The Apparel Market of Saudi Arabia
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The Apparel Market of Saudi Arabia: An Untapped and Growing Market for US Firms. Presentation which accompanied the final project for my International Business class at Parsons: an "EXECUTIVE BRIEFING" that would convince Saks Fifth Avenue to expand into the Middle East.
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The Apparel Market of Saudi Arabia
- 1. The Apparel Market of Saudi Arabia An Untapped and Growing Opportunity for US Firms Global Comparative Analysis Regional Study Country-Specific Insights Business Plan Anne Chen Jennifer Lee Jennifer Coppola Samantha Miletti
- 2. Global Comparative Analysis • robust economic growth • a redefined economy • opened up to investors • locational and infrastructural support • political stability • rapid population growth • trend-conscious and young populace • steady growth in personal disposable income • large working age population Macroenvironmental Factors People-Related Trends Middle East & North Africa Rest of the World Capitalize on Their Growth, Stand Out Against Their Weaknesses • utilize their rising income citizens • population decline • political instability and corruption • economic downgrades • aging populace • continued political instability • poor infrastructure and limited technology • high regulation • underdeveloped • fragmented governance and ethnic tensions Europe Asia Sub-Saharan Africa
- 3. Regional Study: Key Countries UAE • most populous country in GCC - urban areas experiencing growth - strong female / youth consumer base • benefits of oil revenues and government stimulus - $906.8 billion GDP (rose 6.8% ) - rising incomes and education of middle-class - $12.2 billion FDI inflows / most stable country in Gulf • business-supportive reforms - reductions in minimum capital requirements - opening up of and improvements in banking system - unified standardizations • tourism & apparel - most-visited country in region - sight-seeing and rich cultural history - popularity of modern retail and international brands Saudi Arabia • population growth - rise in consumer confidence - high per capita disposable income • positively perceived by ROW - modern and secure - tourism as a driver of retail growth • GCC’s most advanced retail market - unregulated rental prices - success enjoyed by various retail formats Mall of Emirates (Dubai, UAE)
- 4. Saudi Arabia’s Apparel Market Leveraging Industry Synergies TechnologyApparel Tourism Park Hyatt Marina Club & Spa (Jeddah, Saudi Arabia) • 10% increase in tourism • hospitality sector forecast to reach $93 billion by 2019 • new tourist visa program • attracting business, religious, leisure travelers • generating jobs • rise in government spending on airline improvements • young citizens, expatriates, influx of tourists • increasing number of internet users proliferation of e-commerce • high supply of quality mall and store locations • availability of experienced franchise partners Al-Hyatt Mall, Ridyadh • investments to catalyze and support research, science, and innovation • ME’s largest IT market • networked society: widespread Internet and Smartphone usage
- 5. Business Approach Where When Who / What How Floating Mosque, Jeddah Kingdom Tower, Riyadh Why Customer: The Modern Saudi Woman • fluctuating tastes • trend- and price-conscious • joining labor force Product: Style for Hot Climates • lightweight fabrics • bright color • accessories, shoes, beauty, etc. • malls: vacancies, rents • investments in areas besides Jeddah and Riyadh • success of one-stop leisure hubs: food, shopping, entertainment Market Access • Licenscing - 2003: Saks Fifth Avenue opened a store in Riyadh trough licensing agreement with well- established ME businesses (10-year agreement expired in 2012) - technology benefits but limited control • Joint Partnership - SA’s consumer market and business openness has since changed - Saks Off Fifth is more affordable - more control / access to local knowledge to bridge cultural gaps Promotions • Social Media • Travel Packages • Advertising
- 6. Risk Management • political concerns - corruption, dishonesty - effects of conflict-torn Yemen - Islamic extremism, terrorism • government control - national products / firms given priority - “negatives” list - uncertain leadership due to ailing King • trade regulations - no duties/tariffs on exports, but imposed on many imported goods • inexperienced institutions and infrastructure - lack of transparency and reliable data - intellectual property protection / counterfeiting concerns - poor administrative standards - mercurial legal system - inefficient delivery systems • environmental issues - flooding and earthquakes - food prices • lack of education and employment - difficult to attract and retain talented workers - religious-based curricula and intolerance • continued gender inequality - travel restrictions - workplace segregation • cultural differences - conservative society - effect of religious holidays on business activities Dealing with People Handling Operations Hofstede’s Cultural Dimensions
- 7. Questions?
Editor's Notes
- ROBUST ECONOMIC GROWTH – as a region, enjoyed substantial growth in the past few years, with aggregate growth projected to rise about 3.6% by 2016 recovery in high-income countries should increase exports DIVERSIFICATION – transitioning to more diverse and dynamic industries (to create jobs and aid other structural reforms) → moving to more stable economic situation INFLUX OF FDI / BUSINESS-SUPPORTIVE REFORMS - the U.S.-U.A.E. Business Council is a progressive business advocacy organization solely committed to advancing the trade and commercial relationship between the United States and United Arab Emirates the government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement RAPID POPULATION GROWTH as a region, experienced substantial population growth - ME has one of world’s highest population growth rates and a large working age population (projected to grow from 600 million to 1.1 billion by 2050) YOUNG POPULATION conscious about global trends, tech-savvy (influence of social media / mobile phones) – removing ‘cultural’ barriers on dress (i.e. want to show off own unique style, vs. limiting oneself to traditional garb) LARGE WORKING AGE POPULATION - potential to join the foreign firm – good to have Saudis as employees, since they will know how to interact with OTHER Saudis RAPID POPULATION GROWTH – one of the world’s fastest growing populations
- APPAREL INDUSTRY: Key Countries (if you came across any information that says that Morocco or Egypt also has potential in the apparel market, we can add them as ‘country-bullets’ as well – from what I’ve found, though, it seems that out of our four countries, SA and UAE are the best) SAUDI ARABIA – most populous country, with low median age / expanding consumer base URBAN AREAS – rural inhabitants migrating to cities consumer confidence levels are among the highest in MENA, and many market studies show that Saudis are among the most eager consumers in the world utilizing ECOMMERCE retail sales per capita and disposable income remain lower than some of the neighboring locations, so there is plenty of room for growth Saudi Arabia is visited by more than 12 million religious tourists per year, driving the need for tailored offerings catering to an important, diverse consumer group UAE -
- APPAREL: retail space per capita in SA currently lags behind other markets (i.e. Dubai), thus leaving a lot of room for expansion of retail infrastructure in the future TOURISM: numerous investments in hotel projects / cruise lines / etc. – travelers now include both business people and leisure tourists (not just religious pilgrims) TECHNOLOGY: - technology-related advancements provide (a) the tech-support required for apparel business operations (i.e. transferring funds, RFID tagging / inventory management, supplier relations, etc.) and (b) the ability to offer and reach customers via the Internet / mobile platforms (i.e. marketing)