Few markets appear to offer as much potential as Saudi Arabia’s electronics and consumer appliances sector.
Both Abdul Latif Jameel Electronics and outside investors believe the country’s changing demographics, growing population and high internet penetration create the ideal growth environment.
Saudi Arabia is already the Gulf Cooperation Council’s (GCC) largest market for electronics, small appliances and air conditioning. Its population of 31 million people accounts for 45 per cent of the total GCC population, and its electronics market is worth approximately SAR 50 billion (US$ 13.3 billion) annually.1
Although traditional physical retail channels are still the dominant route to market in the sector, the government is committed to attracting both regional and international investment to help develop modern trade and e-commerce channels to 80 percent of the retail sector by 2020.1 To this end, it is easing restrictions on ownership and foreign investment, facilitating the local and regional flow of consumer goods and overhauling necessary regulations.
E-commerce, in particular, is seen as having huge potential for consumer electronics. Internet penetration is almost 90 per cent; some reports put it as high as 94 per cent – one of the highest in the world.1
P. Venkat, Managing Director of Abdul Latif Jameel Electronics, said: “The sheer size of the market attracts a lot of attention from investors all over the world. The demand for electronic goods, from the latest gadgets to household appliances, is massive. And given the demographics of the country, it looks set to grow even further over the next few years.”
Saudi Arabia’s consumer electronics market grew steadily at 5 to 6 per cent each year between 2003 and 2013.1 Despite a dip during 2016 due to low oil prices, few observers expect that dip to last long.
Instead, Saudi Arabia’s young population – and its growing uptake of ecommerce – will be a key driver to the medium and long-term growth of the sector. P. Venkat added: “The smartphone alone accounts for SAR 22 billion of the sector’s SAR 50 billion. People here like to be up to date with technology and connected to the rest of the world. They are very tech-savvy.”
“The other areas where we are witnessing growth are appliances – refrigerators, washing machines and small domestic appliances – and air conditioning.”
P. Venkat added: “The government is placing a lot of emphasis on housing. Half a million new houses are planned. You can imagine the demand that will create for household appliances.” The consumer electronics sector is ripe for growth and investment to support the government’s objective to address the need for contemporary middle-income housing
Despite the tough conditions of 2016, the retail business of Abdul Latif Jameel Electronics still achieved growth of 48 per cent. As a sign of its confidence in the future growth potential and its commitment to bringing the best brands and newest technology to the Saudi Arabian consumer, Abdul Latif Jameel Electronics is upgrading 16 existing stores, will open three more by the end of 2016, and deliver a further 11 in 2017. It expects further growth of 20 to 28 per cent in 2017, particularly through online channels.
“Items that can easily be picked, packed, put in a box and sent to the customer by courier is an area with huge demand and it’s been growing rapidly. Larger items have their own challenges, but for products like smart phones, TVs, accessories, cooking, fashion, things that are easy to deliver, there’s a huge opportunity, and we’re determined to be part of it,” said P. Venkat.
1 Data sources: GfK Market-i Kingdom of Saudi Arabia Report September 2016