Consumers in Saudi Arabia are cautiously optimistic about the economy, and there has been a notable shift in purchasing behavior that shows more customers are prioritizing price and value. This evolving consumer landscape underscores the urgent need for retail and consumer companies to understand changing preferences and to adapt their offerings accordingly.
Conducted in December 2024, our “Saudi Consumer Sentiment Survey” gathered insights from 3,500 respondents across Saudi Arabia, uncovering mixed sentiment. While 56% of consumers were “optimistic” or “very optimistic” about the economy, 44% expressed pessimism or neutrality regarding the financial outlook. Breaking down this consumer sentiment by age reveals younger consumers are less confident: 49% of respondents aged 18-29 feel optimistic compared to the overall 56%. This suggests youth-focused businesses need tailored strategies to engage this demographic effectively.
Overall, the survey results illustrate the emergence of a value-conscious consumer with many respondents indicating plans to reduce spending in discretionary areas. Specifically, 39% aim to reduce dining expenses, 38% will scale back on entertainment and home furnishings, and 37% intend to spend less on electronics. There are also early signs of reduced essential spending. For example, 14-21% of respondents in Riyadh and Jeddah plan to decrease grocery spending in the next six months, compared to 13-17% in smaller cities. This trend highlights the need for major grocery retailers to consider more value-driven formats, such as discount stores, to align with evolving consumer priorities.
With more respondents reporting a decline in income rather than an increase, spending patterns have noticeably shifted. Additionally, consumer spending is outpacing income growth, resulting in 41% of consumers reporting a decrease in their savings.
Understanding what drives Saudi shopper preferences and market trends
Several key factors influence the purchasing decisions of Saudi consumers. Price stands out as a dominant consideration, yet quality remains an essential factor. Notably, nearly half of respondents indicate that when they prioritize saving money, they engage in practices such as comparing prices (48%), seeking out deals and promotions (47%), and opting for stores that offer lower prices (46%).
Consumers find it easiest to compare prices for electronics and groceries, likely due to the structured pricing and available comparison tools. In contrast, fashion and dining present challenges because of their variability, making it difficult for consumers to make informed decisions about price-quality ratios.
This focus on pricing means it’s important that businesses offer clear and transparent value propositions to attract and retain customers in an increasingly competitive market. Additionally, an emphasis on pricing affects loyalty. Pricing also influences brand loyalty — 31% of consumers say they will seek out cheaper alternatives for dining next year, while 30% anticipate switching entertainment and electronics purchases. In contrast, only 15% plan to change their fresh produce grocery shopping habits, indicating strong loyalty in this category.
Three winning strategies for retailers in a changing economy
As the global economic landscape evolves, it presents a significant opportunity for retailers to adapt their strategies to meet the changing needs of customers. By embracing customer-centricity and prioritizing value-led offerings, retailers can unlock their potential and foster deeper connections with consumers, all while maintaining a commitment to overall experience and quality. To effectively navigate this transition, retailers must:
- Develop value-driven propositions: Strategies to make pricing competitive will resonate with consumers seeking affordable options, but there must also be a balance to maintain quality and ensure offerings remain attractive. Retailers can achieve this through various levers, including strengthening their value-focused assortment, effective promotions, off-price strategy, and private labels.
- Elevate store operations: Optimizing store operations enhances customer experience and improves overall efficiency, ultimately improving profitability. Success requires a multifaceted approach, including adopting leaner operations that reduce costs while allowing for reinvestment in growth initiatives such as personalization, store format and technology upgrades. An end-to-end approach to excellence is essential, encompassing all upstream activities, including purchasing, and supply chain management, as well as in-store activities. Artificial intelligence and automation, combined with robust performance management, enable this transformation to ultimately deliver an enhanced customer experience.
- Implement a robust omnichannel strategy: It is essential for retailers to recognize and respond to customers' channel preferences across various product categories. By investing in digital capabilities and technology, retailers can enhance their competitive edge and better serve the modern consumer. Some key strategies include focusing on social commerce as a key component of digital strategy, creating seamless experiences between digital and physical channels, and building an ecosystem through external partnerships and integration across different assets.
The Saudi market offers immense potential for growth, but success requires a deep understanding of consumer behavior, a commitment to meeting their evolving expectations, and agility in addressing their financial concerns. By understanding the nuances of consumer sentiment, organizations can better engage with their target audiences and build a more dynamic future.
