By Rory Jones
RIYADH, Saudi Arabia--British retailer Marks & Spencer Group
PLC bypassed fashion hubs like London, Paris and New York when it
opened its first stand-alone lingerie and beauty store last year.
Instead, it chose Saudi Arabia.
In the conservative Islamic kingdom, women cover themselves in
black when they go out in public and must have a male chaperone,
typically a relative. To free them to browse its store aisles
alone, Marks & Spencer was forced to hire an exclusively female
sales staff. Moreover, the company uses tamer marketing photographs
for Saudi Arabia, requiring separate photo shoots.
The stand-alone lingerie and beauty store "was born on the back
of the customer need," says Mark Koprowski, the company's regional
director for the Middle East.
So far, the company has opened five of the new stores here and
has plans for seven more, in addition to its 24 department stores
in the country.
Marks & Spencer is part of a new wave of foreign retailers
who are piling into Saudi Arabia amid a boom in shopping-mall
construction, showing they can adapt to the kingdom's religious
strictures, while courting a fast-growing and affluent consumer
class. But their efforts to adhere to religious rules, which are
enforced by the country's religious police, can add costs, and in
some cases, tarnish their brands in Western eyes.
IKEA discovered that the hard way in 2012 after the Swedish
furniture giant, acting on its own initiative, deleted images of
women from some photos in catalogs shipped to Saudi Arabia. Swedish
government officials complained to IKEA, and the company publicly
apologized for the move, which it said conflicted with its
values.
"We deeply regret what happened related to the Saudi Arabian
IKEA catalog in 2012," an IKEA spokesperson said, adding that the
company has since revised its catalog guidelines.
Industria del Diseño Textil SA, or Inditex, the parent of
Spanish fashion retailer Zara, says the Saudi market is important
enough to make it worth altering its stores and branding. The chain
has 147 stores in Saudi Arabia, roughly the same as in the U.S. and
U.K. combined, and it has plans for 12 more through its franchise
partnership with Saudi-listed retail giant Fawaz Abdulaziz Al
Hokair, which is also opening stores for Marks & Spencer and
Gap Inc.
A Zara store covers an entire end of the recently opened Al
Nakheel Mall in Riyadh. Music is forbidden in shopping malls in the
capital city, so the latest pop hit isn't playing in the
background. Zara blurs the images of female models on video screens
behind the counter to abide by religious rules that say women's
faces can't be shown.
"We have a global store image, and we have a big capacity to
adapt to the different countries around the world due to the
different cultures, laws or religions," said an Inditex
spokesperson. "We are used to it."
But Saudi religious rules could get harder to manage. King
Salman bin Abdulaziz Al Saud took the throne in January and has
since taken a more conservative tack than his predecessor King
Abdullah, under which women were given greater rights.
A video uploaded to YouTube last month, showed a Saudi religious
policeman barring a veiled woman from entering a store in Barzan
market in the northwestern city of Hail. In the video, the man
criticizes the woman for failing to wear gloves and cover her
hands, a strict interpretation of religious rules.
The Commission for the Promotion of Virtue and Prevention of
Vice, the Saudi religious police, said it was looking into
incident.
Until three years ago, Saudi Arabia's retail stores were staffed
almost exclusively by men. But in 2012, the government forced
lingerie shops to lay off their male clerks, who were mostly
expatriates, and instead employ Saudi women. Saudi women are
increasingly in demand at other stores here that cater to female
customers. That has driven up labor costs for retailers because
Saudi citizens expect to be paid more than expatriates.
Although most Saudis wear traditional dress--a white full-length
thawb for men and black abaya for women, Western-style fashion
stores are still some of the most popular. Saudis typically wear
Western clothes when traveling abroad, at home or at private
parties where men and women are segregated.
International brands have been expanding in Saudi Arabia for
more than 15 years, but the surge in shopping-mall construction has
renewed their interest. New retail space in Riyadh, the country's
most-populous city, is projected to grow by roughly 45% in the next
three years to 21.5 million square feet, according to property firm
JLL. Leasable space in other Saudi cities will grow roughly 20%,
the firm says.
Despite the recent drop in oil prices, the Saudi government's
heavy social and infrastructure spending is expected to trickle
down to the country's consumers. Partly as a result, apparel and
footwear sales are likely to grow by 60% over the next five years
to $17.6 billion annually, according to market research firm
Euromonitor International.
Saudi retailers, meanwhile, are getting a closer look from the
outside world as the country's equities market opens to non-Saudi
institutional investors, giving foreigners their first chance to
buy local retail stocks.
Mr. Koprowski of Marks & Spencer says the opportunity to tap
the growing spending power of Saudi women far outweighs the
retailer's costs of employing more female sales clerks and altering
stores in what he says is one of the company's highest-grossing
emerging markets.
The retailer even goes as far as using headless female
mannequins to display its lingerie. "Unfortunately," says Mr.
Koprowski, "even the mannequins are not allowed to show faces."
Write to Rory Jones at rory.jones@wsj.com
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