How can Saudi retailers keep up with younger, digital shoppers?

Gen Z, Millennials, and Gen Alpha will control 77% of household incomes by 2035.

Retailers in Saudi Arabia are being pushed to adapt business models as younger, less loyal consumers, rapid e-commerce adoption, and shifting urban demographics redefine shopping behaviour, according to a McKinsey & Co. report.

Gen Z, millennials, and Gen Alpha are projected to make up 83% of the Kingdom’s population and control 77% of household income by 2035. These consumers are digitally connected—almost 80% are active on social media—and increasingly expect seamless omnichannel shopping that combines online, social commerce, and in-store experiences.

E-commerce in Saudi Arabia is forecast to grow 15% annually to $60b by 2035. Social commerce is expected to expand 30% per year from 2023 to 2028, reaching $4.5b.

Spending habits, however, are diverging. Over half of value-conscious shoppers switched retailers for lower prices, whilst one in five shifted brands or private labels.

At the same time, premium segments are expanding, particularly in health and sustainability.

About 70% of consumers seek healthier food options, 65% are willing to pay more for organic or nutritious products, and 60% consider sustainable or fair-trade apparel important.

The appetite for experiences is also growing. Sports and entertainment events drew 72 million attendees in 2023, with major international competitions, including the 2034 FIFA World Cup, expected to further boost leisure spending.

Market expansion is underpinned by demographic and economic shifts. Saudi Arabia’s retail sector, valued at $268.6m in 2024, is projected to grow 6.8% annually to $398.5m by 2030, according to New York-based TechSci Research.

The number of consumers in the Kingdom is projected to exceed 100 million by 2035 from 60 million in 2023, with tourists accounting for 70 million, Mckinsey said. The resident population is projected to rise to 42 million to 44 million, including 25 million nationals, alongside a growing skilled expatriate base.

Women’s workforce participation is set to double to three million by 2035, representing 37% of the labor force, with two-thirds in high-skill roles. This is expected to drive demand for ready-made meals, convenience foods, and smaller household packs.
The middle class is also projected to expand, with 75% of residents expected to join the segment by 2035 as disposable incomes double.

Urbanisation and megaprojects such as NEOM are reshaping retail geographies, with Riyadh’s population forecast to rise from nine to 15 million by 2030 and Tabuk’s Red Sea region expected to triple.

Analysts said retailers that combine value, premium, and experience-driven offerings with digital integration—and invest in artificial intelligence, automation, and supply chains—will be best positioned to capture growth.

Questions to ponder:

1. How will the dominance of younger generations shape retail categories beyond food and apparel?
2. How will international players and local retailers compete for market share as urban hubs like Riyadh and NEOM expand?