Saudi retail sector sees healthy growth on e-commerce, changed consumer patterns: Experts

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Saudi Arabia’s retail sector continues to experience positive growth despite challenges. This growth is driven by higher consumer spending, a shift in consumer behavior toward value and experience, the rise of e-commerce, and increased merger and acquisition activity, experts told Argaam on the sidelines of the 2025 RLC Global Forum held in Riyadh in February 2024.

Kearney: Saudi retail sector grows by 5% … Inflations drives consumers to cheaper alternatives

Mohammed Dhedhi, Partner in Kearney Middle East & Africa (MEA), estimated that Saudi Arabia’s retail sector is worth around SAR 160 billion, with an annual growth rate of 4–5% in 2024, reflecting a healthy sector performance.

He explained that this growth is primarily driven by rising prices due to inflation rather than an increase in sales volume, indicating that consumers are purchasing fewer items but at higher prices.

He pointed out that this shift in purchasing patterns is driving consumers to seek more cost-effective alternatives. The diversification of spending options, particularly in the entertainment sector, has helped sustain market activity.

He expects growth to continue at similar rates in 2025, supported by the expansion of e-commerce.

He emphasized that e-commerce and experience-based spending will be among the key growth drivers, while mature sectors like grocery and fashion will see slower growth due to market saturation.

McKinsey ME: Saudi Arabia is well-placed for leading e-commerce … consumers seek value and comfort

Abdullah Iftahy, Senior Partner at McKinsey Middle East, said that the Saudi retail sector witnessed an outstanding year in 2024, driven by several factors, including the rise of e-commerce and shifting consumption patterns among younger generations.

He pointed out that Saudi consumers are highly digitally aware, with younger demographics increasingly relying on online shopping. He projected that e-commerce transactions could account for 25% of total sales by 2035.

He highlighted performance variations across retail sub-sectors, where the luxury segment experienced strong growth, while the grocery sector saw modest expansion due to consumers prioritizing discounts and value.

Consumers are seeking convenience and fast service, boosting quick-commerce models and small-format retail stores.

The growth of the B2B food services sector, including restaurants and cafés, driven by higher out-of-home spending and increased investments in entertainment and hospitality, he added.

PwC: Increased M&A deals in the retail sector

Norma Taki, Deals Partner and Consumer Markets Leader, PwC Middle East

Norma Taki, Deals Partner and Consumer Markets Leader, PwC Middle East, stated that the region is witnessing increased M&A activity across the entire retail value chain, with the off-price retail segment being particularly attractive to investors.

She explained that companies are selling assets or entering partnerships for reasons such as expansion, strategic planning, or market adaptation, as investors are drawn to businesses with strong financial performance, clear growth stories, and stable profitability.

Taki also highlighted major shifts in consumer behavior, especially among younger generations, who now mix luxury, mid-range, and budget brands within a single outfit, indicating that brand loyalty is declining while value-seeking behavior is rising.