Brand name franchising set to transform Saudi apparel market
The Saudi clothes market, currently valued at $15 billion and expanding at a five percent annually rate, is the biggest market in the Gulf for traditional Arab and modern wear. However, the main factor that makes the Saudi apparel market so lucrative is its young, fast growing population, always seeking new and trendy brand name clothing.
The Saudi population today exceeds 20 million, with more than half under the age of 20. With the nation growing at a three percent annual rate, the Saudi population is set to double in the next two decades. All this makes the Saudi apparel market, particularly the children's clothing sector, most lucrative.
The air of privatization and liberalization over the Saudi economy, combined with the emerging role of the private sector and diversification of industries, have brought an influx of international brand names into the Saudi market in recent years, boosting the kingdom's franchising sector at a phenomenal rate of 10 percent a year.
Investment in Saudi franchises is currently estimated at more than $250 million, with eight percent of the total retail activity already franchised. The sector however, is dominated by fast-food franchises, leaving the non-food segment virtually untapped.
Most international fashion brand names already operate outlets in the growing number of shopping centers, located in and around major urban centers, especially in the capital Riyadh, which alone accommodates more than 100 retail trade centers.
Many branded boutiques serving the high-end segment of the market have emerged around shopping malls and the main shopping streets. Specializing in particular brands, the success of these stores appears to be a good marketing model for establishing a presence in Saudi Arabia.
The heat and humidity of Saudi Arabia, keep light cotton fabrics, polyester-cotton blends, silk and virgin wool apparel, at the height of fashion. Saudi men mostly wear the traditional Dishdasha cotton dress, and turn to western style clothing on leisure and travel occasions. Saudi women prefer western fashion under the black Abaya cloak and veil, while children’s wardrobes are increasingly modern.
Nearly 50 percent of Saudi clothes shoppers are affluent nationals or expatriates, looking for high-quality purchases. Fifteen percent of the apparel market is attributed to the general expatriate labor force, trying to minimize expenses and provide for their families back home. More than two million pilgrims and tourists each year, seeking bargain priced gifts, make up the remaining 35 percent of the market.
For exporters able to accommodate the tastes and expectations of the kingdom’s upper and middle class population, the Saudi apparel market holds excellent potential. The lower end segment of the market is essentially controlled by inexpensive imports from Middle Eastern and Asian countries.
Of the total $28-billion worth of commodities annually imported into Saudi Arabia, textile and clothes imports account for an average of 6.7 percent. The total Saudi imports of textiles and clothing for 1997 stood at $1.89 billion (SR 7.1 billion), rising to $1.99 billion in 1998 and then dropping to $1.73 billion in 1999. The 1999 slowdown was attributed to wholesalers scrambling to get rid of their old stocks. The market is expected to rebound throughout 2001.
Imports of ready-made clothing comprise 30.1 percent of the total annual clothes and textile imports to the kingdom, of which 54 percent are female ready garments, while ready-made men’s-ware make up the remaining 46 percent.
The Saudi market for textile, clothing and apparel is being served by many countries, including the US, Japan, Taiwan, Korea, China and Pakistan and India. Well-known French, Italian, and German names are popular with the upper-scale shoppers in designer boutiques.
However, the European market share of apparel imports to Saudi Arabia is undervalued, since many European designer-clothes operations are situated in and shipping from Asian countries where cheap labor minimizes production costs.
The local clothing manufacturing industry is relatively immature. In 1999, 25 local Saudi manufacturers produced some five million pieces per year of men’s and children’s clothing, while women’s garments were chiefly in the hands of local tailoring businesses. -- (Mena Report)
© 2001 Mena Report (www.menareport.com)