Retail sector in Saudi Arabia: outlook for air-conditioners and home appliances

Jameel A. Al Molhem, Managing Director of Shaker Group talks about the retail sector in Saudi Arabia.

In light of everything going in in the global economy as well as locally, what is the outlook for Saudi Arabia’s retail sector?

Shaker is in the retail and project market. We supply durable goods, mainly air conditioning through our partnership with LG and also home appliances with Whirlpool Group & Midea Group. This has been the story of Shaker for the past 60 years. We hold a dominant position in that market, especially in AC.

The sector itself is very resilient; given the demographics of the Saudi economy, it can easily withstand recessions. The project market, on the other hand, is more vulnerable to economic cycles. Last summer, the heat index reached an all-time high. ACs are a necessity here, and that positions Shaker Group well to resist any potential crisis.

What makes you so sure that the Saudi customer base is so strong, has so much potential for growth? Air conditioning, for example, will see a lot of new regulations, and there is always talk of energy conservation, preserving water resources, etc.

The demographics in Saudi Arabia lend themselves to spending. Many Saudi graduates, both male and female, are coming into the employment sector and will have disposable income.

We anticipate a major housing boom, for example. For one thing, there is the natural growth and urbanization of the Saudi population which will boost the market. And the government is looking at housing projects as well as taxation initiatives for undeveloped lands. This will encourage a range of demographics to turn to the housing market, and then that, of course, will reflect on the appliance sector, ACs and the like, which are household staples.

Of course, energy management and energy savings are pivotal themes, and every organization will have to implement these into their strategy. The government has been very clear about its intention to preserve electricity, and has enforced this particularly stringently for AC. Some 60% of housing-related electricity is consumed by air conditioning. Improving energy standards and implementing regulations for AC units are ultimately saving a lot of funds which then need to be put into electric power plants.

That is why the AC units sold on the Saudi market have such high standards. Looking forward, there will be many regulations to do with the energy footprint of commercial entities– industrial plants, etc.– which will foster a new economy in the market. We need to look at how we can support these organizations in achieving optimal energy savings. This is something that we at Shaker have started to invest in through our subsidiary energy management services company. Right now, we are very bullish in that segment, especially as there is a major catalyst which is the electricity tariffs re-balancing. This boosts equipment and services, among other things.