Snapchat & Kearney Report: Saudi Retailers Have Yet to Catch Up with the Kingdom's Innovation Pace
In an exclusive interview, Dina Al Sabbagh, Global Research and Insights Lead at Snap Inc., explains to Communicate why retailers in the Kingdom need to focus on investing in building immersive and engaging experiences. She delves into the numerous factors influencing Saudi youth's choices and how retailers can leverage the latest trends in technology and consumer behavior to stay competitive.
Snapchat is deeply embedded in the fabric of Saudi Arabia’s youth. With that being said, the pace of innovation at which Saudi Arabia is heading is one that has already received apt global attention. A recent report commissioned by Snap and Kearney finds that despite this rapid development, various businesses are still lagging in retail innovation.
Dina Al Sabbagh, Global Research and Insights Lead at Snap Inc., explains to Communicate why and also challenges retailers to step out of their comfort zone and leverage the ongoing digital innovation in the Kingdom.
What factors are best driving the rapidly growing pace of innovation in Saudi Arabia?
Innovation in Saudi Arabia is being fueled by a convergence of factors. The ambitious Vision 2030 initiative is the main catalyst of the Kingdom's transformation, focusing on technological advancement and economic diversification. The government is heavily investing in digital infrastructure, fostering an environment that encourages innovation and entrepreneurship. This commitment is creating the right foundation for growth and business development.
To complement this, Saudi consumers are at the forefront of adopting digital experiences. They are a forward-looking young population with an internet adoption reaching 100% and smartphone penetration hitting 95%. They are open to new ideas, driving demand and eager to engage with the latest innovations.
Additionally, the cultural landscape in Saudi Arabia is undergoing significant shifts. Historically a closed market, the Kingdom is now embracing globalization, opening up to new ideas, trends, and opportunities. This openness is not only attracting international businesses and investors but also encouraging local enterprises to innovate and compete on a global scale. Together, these factors are ensuring that Saudi Arabia continues to transform rapidly, positioning itself as a leader in the digital age.
We know that Snapchat is embedded in the fabric of KSA’s society – especially the young community. With that in mind, can you define what it is about Snapchat that attracts the community? How has it become a part of the country’s culture?
As Saudi Arabia undergoes rapid societal and cultural transformations, the need for this tight-knit community to stay connected with family and friends remains paramount. Connections are a fundamental part of the daily lives, culture, and values in KSA, and these connections are fueled on Snapchat. Saudi nationals say Snapchat is their favorite app for sharing their most meaningful moments. It’s the most popular social connectivity app in KSA, and is more than twice as likely to be used to connect with friends and family than all other such apps.
With over a decade of presence in the region, Snapchat has become a part of the nation’s social fabric, offering a safe and private space for those of all ages to gather online daily. In fact, Snapchatters in Saudi Arabia open the app over 50 times per day on average, making it the most frequently used app throughout the day. This makes it ideal for businesses seeking to authentically engage with the Saudi community, as well as creators wishing to showcase their true selves. Snapchat empowers businesses of all sizes to build trust and influence. With a monthly addressable reach of over 22 million and reaching more than 90% of 13-34-year-olds in the Kingdom, Snapchat is the go-to platform for Saudis to stay updated, connected, and engaged with their community.
How is Snapchat redefining online shopping in KSA?
As the Kingdom undergoes a rapid shift towards fully integrated digital retail experiences, Snapchat emerges as a pivotal player in meeting the evolving shopping needs of Saudi consumers. At Snap Inc., we are committed to empowering retailers with innovative tools and technologies that enhance the consumer journey, offering convenience, accessibility, and personalization. Through narrative-driven content and immersive experiences, Snapchat enables businesses to engage with consumers in unique ways, driving product discovery and influencing purchasing decisions.
Offering features like AR try-on experiences have revolutionized the shopping journey, by bringing the store directly to consumers’ fingertips. In recent years, we introduced Snap’s AR Ramadan Mall to the region, an innovative shopping experience merging the digital and physical worlds. This not only showcased exclusive deals from top brands but also gave Snapchatters the chance to experience online shopping in an entirely new way, enabling them to share their favorite products directly with friends and family. Snapchat's dedication to reshaping online shopping into an engaging and interactive journey reflects its commitment to enhancing the overall consumer experience in KSA and beyond.
Are retailers in KSA aware of the ongoing digital transformation and its pace? Can you provide an insight into the various sectors that have best leveraged and those that are still lacking in embracing this transformation?
It is becoming clear that traditional means alone are no longer effective for retailers who want to engage customers authentically. To build and maintain competitive advantage in Saudi Arabia’s new era, retailers need to look at digital not as an add-on to their traditional business model, but as the backbone to attracting and winning the loyalty of customers that today have more choice than ever before.
According to the report conducted with Kearney, sectors such as governmental services, consumer services, telecom and entertainment are perceived to be the most advanced in embracing digital transformation. Retailers in KSA are increasingly recognizing the importance of digital transformation, but are not necessarily acting as fast. Currently, less than 30% of consumers see the sector as being technologically advanced. While some retailers in KSA are embracing the digital revolution with open arms, others are still playing catch-up. Categories like lifestyle brands and grocery retailers are leading the charge, leveraging digital tools to enhance customer experiences. However, there's still work to be done to bridge the gap and ensure that all retailers are equipped to thrive in the digital age.
