Foreign Retailers Bend to Conform to Saudi Religious Rules

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 [e-mail]

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