Saudi Arabia: Reaching the Consumers

Consumer Profile

The Saudi population represents 0.45% of the world's population with an estimated 35.8 million inhabitants in 2022 (UNFPA). Some 42.2% are women according to the latest estimates of Stats SA. The population increases by 1.6% per year, bringing the country's density from 9.6 inhabitants / km2 in 2000 to 16 inhabitants / km2 in 2020 (World Bank, latest data available). According to the World Bank around a third of the population residing in Saudi Arabia was born outside the country. The median age is 32.4 years in 2022 while it was 21.3 years in 2000 (Data Reportal). This ageing of the population can be seen at all age group levels. The  0/14 age group represented 24% of the population in 2022 compared to 41.7% in 1995, the 15/64 age group 72% in 2022 against 55.3% in 1995 and those aged 65 and over 4% against 2.9% over the same period (UNFPA). As this ageing is accelerating, the Saudi government even estimates that the over 60s could represent 25% of the population by 2050.
The number of households is 5.46 millions of which 35.9% are foreign and 64.1% Saudi (Stats SA, latest data available). According to the country's General Statistics Authority (latest data available), households have an average of 5.9 people and 52% of them are in Mecca or Riyadh. The majority of the population is urban with 84.7% of Saudis living in the city in 2022 and a third of whom live in settlements with more than one million residents (Data Reportal and World Population Review). There are four of these,  Riyadh (capital and the most populous city in the country with more than 4 million souls), Jeddah, Mecca and Medina. According to the World Bank, 98% of the population aged 15 and over was literate in 2020. Thus, 96% of women and 99% of Saudi men know how to read and write. The enrolment rate has increased significantly in the last ten years. According to UNESCO, 92.9% of the population attended primary education in 2020, compared to 96.6% in 2016. Some 96.2% of the population had secondary education in 2020 compared to 89.7% in 2016 and 70.6% of the population attended tertiary education in 2020 whereas only 58.3% had this chance in 2014. While unemployment affects 7.4% of the total population in 2021, it concerns 22.3% of young people aged 15 to 24, and 21.6% of women looking for work (only 3.7% of men) (World Bank). The hiring sectors are services (73% of total employment), industry (25%) and agriculture (2%) (World Bank).

Purchasing Power

In Saudi Arabia, GDP per capita PPP was $ 46,759 in 2020 compared with $ 39,882 in 2000, according to the World Bank. A five-year survey data issued by the General Authority for Statistics (GASTAT, latest data available) showed that the average monthly income for Saudi families amounted to SAR 14,820 in 2018, up 8.9% from 2013’s income of SAR 11,980. The average monthly income for individuals (Saudis and residents) reached SAR 2,485 in 2018, compared to SAR 2,062 in 2013. One of the main problem of Saudi Arabia is the low household savings ratio, which stood at 1.6 percent of annual disposable income for Saudi nationals in 2018, which is significantly below the 10 percent global standard recognized as the minimum level to ensure long-term financial independence.
The kingdom has a two-tier economy made up of about 16 million Saudis, with most of the rest foreign workers. They have lower income and work mainly in the construction and maintenance sector. The poverty rate among Saudis continues to rise as youth unemployment skyrockets.
Another notable inequality is women's access to education, work and outdoor activities. While Prince Mohammed bin Salman has taken a more progressive approach in granting driving licenses the kingdom remains one of the world's most lagging countries in terms of gender equality. In particular, gender segregation and women's wards prevent women from working, making Saudi Arabia one of the lowest countries in the world for women to access jobs. According to Stats SA, the proportion of women that is economically active is 34.9% (Q4 2021), far below the 79.5% male labor force participation rate.

