E-commerce to represent over 25% of Saudi retail sales by 2035: McKinsey

Abdellah Iftahy, Partner and Core Leader of McKinsey & Co. in the Middle East at McKinsey Middle East

E-commerce is expected to constitute more than 25% of Saudi Arabia's retail sales by 2035, compared with 10% currently, Abdellah Iftahy, Partner and Core Leader of McKinsey & Co. in the Middle East at McKinsey Middle East.

On the sidelines of Retail Leaders Circle MENA Summit, Iftahy told Argaam that 80% of spending in 2035 will likely come from millennials, who are born between 1981 to 1996, and younger generations. This is compared to less than 35% currently.

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He added that factors affecting the market in 2024 should be discussed. This includes the impact of inflation on demand, the development of infrastructure such as malls and new cities, and the timely availability of offers in the food and beverage sector to consumers.

The main considerations for market performance include the population composition, the increase in the number of expatriates, and the growth in population and tourism, as these factors are essential in determining whether the market will witness robust/moderate growth or remain stagnant. Meanwhile, there are positive indicators that should be considered to help the market reach its full potential.

Regarding 2035 outlook report, Iftahy pointed out that when considering the future of consumers, the middle class will constitute 75% of the population, and this trend should be taken into account to serve this comprehensive market.

The average number of family members is expected to reach four by 2035 compared with six currently, which affects consumer knowledge.

The report anticipates major changes driven by forces impacting the Saudi market, particularly as youth dominate consumption. A total of 60% of the population is under 30 years old. Additionally, the population is expected to surpass 40 million by 2035, amid significant growth in the entertainment and religious tourism, which will contribute to expanding the consumer base.

Amid female labor participation, families are expected to have dual incomes, leading to increased disposable income for spending. Individual income levels are likely to grow in the future given the economic expansion and increased consumers within the economy, said the report, expecting significant market growth and spending.

The report highlights that Saudi consumers are likely to demand more personalized interactions with the increasing prevalence of e-commerce. Saudi consumers are anticipated to be more demanding going forward.

Regarding companies, he stressed the need for businesses to adapt to future consumer preferences, incorporating digital and analytical strategies to provide a seamless online experience.