The ‘Womenomics’ of Saudi Arabia’s retail sector

An exclusive piece by retail industry expert Dr Martyn Davies for IMAGES RetailME.

The World Health Organization (WHO) declared in May this year that the COVID pandemic no longer represents a global health emergency. But while the health crisis is over, the economic scarring impact on many countries remains from the pandemic. The differentiator of winning and laggard countries is now the pace of structural reform in their domestic political economies. Structural reform is underpinned by liberalization, privatisation and enhanced economic efficiency in the domestic economy. Arguably, the country setting the benchmark is the Kingdom of Saudi Arabia (KSA), the fastest growing G20 economy last year.

The structural reform tailwind is boosting optimism amongst Saudi consumers. In a survey released in mid-November, 71% of the population expressed their confidence in the future, far above the global average of 43% (Toluna Global Consumer Barometer). Saudis’ greater sense of optimism is buoying consumer spending, less impacted by the negative impact of high inflation inflicting many economies over the past two years.

The link between diversification and female empowerment

As the domestic economy seeks to diversify away from oil, underpinning this structural reform is the inclusion of women into the workforce. The Kingdom has witnessed a remarkable shift in the recent past as women play an increasingly vital role in the country’s economy and their increasing contribution to GDP and value creation in the economy.

While contribution by women in the workforce has been significant, the performance also needs to be put into relative perspective alongside its emerging market peers. Saudi Arabia lags countries when it comes to female labour market participation such as Brazil (51.9%), Indonesia (52%) and South Africa (49.6%) but has surpassed India (23%).

A star performer when it comes to increasing female participation in the workforce has been Singapore. According to Janice Loo from the National Library of Singapore, between 1970 and 1980 the city state’s female labour force participation rate rose from 29.5% to 44.3%, an increase of 14.8%. But what took Singapore a decade in terms of percentage increase, Saudi Arabia has achieved in half this time!

Saudi Arabia’s diversifying economy – non-oil growth stood at 3.6% in the third quarter of this year – is driving demand for labour with new skills, in particular the service economy. As economies diversify, gender equality improves due to the increased and varied opportunities in the economy that are created. As the profile of an economy becomes more diversified and complex, there is a need for higher skill levels that in turn will result in greater efficiency and productivity. This is now occurring in Saudi Arabia with previously marginalized tertiary educated women now being absorbed into the workforce. A similar process occurred in East Asia. As the region’s economies experienced rapid growth and diversification, the opportunities for women increased dramatically in many traditionally patriarchal societies in Asia. With greater economic complexity come work opportunities requiring higher skilled workers.

Multinational companies are taking steps to empower and educate women in the domestic economy. Mastercard’s Girls4Tech™ aims to bridge the skills gap in the tech industry for primary school girls, offering activities and curriculum built on global science and math standards. Girls4Tech has supported more than 3.5 million girls between the ages of 8 and 16 across 60 countries and is launching a local partnership with King Abdullah Financial District (KAFD) to introduce the programme in Saudi Arabia. Mastercard’s Maria Medvedeva, Country Manager, Saudi Arabia and Bahrain said that the firm is “unlocking the power of the female economy and we aim to create an environment where women have the opportunities and support, they need to reach their full potential in the Kingdom and beyond”.

The rising female workforce in retail

The domestic retail sector is the leading sector providing employment for aspiring Saudi women. At the end of 2022, there were 192,952 females employed in retail and related services accounting for 19.88% of the entire female workforce.

The retail sector has been a main contributor to the reduction in overall unemployment in the Kingdom. The diversifying Saudi economy has shown its ability to create jobs, but the highest unemployment rates are predominantly found in the lesser skilled and experienced younger age categories (15-19 and 20-24). Under Vision 2030, it is a priority for public policy to stimulate employment through the Human Capability Development Program (HCDP) and promote female participation into the workforce.

The retail sector has provided an entry point for labour market entrants, but turnover rates are very high with talent retention a key challenge facing employers. Annual employee turnover can easily surpass 50% per annum in many cases amongst some of the Kingdom’s leading retailers. With increased training, deepening skillsets and enhanced labour productivity, the retail industry will begin to provide long-term career paths, rather than mere transitory jobs.

The surging trend of women’s economic inclusion and the expanding female workforce is in turn driving growth in consumption. Consumer spending grew by 7.46% from SAR107.1bn to SAR115.4bn in August 2023 from the same month last year. Point of sale transactions grew a robust 10% year-on-year to SAR 54.6bn over the same period (Saudi Central Bank, SAMA).

How and where women spend in the economy is a key driver of the emerging retail scene in Saudi Arabia. According to a recent report by leading retailer Chalhoub Group, 86% of Saudi women say that shopping is a top area of their discretionary spending (vs 68% of men). In the beauty consumer market, Chalhoub Group asserts that most categories are driven by female consumers that are 55% higher than men.

In the mid-to-older age categories, female employees earn more than their male counterparts. This has been the case since 2020 in the 40-44, 45-49, 50-54, 55-59 and 60-64 age groups, which translates into higher purchasing power.

To cater for this new and shifting market landscape, brands are adapting to the market. There are obstacles to overcome but the local market expansion plans of most retail groups are notable. The market has a great deal of potential and one of the main tasks to overcome is to enhance the overall attractiveness of the retail ecosystem, especially for the luxury segments. Saudis regularly feature amongst the largest buyers of luxury goods in Europe’s luxury brand stores and there is a strategic intent to encourage the localisation of this spend.

Saudi Arabia is in an almost unique position – a job-creating, diversifying and increasingly service-oriented economy, a well-educated and rapidly expanding female labour force, a burgeoning young population where almost two-thirds of Saudis are under the age of 30 years and strong demand side growth of international tourist arrivals. These positive factors are being supported by a strong enabling state that seeks to support the growth of consumer spending in line with its diversification ambitions. To boost their growth prospects and reduce the economic scarring from the COVID period, emerging economies would do well to pursue greater inclusion of women into their workforces. Through actively pursuing this inclusive policy, women have rapidly become a major contributory driver of Saudi Arabia’s economic future.