Saudi traditional stores remain resilient despite e-commerce growth: Knight Frank

Amar Hussain, Associate Partner in Research for the Middle East and North Africa region at Knight Frank

E-commerce now accounts for approximately 36% of total point-of-sale transactions in Saudi Arabia, particularly in the entertainment and consumer goods categories, but it has not negatively impacted traditional stores, said Amar Hussain, Associate Partner in Research for the Middle East and North Africa region at Knight Frank.

In an interview with Argaam, Hussain added that both e-commerce channels and point-of-sale transactions grew by 5% during H1 2025, reflecting overall growth in spending rather than the replacement of one channel with another.

Hussain warned that shopping centers relying solely on transactions risk losing their appeal, emphasizing that physical stores must now offer interactive experiences, temporary events, premium dining, and integrated services such as “click and collect” and flexible returns to retain visitors.

He explained that average individual spending in the retail sector ranges between SAR 100 and 400 per visit, with data showing that 71% of consumers spend within this range, depending on monthly income, purpose of visit, and type of purchases.

The middle-income segment tends to spend between SAR 100 and 300, while the high-income segment can exceed SAR 1,000 per visit, highlighting a dual market that combines value retail and the premium sector.

Hussain pointed out that retail spending in Saudi Arabia reached SAR 1.41 trillion in 2024, growing 7% year-on-year (YoY), supported by a young, digitally aware population, increasing reliance on electronic payments and e-commerce, and consumers’ ongoing search for value.

He expects the positive momentum to continue through 2025 and beyond, fueled by wider use of payment tools such as buy-now-pay-later (BNPL), which is expanding shopping baskets and drawing in more consumers.

Regarding the best-performing segments, Hussain said that food and beverages lead the way, with restaurants and cafes accounting for around 29% of total point-of-sale transactions in Q1 2025, supported by promotional offers, multiple shopping channels, lifestyle-driven experiences, and quick-service options, particularly amid the continuation of hybrid working models.

Looking ahead, Hussain said Saudi Arabia plans to add around 4.9 million square meters (sqm) of new retail space by 2030, including more than 600,000 sqm in Riyadh through The Avenues and Diriyah Square projects between 2026 and 2027.

He cautioned that new projects risk underperformance if they lack clear and distinctive offerings, while the most resilient projects will be those that integrate mixed-use spaces, rich experiences, and specialized dining options, in line with the urban development plans for the regions.