Pricing in Saudi Arabia

A Hot Tip about Sales in Saudi Arabia

Posted on: 24 May 2010

The government maintains a free-trade approach and, since 1981, the Saudi Arabian Monetary Agency (SAMA, the Central Bank), has pegged the Saudi Riyal to the U.S. Dollar to facilitate long term planning and minimize exchange risk for the private sector. As such, Saudi importers expect American producers to practice a more stable pricing policy than their foreign competitors. In the last couple years, there have been numerous speculations that the Saudi Government would revalue the Riyal, but SAMA has consistently stated that it has no intention to do so, and given SAMA’s huge stock of foreign assets, there doesn’t appear to be a need.

 

Products are usually imported on a CIF basis, and mark-ups depend almost entirely on what the vendor feels the market will bear relative to the competition. There is no standard formula to come up with the mark-up rates for all product lines at different levels in the relatively short distribution chain.

 

Contrary to popular belief, pricing is very important to the average Saudi. Therefore, where there are competitive products, Saudi buyers frequently will compare prices before making a decision. For the American supplier, some give-and-take is expected in preliminary negotiations.

 

An economic study by a local bank has stated that for much of 2008 inflation was a serious and pressing issue for Saudi Arabia, with prices rising 9.2 percent on average. In 2009, however, inflationary pressures subsided due to a slowdown in demand and lower prices for commodities, food, rents, etc. The inflation rate for 2009 is estimated at 4.4 percent. In 2010 inflation will continue to decrease, to around 4.0 percent, reflecting an lower domestic demand.

 

 

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Posted: 24 May 2010

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