Digital oasis: Luxury and tech converge in Saudi Arabia

What do you get when you have an abundantly youthful population and a nation bent on digital domination? A tech revolution that sends ripples across the globe. As part of Vision 2030, Saudi Arabia aims to become one of the most technologically advanced countries in the world. It is already the largest tech market in the Middle East and North Africa (MENA) region and has even surpassed the US on a digital regulatory maturity index, attributed to its cutting-edge digital infrastructures and stakeholder involvement. Keeping up with the digital pace is key to connecting with local consumers, 63 percent of whom are under the age of 30. According to the “New Codes of Luxury in Saudi Arabia” report, published by The Future Laboratory and Together Group, 46 percent of Saudi nationals ages 18 to 34 use predominantly digital methods for purchasing luxury goods. They are also increasingly interested in gaming, Web3, and crypto investments. Today, Saudi Arabian consumers demand convenience, innovation, and unique experiences — and new technologies are only raising their standards. How can luxury brands leverage these tools to satisfy these evolving shopping preferences? A shift to local e-commerce The Saudi government is striving to raise the ratio of non-cash transactions to 70 percent by 2025, up from 62 percent in 2023, in order to support economic growth and diversification. E-commerce sales are set to reach nearly $10 billion in 2025, up from $6.25 billion in 2022, according to Euromonitor. A testament to the kingdom’s booming online ecosystem, 74 percent of online shoppers are expected to shift from global to local e-commerce platforms, states consulting firm Kearney. One of the region’s favorite luxury retail platforms is Dubai-based Ounass, which offers carefully curated edits of exclusive capsule collections from local and international designers, along with express delivery to those in Saudi Arabia and other Gulf countries. “It’s this localized luxury mindset that e-commerce platforms in the region should note,” says Alex Hawkins, Strategic Foresight Editor, The Future Laboratory. “When planning events and product offers, they will need to strike a balance between global and local appeal. Region-specific collections hold sway here and offer exclusivity among this discerning community.” And that’s exactly what global luxury retailers have done to compete in the market. In 2017, Farfetch teamed up with Chalhoub Group, a leading partner for luxury brands across the Middle East, to open its first office in the region, roll out an Arabic-language website, and offer private client services in the region. It later partnered with Saudi Arabian retailer Rubaiyat to enhance its targeted offering for local shoppers. “The new generation of Saudi consumers want to respect their culture and live their culture, but they want to be global in their luxury outlook; it’s a unique blend of international sophistication and national nuance,” Hawkins adds. He advises global e-tailers to stock Saudi design talents and employ competitive pricing to differentiate themselves. “The new generation of Saudi consumers want to respect their culture and live their culture, but they want to be global in their luxury outlook.” Growing acceptance of NFTs Across the Gulf, a soaring awareness of NFTs is creating exciting avenues for fashion brands to explore, according to a report by Chalhoub Group. Of the GCC (Gulf Cooperation Council) luxury consumers interviewed, 23 percent already own NFTs, and 83 percent would consider buying one to redeem a physical product. Sol3mates, Chalhoub’s Web3-native sneaker brand, seized this opportunity by launching its inaugural NFT collection in 2023. NFT holders could become members of the community and receive exclusive membership benefits, including preferred pricing, free merchandise, and priority access to limited-edition drops. “The great reception in Saudi Arabia reflects the Kingdom’s growing interest in (digital) streetwear, linked to virtual assets,” Nick Vinckier, co-founder of Sol3mates, tells Jing Daily. “The GCC (UAE and Saudi Arabia) overall is our No. 1 market, followed by France, the US, and Japan. Overall customer feedback regarding NFTs centers on the novelty, exclusivity, and investment potential of NFTs, aligning with global trends in digital fashion.” Besides being redeemed for physical products, NFTs can also be used to gain exclusive access to luxury events and experiences. At the third Riyadh Season, for example, NFT access cards were used by holders to access Boulevard Riyadh City and Boulevard World, the festival’s key entertainment zones, and partake in various activities, including electronic games, festivals, concerts, and exhibitions. Not only do NFTs allow for more intimate consumer connections and innovative revenue streams, but they also empower luxury brands to obtain better data insights. “NFTs enable organizers to gather valuable data on attendee preferences and behaviors, facilitating more targeted marketing efforts,” Vinckier says. “They also open direct communication channels with attendees, allowing for enhanced post-event engagement and community building. This results in a new layer of customer loyalty based on engagement instead of merely purchases.” Mega cities? More like meta cities At the same time, the metaverse is forecast to contribute nearly $38 billion in additional GDP to Saudi Arabia annually by 2035, per a Deloitte study. This is changing expectations for shopping experiences; a Chalhoub survey of GCC consumers found that 89 percent would like to preview products in the metaverse, while 71 percent are already engaged with branded virtual experiences. Saudi Arabia has begun rolling out major metaverse projects, including XVRS, a digital twin metaverse platform of its smart city project, Neom. Described as a first-of-its-kind mixed-reality urban living model, XVRS will enable visitors to have a simultaneous presence in Neom both physically and virtually, as an avatar or hologram. The space will offer immersive entertainment, a social platform, and a built-in digital marketplace for crypto and NFTs. Earlier this month, the Saudi government also launched a cultural metaverse to commemorate its founding day. The platform features mini games, a performance center for live events, and replicas of historical sites to allow audiences to explore the country’s heritage. While metaverse endeavors in Saudi Arabia are currently centered around real estate and tourism, they point to an increasing appetite for innovative experiences and the kingdom’s commitment to diversify its economy. As Hawkins says, “Already, robust adoption of e-commerce and fintech is creating the right conditions for a new breed of digital luxury among Saudis. The trickle-down effect of this means there will be a lot of future opportunity when it comes to digital experiences and engagement — whether we call that the metaverse or not.”

Digital oasis: Luxury and tech converge in Saudi Arabia

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Published March 05, 2024

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Digital oasis: Luxury and tech converge in Saudi Arabia