Consumer Behaviour

According a survey of McKinsey & Company, Saudi consumer optimism has remained steady throughout the Covid-19 crisis, even if more than half of consumers have seen a decline in income savings. Most Saudi shoppers go to shopping centres for food, clothing and electronics. They can be divided into five broad categories based on their behaviours. The savvy consumers, brand savers, multi-channel buyers, discounted converts and selective spenders. More generally, Saudis prefer quality over quantity (two thirds of consumers value quality over price) and are attracted by international brands, especially luxury brands. However, in recent years there has been a change in the behaviour of consumers in the Arab world in general, and Saudi Arabia in particular. They pay more attention to prices and are therefore less loyal to brands. More than half of Saudi Arabian consumers have become more mindful of how they spend their money. Consumers tend to change to less expensive products, research brand and make shopping lists before buying. As the economy is recovering from the Covid-19 pandemic, consumers’ confidence level is increasing and the great majority of them have a positive outlook about the future (Ipsos, March 2022). Since the pandemic they focus more on healthy products, have a better work-life balance and have become more digital (PwC, March 2022).

The e-commerce market in the MENA region is particularly promising and represents the emerging trend in Saudi Arabia, where it grew about 60% in 2019-2020. It is expected to reach USD 13.3 billion by 2025 (Boston Consulting Group and Meta Platforms). The great majority of Saudis (77%) are shopping online more frequently than before the pandemic (Mastercard). A behaviour strongly focused on their mobile phones with more than half of internet users making their purchases smartphones and barely a quarter on a computer. This is mainly due to the predominance of a young and connected population - the internet penetration rate stood at 97.9% of the total population in 2022 according to Data Reportal - that seeks to save time and money, but also by the arrival in Saudi Arabia of new secure online payment methods. E-consumers are mainly men, aged from 25 to 44 years. The market's largest segment is Fashion with a projected market volume of US$3.84 billion in 2022, then there are electronics & media and food &personal care (Statista).

Consumer Recourse to Credit

As of 2010, the use of credit continues to grow in Saudi Arabia with consumer loans increasing by 17.3% every year between 2010 and 2014 at the height of the trend. This has been accompanied by an increase in the use of credit cards, whose circulation has increased by 28% in 2013 alone. To curb this progression before it becomes problematic, the Saudi monetary agency set up, as of 2015, restrictions on cash withdrawals citizens can make with credit cards. These are now limited to a maximum of 30% of the consumer's monthly expenses (compared to 50% previously).
In June 2018, Saudi household debt reached $ 88.6 billion, compared to $ 87.7 billion in the previous quarter. It affected 12.83% of households in 2017, according to the IMF.

Growing Sectors

With the Vision2030 plan, the kingdom hopes to diversify its economy. Tourism and leisure, manufacturing or new technologies are all sectors that should benefit from this new development. The digital economy is also a sector on which the Saudi government is banking on. In order to encourage the use of electronic payments, the Saudi Monetary Agency has taken a number of initiatives, including the introduction of a new electronic payment system "mada" and mandatory payment of salaries into bank accounts.
In addition, the creation of a new city dedicated to energy and the construction of a gas distribution network represent important opportunities. With more than $ 1.4 trillion in planned and ongoing major investments, Saudi Arabia is the largest construction project market in the region.

Consumers Associations

Consumer Protection Association of Saudi Arabia

Population in Figures

Total Population:

35,950,396

Urban Population:

84.5%

Rural Population:

15.5%

Density of Population:

17 Inhab./km²

Men (in %)

55.3%

Women (in %)

42.2%

Natural increase:

-0.13%

Medium Age:

24.0

Ethnic Origins:

The population is comprised of mostly Saudians (around 62%), non-Saudians (mostly Afro-Asians) represent around 38% of the total population. (General Authority for Statistics of the Kingdom of Saudi Arabia)

Population of main cities

Source: Citypopulation.de, Latest data available.

Age of the Population

Source: World Bank, Latest data available.

Consumption Expenditure

Media in Which to Advertise

Television

Private TV channels are not authorised to operate inside the country, however, Saudi Arabia is a major market for Pan-Arab satellite and pay-TV. Saudi investors are also behind UAE-based channels MBC and OSN. Daily viewership has been on a steady decline as only 49% of Saudis say they watch TV every day (Mideast Media Survey 2017, the same rate was 65% in 2014), one of the lowest rates in MENA. Domestic channels, as in most other countries in MENA, generate little advertising revenue (10% for domestic channels as opposed to 90% for Pan-Arab channels) and TV advertising expenditure lags behind print, radio and OOH at USD 39 million.

