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What is driving the Bags and Luggage market in KSA? – 7 key tailwinds and Catalyst

April 13, 2023
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Saudi Arabia has been strategizing to shift its economic dependency from oil and focus on non-oil sectors. Promoting tourism is one such important initiative of the country. Saudi Arabia is one of the major destinations of religious gatherings for Muslims with one of the largest religious congregations of Hajj and Umrah. As per Ken research findings, ~20 Mn tourists visit Saudi Arabia in a year for religious reasons with 2.4 Mn visiting Hajj in 2019. The growing tourism has also cushioned many industries and the Bags and luggage market is no exception here. The industry is growing at a positive growth rate but has a huge potential to grow more in the coming years.
The interesting note is- rising tourism is not “only” the growth driver of the KSA bags and luggage market. To find out what is contributing towards the expansion of the bags luggage industry in KSA, keep reading!

1. The Economy of Saudi Arabia is growing at a CAGR of 3.5% with Rapid Growth in Non Oil Sectors such As Tourism, Retail Business and Manufacturing

Country Demographics

  • Population (2020): 34.8 Million1
  • Expat Population (2020P): ~10 Million2
  • Poverty Rate (2020P): 13%3
  • Current Life Expectancy: 75.22 (2020)4
  • Average Monthly HH expenditure is ~$3,886.4 per month for Saudi in 2020

GDP and Inflation Rate, 2015-2020P

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  • Nominal GDP per Capita at Current Prices (as on 31st December 2020P): $ 20,542.06
  • Annual Growth Rate at Current Prices (2020P): 14% 6
  • Unemployment Rate (2020P): 9.77
    1. Saudi (2020P): 15.97

Kingdom of Saudi Arabia

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The Kingdom is ruled by the house of Saud along traditional Islamic lines. Saudi Arabia is the largest oil producer in the Middle East. The proven oil reserves in the Saudi Arabia are the second largest in the world, estimated to be 268 billion barrels.

Geographical Location
  • Area (2020): 2,000,000 square kilometers.
  • 13 administrative regions
  • Main Cities: Dammam, Jeddah, Riyadh
  • 35+ Free trade Zones with 31+ Industrial Cities and 4 operational Economic Cities
Major Industries as part of GDP (2020)6
  • Mining and Quarrying: $240.6 Bn
  • Manufacturing: $358.8 Bn
  • Finance, Insurance, Real Estate & Business Services: $95.6 Bn
  • Wholesale & Retail Trade, Restaurants & Hotels: $70.9 Mn
  • Travel and Tourism: $50 Bn
Trade Scenario
  • Imports: $ 140.0 Bn (2020P), CAGR: -4.7% (2015-2020P)
    Major goods: Machinery, Vehicles, Food Products
    Major Countries: China, USA, UAE, Germany, Japan, India
  • Exports: $250.0 Bn in (2020P), CAGR of 6.6% (2015-2020P)
    Major goods: Mineral Products, Products or Chemical/ Allied Industries, Plastics
    Major countries: India, China, Japan, South Korea , USA
Source: 1 – World Bank | 2 – United Nations Department of Economic & Social Affairs, Worldo Meters Info | 3 - The Brojen Project | 4 - Macrotrends LLC | 5 - General Authority for Statistics of Saudi Arabia | 6 – KAPSARC Data Portal | 7 - Saudi Arabian Monetary Agency | 8 – CIA OpenGov Library | 9 – Economic Cities and Special Zones Authority of Saudi Arabia | 10 – International Trade Center Database, Trademap and Central Intelligence Agency | P – Provisional Numbers

2. Due to the Global Pandemic, tourism was on hold due to which KSA Bags and Luggage Market also saw a Significant Dip in Revenues in 2020

Impact of COVID19 in the Bags and Luggage Industry

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Key Facts1

75% Domestic air travel capacity reduction in April 2020
40-45% Reduction of Footfall in Retail Shops/ Malls during 2020
50+ Shut down of Stores (Arabian Centres, Jarir, Xtra and others)

