfall averages.

Neil Howe, a leading economic theorist of demographics who coined the term ‘Millennial’ has been vocal about the way different demographic generations impact economic development. He argues both demographic bulges and declines can each impact economic development in different ways but argues that population growth invariably adds growth to an economy.

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The underlying strength and resilience of Saudi’s macroeconomic environment is clearly having a highly positive impact for the retail sector.  The growing impact and prominence of the Saudi Millennial and Generation Z population will have a lasting impact in the short, medium and longer term.

These strong fundamentals for economic growth are evidenced by back to back sustained four quarters of Saudi GDP growth. 

Estimated size of the Kingdom’s population is expected to reach forty million by 2025.  The Saudi retail market remains relatively undersupplied when measured against other global retail markets and is certainly undersupplied compared to the UAE. The undersupply of malls mixed with the booming Millennial and Generation Z population equates to an atypical opportunity for the retail sector compared to other GCC countries. We are left with a clear picture of an evolving retail landscape in the Kingdom with no signs of slowing.

The traditional Saudi economy fuelled by both oil and growing investments to expand religious tourism bode well for the overall retail spending. The continued buoyancy of global oil prices again fuels the Saudi economy.

Additional policy changes that tap into the growing economic independence of women has resulted in significant new spending power with key benefits for recreational retail.

Strong growth in religious tourism allied to modern infrastructure developments see forecasted growth to an estimated thirty million religious tourists by 2025.  

Fast rail links from Jeddah to the religious cities of Makkah and Medinah are also set to further stimulate the retail sector.

A real sense of optimism is reflected in the positive numbers for retailers who are recording a strong start to the year overall.

A sizable component of personal disposable income is being spent directly in shopping malls in Saudi in the major centres like Jeddah, Riyadh, and Dammam.

Demand in Saudi is largely locally-driven, providing a depth and breadth to the market that is unique to the region.

The positive sentiment is back in the market and working in retail in the Kingdom is again a truly exciting place to be.

David Macadam
CEO, Middle East Council of Shopping Centres With a career spanning 37 years in the retail industry, David is a regular contributor to local and international newspapers including Gulf News and Khaleej Times and numerous Magazines with articles on topics associated with current retail industry trends, commercial real estate and residential property challenges and opportunities. He has appeared on CNN, BBC, Bloomberg, Dubai One, Dubai City 7 TV, Selfie TV and Dubai Zee television as a retail expert in the MENA region. In radio, on Dubai Eye 103.8, David is regularly on air as the retail industry expert, retail property market commentator and guest. A Canadian, resident in the UAE for fourteen years. David has held leading roles in the region with major shopping centre development companies and advisory firms before taking over in 2013 as the CEO of the MECSC.