Fashion in the Kingdom: Need for international brands

23 Mar, 2024 - Uncategorized

Built on three pillars: an ambitious nation, a thriving economy and a vibrant society, Saudi Arabia’s Vision 2030 aims at increasing non-oil gross domestic product by 50%, the Kingdom’s private sector contribution to the GDP has gone from 40% to 65%, as well as the labour force participation of women from 22% to 30%.

With Saudi Arabia’s move toward economic diversification and expansion outside of its biggest natural resource, bolstering non-oil contributors to GDP and a greater inclusion of women in the workforce, fashion is considered an integral part of the cultural economy and has the potential to be a major driver of the country’s economic growth.

According to the 2023 Saudi State of Fashion report, the total trade deficit for the Kingdom’s finished goods fashion industry was GBP 5.16 billion (SAR 24.4 billion) in 2021, an increase from GBP 4.1 billion (SAR 19.1 billion) in 2017, the bulk of the trade deficit driven by apparel and footwear. In support of the realisation of Vision 2030, the Saudi Fashion Commission suggests that import substitution can increase economic diversification and promote domestic production and innovation, thereby underscoring the importance of a local fashion ecosystem.

The fashion industry currently accounts for 1.4% of the Kingdom’s GDP and is responsible for approximately 230,000 jobs, or 1.8% of the total labour force, of which 52% are women. There are various initiatives within the Commission for empowering local businesses and promoting entrepreneurship, like the Saudi 100 Brands, which seeks to identify and elevate homegrown brands by giving them visibility on the international stage in Milan, New York and Paris.

Whilst KSA’s looks to develop its local fashion market, a number of trends persists and the reliance on fashion import remains and presents opportunities for UK SMEs fashion brands.

  • Sportswear is expected to grow by 21% through to 2027, driven by increased health consciousness and global sports brands such as Adidas and Nike’s strong marketing in the region.
  • Luxury goods continues to perform remarkably in Saudi and the wider the GCC region, with sales reaching GBP 7.70 billion (SAR 36.4 billion) in 2021, representing a cumulative growth of approximately 23% from 2019 levels. Its luxury fashion market growing by approximately 19% and is expected to drive the growth of the luxury market in the GCC, which is anticipated to reach GBP 8.73 billion (SAR 41.2 billion) by 2030.
  • At 9% of total retail sales in Saudi Arabia, e-commerce has the potential to significantly increase its market share.

As it becomes increasingly mature, Saudi Arabia’s domestic fashion industry will contribute strongly toward the realisation of the medium-term Vision 2030 strategic goals. Owing to changing consumer preferences, evolving retail landscapes, and a growing population, fashion sales in Saudi Arabia are expected to surge by 48% from 2021 to 2025, representing a notable compounded annual growth rate (CAGR) of 13%, thus presenting an opportunity for UK SMEs operating with the fashion retail space looking to explore new markets.