The onset of global pandemic led to a significant spike in Luggage in the early March since the expats started shifting back to their native places. Customer footfall to shopping malls and retailing stores along with leisure and business travels decreased significantly as consumers had to stay at home. This had a particularly detrimental impact on bags as many of these sales are either dependent on tourist population or carried out on impulse

Post COVID Outlook

Consumer Framework
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  • Companies focus on Building Omni Channel Strategy: The conventional brick and mortar retail business will follow a downward trend over the years with e-retailing to exponentially grow post the corona pandemic.
  • Subdued Demand (even though restricted travel will resume) for products such as trolley bags, suitcases, rucksacks and other travel accessories— around 30-35%2, as compared to pre-Covid levels.
  • Because consumers are likely to opt for domestic destinations in the next few months along with focus on keeping a healthy lifestyle, a shift in preference towards smaller and convenient bags such as duffles, backpacks, and weekenders would be in demand.
  • Brands such as Samsonite will cut down their advertising spends for the coming years and increase their spend on the digital medium to gain more traction.
  • The company are also focusing on smaller products that can carry items like hand sanitizer and extra masks which can be folded up into a tiny square when not in use and other accessories such as iPhones and sunglasses.
Source: 1. Gulf News.com 2. Source: Interviews with Industry Veterans, Industry Articles, Ken Research Analysis

3. Presently over ~35 Million Saudi & Non-Saudi Population of Different Income Group presents a Huge Potential for Different Variants of Bags and Luggage present in the Market

Basis Gender, Nationality and Age Group2

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By Income Distribution, 20202

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Saudi Arabia International Tourist Statistics, 20203

~ 19.7 Mn Number of International Arrivals in Saudi Arabia (2020)
USD ~870 Average Spend by International Tourists per Visit
Riyadh, Mecca, Medina & Dammam Most popular Tourist Destinations in KSA

Saudi Arabia is one of the major destinations of religious gathering for Muslims with one of the largest religious congregations of Hajj and Umrah.

Source: General Authority for Statistics, Saudi Arabia l 2. Gulf Research Centre
Note: Dates are mentioned as on 31st Dec, 2020 Represents Potential Audience

4. Imported and Locally manufactured Bags and Luggage are effectively distributed to all Retail outlets via Effective Distributive channels operational throughout KSA

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Source: Interviews with Industry Veterans, Industry Articles, Ken Research Analysis

5. Seasonal Discounts during festive months of Eid and Ramadan, New years and Christmas are offered for high influx of customers in the Stores

Seasonal Indicators of Retail Sales In KSA

Ramadan

  • Major Months: April, and May comprise peak shopping season.
  • Ramadan presents many valuable seasonal marketing and promotional campaign opportunities.
  • Much of the online activity shifts from daytime into the evening hours, meaning marketing campaigns should be adjusted accordingly.

Eid al-Fitr 

  • Major Months: July to September
  • In Saudi Arabia, both Eid celebrations are a ten-day government holiday.
  • This holiday presents many opportunities for a variety of marketing campaigns targeting Arab and Muslim consumers.
  • Collaborating with destinations, hotels, and airlines  for advertising promotions for special Eid offers, like discounted rates, or special feasts.
*Note: Retail Sales for the month of June has been considered as the base value for calculating the monthly growth rates. These are tentative growth rates and we are conducting additional interviews to confirm the same

6. People of KSA are being aware of the fashion trends by Influencers and Bloggers trend, Online Marketing Techniques in KSA which is boosting the demand for stylish yet functional bags and luggage in KSA

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Fashion Influencers/ Bloggers

  • Highly Influenced by Fashion bloggers, celebrities and Instagram Followers such as Lama Al-Akeel , Just.bayan with 584k and 278k followers as on 6th April 20201
  • First Fashion week was held in Riyadh in 2018, making Youngsters and women more fashion Conscious
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Restrictive Raw Material Procurement

