Unpacking Saudi Arabia’s $4B online fashion opportunity

The Kingdom of Saudi Arabia? More like the Kingdom of Selling Apparel. Saudi Arabia is set to shake up global e-commerce, with online fashion sales predicted to grow from $2.34 billion in 2023 to $4.08 billion by 2027, up 74 percent. According to a 2024 report by the Saudi Fashion Commission, the country is uniquely positioned compared to China, the US, and Europe, which are currently the most prominent e-commerce markets globally. This is largely due to a whopping 65 percent of its population being under 40, which is markedly higher than the under-40 population in China and the US, at 51 percent and 54 percent, respectively. The demographic, comprising Gen Z and millennials, represents the largest number of online shoppers globally, per the Fashion Commission report. At the same time, the percentage of Saudis with smartphones, at 98 percent in 2022, is well above the global average of 68 percent. Despite Saudis using their phones for over five hours a day, only 39 percent of all e-commerce sales are generated through mobile phones, suggesting an untapped opportunity. Further bolstered by a government push towards AI, fashion e-commerce in Saudi Arabia is unlikely to look the same tomorrow as it does today. Will brands keep pace, lag behind, or lose out altogether? Fashion search begins online Although 74 percent of fashion sales are still expected to take place offline through 2027, the shopping journey undoubtedly starts online. As the Fashion Commission notes, over 60 percent of internet users rely on social media to research brands, making it key for brand discovery, awareness, and purchase consideration. In Saudi Arabia, Instagram and Facebook are primarily used for discovering new brands, while Snapchat leads in sharing purchases and following influencer content, according to a study by social media giant Snap and Kearney. “[Social media] makes me discover more products and learn more about them, either through influencers or ads,” says Osama Afesh, a 22-year-old fashion model who follows brands such as Tom Ford and Casablanca on Instagram. “TikTok is taking over, but it’s not going to be like Instagram; it’s basically the fashion industry’s online display hub.” Sara Alsaedi, a 26-year-old costume designer from Jeddah, agrees. “When it comes to researching and comparing products, Instagram is useful. I can check brand pages, see customer reviews in the comments, and even find user-generated content with styling inspiration,” she says, adding that she follows local brands like Doolab and KaafMeem. Women’s apparel drives sales As for what Saudi consumers are buying online, women’s fashion dominates, according to the Fashion Commission. In 2023, women’s apparel was valued at $647 million, almost double the size of men’s apparel at $357 million. “The increasing participation of Saudi women in the workforce earning a salary will change the market dynamics. They need more modest work attire than before,” says Reiting Lee, founder of The Oriental Hybrid, a consultancy that connects Chinese and Arabic-speaking markets. “Saudi female consumers have more power now to shape trends, and they will convey women’s empowerment, baring modesty and culture in mind, through clothing in this new era.” Products that reflect Saudi culture or national pride usually generate better sales by creating a stronger emotional bond with the consumers, Lee continues. “For women, several Saudi 100 brands are modernizing the traditional menswear elements and reinterpreting them on womenswear, such as Abadia’s Harness Belt and Hala AlGharbawi’s dress using rope inspired by Agal. The date palm symbol and Saudi green are also very popular in the market and can often be observed at the Saudi Cup.” Luxury retailers reap rewards Even luxury fashion sales are starting to shift online. A 2024 report by The Future Laboratory states that 60 percent of Saudis now use a mix of digital and traditional methods when purchasing luxury goods, with 39 percent predominantly using digital platforms. Abdullah Alkhorayef, founder of Ain Alfaras Atelier, says he only trusts luxury e-commerce platforms such as Mr Porter, Farfetch, and Matches. “I would buy things that are not available in Saudi, so luxury brands for men... However, I know that now many Saudis see what’s in the shops and then try to shop online from cheaper places, and that seems to be a trend happening now,” he explains. Saudi model Afesh also mainly shops for luxury brands through online retailers like Farfetch and Net-a-Porter, citing greater trust, better prices, and excellent service. This embrace of luxury e-commerce has given retailers like Chalhoub and Dubai-based Ounass a boost. In 2022, Ounass was ranked fifth in revenue among online stores in Saudi Arabia, growing 56 percent year on year, as highlighted in the Fashion Commission report. In April 2024, it was among the top 20 most visited fashion sites in the kingdom. Overcoming e-commerce challenges However, e-commerce faces a number of challenges, including high churn rates, low conversion rates, and high return rates. At the same time, interactions must be personalized, considering users’ size, budget, and cultural preferences. To address these challenges, brands should maximize the use of AR and emerging tech, advises Shahad Geoffrey, co-founder and CEO of Taffi, a startup that provides online stores with AI-powered personalized styling and shopping software services. “Virtual try-ons can help customers visualize products on themselves, reducing the hesitation associated with online shopping. AI chatbots and shopping assistants can offer real-time, tailored advice and recommendations, enhancing customer satisfaction and loyalty. These technologies can build trust and increase conversion rates by providing an immersive and informative shopping experience,” she tells Jing Daily. Taffi, for example, uses an AI-powered Fashion Co-pilot to guide users at various touch points in their journey, an AI stylist to engage in conversational commerce, and a Discovery Assistant to generate complete outfits based on the user’s profile and preferences. These solutions helped one US-based brand increase its average order value by 52 percent and double its sales in Saudi Arabia within less than a month. As Geoffrey says, “The key to reducing churn and increasing conversions is eliminating consumer confusion by answering their questions with relevant, hyper-personalized recommendations.” While some Saudi shoppers view AR try-on as a gimmick and express uncertainty about how it would work with their body type — highlighting the need for education about these tools — others like Gen Z Alsaedi express willingness to try anything that makes online shopping more convenient. In fact, the Snap-Kearney survey found that one-fifth of respondents stated that if they had virtual try-on options, their returns on online purchases would drop to zero. Although brick-and-mortar stores aren’t going anywhere, it’s clear that brands, especially newcomers to the market, need a strong online presence to grab the attention of Saudi consumers. And to keep that attention and ensure a seamless shopping journey, leveraging tools like AR try-ons and AI chatbots will be crucial. In Saudi Arabia, modern luxury is intricately linked to innovation.

Unpacking Saudi Arabia’s $4B online fashion opportunity

On this page

Published June 14, 2024

Sectors

Insights

Company

Unpacking Saudi Arabia’s $4B online fashion opportunity