How can retailers build meaningful relationships with Saudi’s Gen-Z? Given the fact that they are the most active and dominant communities in the country.
To build meaningful relationships with Gen Z consumers in Saudi Arabia, retailers must prioritize the innovations that resonate with this tech-savvy demographic. This generation’s shopping preferences change rapidly, and they expect brands to keep up with them. This is why we see that 88% of them are more likely to recommend brands that offer innovative shopping experiences. With over 85% of Snapchatters using lenses daily, retailers have a prime opportunity to leverage AR experiences to engage and connect with their audience. By 2025, it's estimated that almost all of the Gen Z population in Saudi Arabia will be frequent AR users, underscoring the importance of integrating AR into retail strategies.
Moreover, retailers need to address the increasing demand for convenience and personalization among Saudi shoppers. The evolving shopping journey, driven by sophistication and AI-powered hyper-personalization, presents an opportunity for retailers to tailor promotions and messages in real-time, catering to the unique preferences of Gen Z shoppers. By embracing innovative technologies like AR and AI, and prioritizing convenience, personalization, and privacy, retailers can foster meaningful relationships with Gen Z audiences.
Are retailers leveraging the true potential of social and quick commerce in the Kingdom? If not, what are the various barriers reducing execution?
Retailers in the Kingdom have a vast and largely untapped opportunity to leverage the power of social commerce. While platforms like Snapchat offer unparalleled reach and engagement potential, many retailers are still not fully harnessing these capabilities to connect with buying audiences in KSA.
Despite these advantages, there are barriers including a lack of awareness among retailers about the potential of platforms like Snapchat, as well as perceived challenges in integrating AR technology into marketing strategies. Additionally, some retailers may be hesitant to adopt new technologies or lack the resources and expertise to implement them effectively. To overcome these barriers, retailers need to prioritize understanding the unique needs of the KSA audience and tailor their strategies accordingly.
In what ways do retailers need to localize their social commerce strategies to best connect with their consumer base in KSA? How is the Kingdom’s DNA different from any other market? What makes it the best place to expand commerce for retailers?
Understanding Saudi Arabia's unique consumer landscape is essential for retailers to succeed. With a strong digital presence and high social media engagement, Saudi consumers expect seamless experiences, relevant brand values, and an understanding of their lifestyle.
Retailers need to tailor their strategies to resonate with the local audience, who are currently balancing between leaping towards transformation while holding on to a culture they’re so proud of. Weaving this reality into a brand’s content, leveraging creators effectively, and pursuing partnerships with complementary brands can go a long way. Success hinges on embracing digital tools, enhancing customer engagement, and delivering personalized experiences that cater to Saudi Arabia's distinct market dynamics and preferences.
Between in-store and online experiences – which is the most preferred in the KSA? Among which communities and why?
The short answer: Hybrid. In Saudi Arabia, there's a clear preference for online and hybrid shopping experiences over traditional brick-and-mortar stores. An overwhelming 84% of survey respondents favor engaging in at least part of their shopping activities online. Among these, 46% prefer a hybrid approach, blending both online and in-store experiences, while 38% opt for exclusively online shopping. Only 16% still prefer traditional in-store experiences over online options, and we expect this number to shrink with time.
This preference for online and hybrid experiences is driven by several factors. Convenience ranks high across all demographics, with older customers notably valuing it twice as much as younger demographics. Value for money and a wider assortment of products are also critical factors influencing consumer choices, often associated with online or omnichannel shopping.
Moreover, the hybrid model consistently outperforms traditional brick-and-mortar stores across essential metrics. It offers the convenience of online shopping while still providing the quality of service typically associated with physical stores. This underscores a broader shift towards a seamless omnichannel retail experience, highlighting the diminishing appeal of exclusively offline retail formats.
What challenges are retailers in KSA currently facing in the realm of the commerce revolution and how do you suggest they tackle the same?
A myriad of challenges face retailers navigating the e-commerce surge. Retailers we spoke to cited common barriers including underinvestment in innovation, limited C-Suite focus, reliance on traditional media, and resistance to systematic value chain digitization. From digital infrastructure limitations to cybersecurity concerns, the road ahead is not without obstacles. A significant gap exists between consumer enthusiasm for online shopping and the level of retail digitization.
For example, one clear challenge has become increasingly evident throughout the online shopping experience. With a whopping 2.6 billion SAR in returned clothing purchases reported in 2022 alone, retailers are facing exceedingly high return rates. However, cutting-edge technologies like AR try-on have been shown to decrease return rates by 66%. By embracing innovation, fostering a culture of agility, and collaborating with partners like Snapchat, retailers can overcome these challenges and seize the opportunities of the digital age.
Retailers agree on the crucial need for better digital strategies to understand consumer needs, optimize reach and support customer journeys across the various touchpoints. Many of them know they’re falling short; the question is what they are going to do about it and when?