  • Legal Restrictions and Various campaigns by many activist groups against the Use of leather are shooting up the prices for manufacturers & retailers in KSA.
  • Custom duty on leather Imports has been increased from 12% to 15% by Saudi Council of Ministers effective from 20 June 20203
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Fashion Conscious Youngsters & Women

  • Young Saudi men are turning against traditional looks & following latest fashion trends in clothes, accessories and untraditional bags
  • Fashion and Style is also influenced by studying abroad for youngsters especially teenagers between 16 and 18 having courage to try out new things.2
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Rise in Online Purchases due to COVID

  • With closure of malls due to COVID, online shopping has been a mental satisfaction or emotional release during house quarantine or self-isolation for unnecessary items, such as clothes & bags
  • Amazon even hired extra staff to keep up with worldwide demand; plans to take additional 100k warehouse & delivery workers through April 20202
5

Liberalisation of Societal Norms on Women

  • Cultural change from being Islamic orthodox to rational changes brought by the new King of the Kingdom, Mr. Salman Abdul-Aziz
  • Changes include lifting the ban on driving by women and accessing basic rights, like education and healthcare, without permission from a male guardian
  • The independence has led to a positive impact on the bags & luggage market in KSA
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New Start Ups in the Market2

  • Start Ups such as Mine Bags, Vintoria are providing luxury bags & Bags with traditional hints making them attractive to Saudi youth
  • Accessories for Mine Bags are designed and made by other Saudi startups, NGOs, and charities.
  • Collaborations with Big Designers such as Nasiba Hafiz are adding more to sales
Source: Source: 1. Instagram.com 2. ArabNews 3. Deloitte

7. Also, the growth of E-commerce, FDI, rising Tourism, and surging Young and Women population will further fuel the growth of the Bags & Luggage market in KSA

Growth of Tourism Sector

  • The growth in domestic tourism has supplemented the growth of the luggage market.
  • According to Saudi Communication for Tourism and National Heritage, there were 2 mn domestic tourist arrivals during midyear vacation in 2019.
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New Investments

  • Local family-owned businesses including Alhokair, Alshaya, Al Tayer, Azadea, Chalhoub, Saudi Jawahir Trading and Rubaiyat increasing digital retail through franchise relationships, joint ventures or distribution-only models
  • Start ups such as Mine Bags with Innovative concepts for Bags are entering the market
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Surging Young & Women Population

  • 55%2 of the population in Saudi Arabia belong to the Young Age Group (20-50 years) who are becoming fashion conscious & foreseeing bags as a style statement than its functional aspect
3

High Consumer Spending

  • Average Spending in KSA is twice as much on fashion as the average consumer in China.4
  • The average monthly “consumption” expenditure of households in Saudi Arabia is as high as $3.12 k- 3.8 k in 20182
4

Rising Sports Practitioners5

  • Saudi men & women (18.9%) are more active in practicing sports as compared to Non Saudis (13.8%)5
  • ~20.0% of the population are individuals aged 15 years or above who practice sports activity in 2019; 76% of them have age >20 years or more5
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 New Malls in Pipeline

  • Construction of New malls (Mall of Saudi, City Center Ishbiliyah, Mall at Yanbu & Avenues by Investors such Nesma & Partners, Al Futtaim, Lulu Hyper market for Retail Outlets
  • Despite retail rents continuing to decrease, mall operators continue to retain tenants & maintain average rental rates through incentives including rent free periods & discounts3
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Source: 1. UNCTAD Report 2020 | 2. General Authority of Statistics | 3. JLL Report and Arab News| 4. Mckinsey| 5. GASTAT, Ken Research Analysis |Sports practitioner are defined as individuals who are aged above 15 years and engage in sports activity for 150 minutes or more in a week.
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Some of the Intelligence Curated by Ken Research in Bags and Luggage Space:
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