Main Televisions
Middle East Broadcasting Center (MBC)
Al Saudiya Television

Press

Newspapers can only be created by royal decree and are subject to censorship. A dozen dailies as well as Pan-Arab newspapers are available in the country. Newspaper readership has been on a steady decline and only 18% of Saudis read the newspaper every day (as opposed to 20% in 2014 - Mideast Media Survey). Nonetheless, newspapers continue to dominate the advertising industry and accounted for 48% of total advertising expenditure in 2016 (USD 1.1 billion). Magazines were only able to capture 2% of advertising spending (20% year-on-year decrease).

Main Newspapers
Al Watan
Al Riyadh
Okaz
Al Jazirah
Al Sharq Al Awsay

Mail

Commercial mail advertising is not very common, partly due to limitations in the Saudi postal system. Saudi national postal services offer a direct marketing tool, Shaher, through addressed and unaddressed promotional mails.

In Transportation Venues

Out-of-home (OOH) advertising in Saudi Arabia has proven resilient despite the advertising industry expenditure falling by 30% between 2015 and 2017. New infrastructure projects (Red Sea Project and the construction of the transnational economic city, Neom) are expected to give the outdoor and transport advertising a significant boost in the upcoming years. OOH advertising currently captures 21% of total advertising expenditure (third after newspaper and radio) and recorded a 4% year-on-year growth in 2016.

Market Leaders:
Abdul Latif Jameel

Radio

Despite a relatively small number of nation-wide radio stations (12 in total for a population over 30 million), Saudi radio's reach is the highest in MENA region (87%). Radio market concentration is also the highest, with the top three stations reaching almost three-quarters of the population. With this high penetration rate, the radio accounts for a large share of total advertising expenditure (24% of the total USD 1.1 billion spending and 8% year-on-year increase in 2016). As such, the radio remains one of the most cost effective and successful forms of advertising in the Kingdom.

Main Radios
Saudi Radio
MBC Radio

Web

Saudi digital market has been growing constantly as more and more Saudis use Internet for news, entertainment and shopping at the expense of traditional media. With Internet penetration as high as 93% and smartphone penetration at 95%, Saudis are one of the most digitally connected nations in the world. Snapchat has also chosen Saudi Arabia as one of the 29 countries where it offers advertising manager services (38% of Saudis use Snapchat on a daily basis- Mideast Media Survey). Digital advertising was expected to have brought USD 1.508 million in revenue in 2017, with search advertising accounting for the largest share at USD 819.6 million. Saudi digital advertising revenue is forecast to grow to USD 1,651 million in 2018.

Market Leaders:
Bassmat
Solutel
SolutionDots

Main Advertising Agencies

Porter Novelli
M&C Saatchi
ASDA’A Burson-Marsteller

Main Principles of Advertising Regulations

Beverages/Alcohol

There is a total ban on alcohol advertising as on-/off-premise sales of alcoholic beverages are also prohibited. The same advertising ban is also extended to energy drinks as of 2014.

Cigarettes

The Executive Regulations of Anti-Smoking Law issued by Royal Decree No. (M/56) sets forth a complete ban on tobacco advertising and sponsorship. Scenes containing tobacco use or promotion shall also be omitted from movies, programs and publications broadcasted in the country.

Pharmaceuticals/Drugs

Saudi Code of Pharmaceutical Promotional Practices regulates pharmaceutical advertising in the Kingdom. Pharmaceutical products must be issued with a marketing authorisation license before any promotion and their advertising must be approved by the Saudi Food and Drug Authority. Advertisements should include trade name of the product, its generic name, name and address of the company or the Agent responsible for marketing the product as well as all other information available in the product's leaflet. The Code does not distinguish between over-the-counter and prescription drugs.

Other Rules

Advertising must conform to religious and ethical codes. Most international brands edit their globally broadcasted advertisements to take out culturally or religiously sensitive image (especially regarding the portrayal of women).

Use of Foreign Languages in Advertisement

No specific rule regulates the use of foreign language in advertising. Nonetheless, advertisements in English are always accompanied by a translation or subtitles in Arabic.

Organizations Regulating Advertising

Ministry of Communications and Information Technology
Ministry of Commerce and Investment