Department Stores in Saudi Arabia

PROSPECTS

Declining value sales for department stores

Due to the overall uncertainty in the economic environment in the country, consumer spending was negatively impacted, which directly affected department stores. With consumer focus in 2018 on meeting their basic necessities and saving up in expectation for a continued slowdown, there was a major shift in spending on standard and premium brands to budget-friendly options.

Franchising continues to be a preferred mode of entry for international players

Franchising continued to be a major entry point for international players, especially for department stores. Entering the channel in Saudi Arabia through a local partner that is already deep rooted in the domestic market is helping global brands to establish and expand their presence in the country.

Department stores acts as attractive entry point for international cosmetics brands

As real estate costs are high and overall dynamics seem to be relatively uncertain, many international brands prefer having kiosks in well-known department stores compared to standalone stores. Many players also follow the retail strategy set in accordance with the local franchisers, which launch brands through existing department stores to feature the brand’s entry into the country.

COMPETITIVE LANDSCAPE

Al Bandar Trading Co strengthens its lead of department stores

Al Bandar Trading Co continued to lead department stores, gaining value share in 2018 due to its leading brand Centrepoint. The brand has a strong presence across the country as its stores are not only limited to shopping centres or big cities.

RedTag offers highest number of outlets

In outlet terms, RedTag outpaces Centrepoint in Saudi Arabia quite drastically (at 126 compared to 88 for the latter), but both retailers differ widely in their category assortment. RedTag holds a larger share of products in apparel and home furnishings, while Centrepoint offers a wider assortment of products including sportswear, stationery and gift items as well as a wide range of aromatic products such as aroma diffusers and scents, which are trending in the country.

Local department stores remain popular despite economic challenges

Besides the presence of regional and global department store players in shopping centres, Saudi Arabia has a number of popular local department stores such as Al Sawani, which offers a variety of products ranging from apparel and footwear to bedding and homeware, in addition to local traditional designs and clothing. These local department stores operate on the principle of economies of scale and offer a wide variety of products at very reasonable prices.

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