'

Expat curbs threaten to hurt Saudi retail growth

Analysts warn stores may face staffing shortfalls following kingdom’s Saudisation push
[Image for illustrative purposes only]
By Elizabeth Broomhall
Sun 11 Dec 2011 12:52 PM

Stores in Saudi Arabia’s underserved retail market could face staff shortages amid new curbs on visas for foreign workers, said a report by Jones Lang LaSalle published on Sunday.

Retail brands must funnel investment into customer service training for employees as new quotas take effect or risk a shortfall in qualified Saudi workers to staff stores, the consultancy said.

“Unless this becomes a serious consideration for major stakeholders, there is a real danger of a shortage of qualified, national candidates suitable for servicing future retail needs,” the report said.

Saudi Arabia, the wealthiest Arab state, has lagged the UAE on the growth of shopping malls and retail spending. Riyadh and Jeddah have retail space of 0.20 sq m per capita, less than that seen in Bahrain, Qatar or the UAE, in part because of the market’s unique cultural restrictions.

The kingdom’s ban on cinemas has also curbed the shift of malls into entertainment centres seen in other Gulf states, while the ban on women driving has reduced the spend of a key market segment.  

“Women represent a significant opportunity for retailers as their spending… [is[ also for their husbands, children and wider families,” the report said. “The consequence is… that retail spending in Saudi Arabia remains below its full potential.”

A lack of female changing rooms and the family-only policies adopted by some malls, which restricts access for young, single men, have also hurt retail spend, JLL said.

In Saudi Arabia, the Gulf’s most populous state, retail accounts for more than 17 percent of the country’s total GDP. The kingdom expects retail spending to top SR256bn ($68bn) by end-2011, more than twice the size of the UAE market.

A report by Business Monitor International said retail sales per capita in the kingdom continued to move upwards during the downturn, and are likely to reach SR15,274 ($4,078) by 2015.

Saudi’s mall market also faces challenges stemming from the monopoly of a small number of groups that control 90 percent of brands and malls. This system dissuades smaller, independent retailers from entering the market, meaning most shopping centres carry replica brands.

“[This raises] potential conflicts of interests in the relationships between retailers, landlords, investors and lenders,” said JLL. “The lack of separation between brands and operators/mall developers often results in a lack of financial transparency, making it difficult to assess the true performance of either [malls] or brands.”

For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Last Updated: Thu 26 Jan 2017 01:27 PM GST

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.