Consumer spending across sectors in Saudi Arabia is ramping up as Covid-19 restrictions ease, and the trend looks like it will last as those in the kingdom say they intend to spend more in the coming months.
Some 20 percent of people in Saudi have indicated a desire to increase spending post-pandemic on an ongoing basis, a higher proportion than any other nationality polled by AlixPartners in a new consumer sentiment survey.
“If you look at the spending in Saudi Arabia, across the categories, we see increasing spending or decreasing limitations on spending across categories of travel and tourism, entertainment outside of home and in restaurants,” said Gawel Adamek, senior vice president at AlixPartners.
“There’s been a much quicker ramp-up of the customer spending, attributed to less restrictions, but also more economic safety, and that will primarily drive spending in the future as people feel back to normal and more secure about their jobs,” Adamek added.
According to the survey, dining out and out-of-home entertainment are set to be less impacted by spending cuts among Saudis post-pandemic than globally. Only 17 percent of consumers are expecting to cut spending on out-of-home entertainment permanently, compared with 38 percent globally; and only 13 percent on dining out, versus 27 percent on the global stage.
Meanwhile, in-home entertainment and groceries will benefit from increased spending by Saudi consumers, with 15 percent and 36 percent respectively expecting to spend net more.
During the pandemic, Saudis slashed discretionary spending, and in March, despite optimism in the kingdom around an economic recovery, Saudis continued to spend less on discretionary items and more on essential goods, McKinsey analysis found at the time.
Like the rest of the world, Saudi has adopted online purchasing for many goods, including groceries. Forty-one percent of Saudi consumers said they have permanently altered their buying habits, compared to 44 percent globally, AlixPartners found.
“The pandemic has really changed, not only our way of thinking, but our shopping habits as well,” Hisham Abdulkhalek, director at AlixPartners, said.
However, as the recovery continues, more are returning to supermarkets to buy their necessities, with 45 percent reporting they prefer to shop for groceries in-person.
“What’s interesting is the increase in spending on groceries. Twenty percent of consumers reported spending more on groceries,” Adamek said, adding that people spending more time at home and more time cooking translated to higher grocery spending.
Retailers need to be prepared to continue to invest in brick-and-mortar retail outlets, AlixPartners found. On the other hand, 24 percent of respondents in Saudi Arabia said they want to shop online more. In Saudi, only 3 percent of major retailers’ sales come from online platforms, according to AlixPartners.
“Major retailers need to further invest in building online capabilities,” Abdulkhalek said.
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