Identifies common practices to be aware of when selling in this market, e.g., whether all sales material need to be in the local language.
Expatriate managers have had a strong influence in introducing advanced selling techniques into a market that relied heavily on word-of-mouth and established buying patterns until recently. Saudi consumers are becoming more discerning and sophisticated. Although preliminary contact and exchanges may be handled electronically, no serious commitment is likely to be made without a face-to-face encounter and negotiation. Exchange of business cards, usually printed in English on one side and Arabic on the other, is customary for first meetings. American business visitors should bring a large supply of business cards to share with contacts during their visits.
Saudis are gracious hosts and will try to put a visitor at ease, even during arduous business dealings. Many upper and middle-class Saudis were educated in the United States or in Europe, are comfortable in English, and receptive to doing business with foreigners.
Financing and credit facilities may be offered as part of a sales proposal, usually after a solid relationship has been established. The 2003 Capital Market Law (CML) created the Saudi Stock Exchange (Tadawul), as well as the Capital Market Authority (CMA). The CMA is charged with overseeing and regulating the Saudi Stock Exchange and ensuring that markets operate fairly, transparently, and efficiently. The CML also established a new regulatory framework designed to encourage greater participation in the financial market. It also established Tadawul as the exclusive securities market.
The CML provided the basis for the establishment of two committees to settle securities disputes: The Committee for the Resolution of Securities Disputes (CRSD) and the Appeals Panel. The CRSD has jurisdiction over disputes falling under the provisions of the Capital Market Law, the rules and regulations issued by the CMA, and the Stock Exchange. The Appeals Panel hears appeals against decisions issued by the CRSD. A decision issued by the CRSD may be appealed to the Appeal Panel within thirty days of the notification date. The CML also created the Securities Deposit Center (SDC), which is operated by Tadawul. SDC oversees managing deposits, transfers, settlements, clearing, and registration of all Saudi securities on the exchange. Other entities created by the CML include the Department of Authorization and Inspection, the Corporate Finance, and Enforcement and Market Supervision Divisions.
The Saudi Arabian Government liberalized the wholesale, retail, and franchise sectors in 2016, allowing full foreign ownership of retail and wholesale businesses by removing the former 25 percent local ownership requirement. An increasing number of companies, including U.S. firms, are taking advantage of the new regulation.
Many Saudi companies handle numerous product lines (sometimes even competing product lines), making it difficult to promote all products effectively. Saudi agents typically expect the foreign supplier to assume some of the market development costs, such as hiring dedicated sales staff (especially for high-tech or engineered products), setting up workshops, repair facilities, and funding local advertising. Foreign suppliers often appoint a salesperson to the Saudi distributor to provide marketing, training, and technical support. In the absence of such arrangements, U.S. firms should expect to make periodic visits each year to support their Saudi distributor and maintain their “share of mind” with that distributor.
There are licensing restrictions limiting who may or may not offer certain professional services, including law, medicine, accounting and financial services, architecture, engineering, and other similar professions. In this case, having a Saudi joint-venture partner is a requirement for any entity or individual to practice the above-mentioned professional services.
Trade Promotion and Advertising
The U.S. Commercial Service in Saudi Arabia organizes a number of annual trade promotion events aligned with market needs and priorities, such as leading Saudi buyer delegations to participate in trade shows in the United States, supporting U.S. companies at trade shows in Saudi Arabia, and bringing delegations of U.S. companies to Saudi Arabia. In addition, the U.S. Commercial Service conducts numerous webinars on opportunities for U.S. companies in Saudi Arabia. Most trade promotion events take place from September through June. Most Saudi chambers of commerce proactively promote and organize business-to-business and business-to-government engagements during and outside of trade shows and are generally eager to attract American and other western suppliers.Companies seeking to develop advertising and/or promotional campaigns in Saudi Arabia can leverage the same channels they use in Western markets including print, outdoor billboards, television, and internet/social media marketing. Advertising is highly regulated by a number of Saudi Arabian Government entities including the Ministry of Media, the Communications and Information Technology Commission, the Ministry of Commerce, and the Ministry of Investment. In addition, there are specific regulators by industry sector; for instance, medical device and pharmaceutical companies must adhere to Saudi Food and Drug Authority regulations vis-à-vis advertising. In addition to ensuring that the advertised content conforms to Saudi Arabian Government regulations, companies must ensure that their campaigns are culturally sensitive and do not offend public morals. The U.S. Commercial Service advises that companies consult with a reputable advertising/media agency with offices in Saudi Arabia to develop effective and legal campaigns.
Pricing
ince 1981, the Saudi Central Bank, previously known as the Sa www.exim.gov udi Arabian Monetary Agency, has pegged the Saudi riyal to the U.S. dollar at 3.75 to 1.00 to facilitate long-term planning and minimize the impact of exchange risks. The Saudi Central Bank has consistently stated that it has no intention to adjust or abandon the peg, and given its substantial stock of foreign reserve holdings, it is currently well positioned to maintain the current peg. Products are usually imported on a Cost-Insurance-Freight (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 for the mark-up rates for all product lines at different levels in the relatively short distribution chain. Contrary to popular belief, pricing and value are very important to the average Saudi. Therefore, pricing strategy is important to succeed in the market. Saudi buyers frequently compare prices before making a purchasing decision. For the U.S. supplier, some give-and-take may be expected in preliminary negotiations.
Sales Service/Customer Support
Saudi Arabia is a relatively open and competitive market. Brand loyalty and established preferences are less developed than in some other countries. Consequently, sales service and customer support are indispensable to win and maintain clients. Saudis view a foreign firm’s physical presence in Saudi Arabia as a tangible sign of a long-term commitment. Prompt delivery of goods from available stock and the presence of qualified support technicians have become more important and influence repeat business. Government agencies usually require equipment suppliers to commit to providing maintenance and spare parts for an average of three years.
Local Professional Services
The U.S. Embassy in Riyadh maintains a list of local law firms. To find other forms of business assistance such as accountants, translators, and marketing firms, companies can consult with the American Chamber of Commerce Saudi Arabia, the U.S.-Saudi Business Council, and the Federation of Saudi Chambers.
Limitations on Selling U.S. Products and Services
The importation of the following products requires special approval by Saudi authorities: agricultural seeds and live animals; books, periodicals, movies, and tapes; religious media; chemicals and harmful materials; pharmaceutical products; wireless equipment, radio-controlled model airplanes or drones; products containing alcohol (e.g., perfume); natural asphalt; and archaeological artifacts.
There are health and sanitation regulations for all imported foods. For beef and poultry imported from the United States, Saudi Arabia has agreed to recognize a two-certificate approach: (1) an official Food Safety Inspection Service export certificate issued for beef and poultry, and (2) a producer or manufacturer self-certification to cover any additional requirements not related to food safety or animal health issues, such as animal protein-free feed declaration. The government has also agreed that any maximum residue requirements for synthetic hormones in animal products would be consistent with international standards. Companies can request a copy of the labeling requirements by contacting the Saudi Standards, Metrology and Quality Organization.
Saudi law prohibits importation of the following products: weapons, alcohol, narcotics, pork and pork products, non-Islamic religious materials, pornographic materials, distillery equipment, retreaded or used tires, used clothing, and certain art and sculptures. For additional information, please review requirements of the Saudi Standards, Metrology and Quality Organization and the Zakat, Tax and Customs Authority.
Resources
- U.S. Commercial Service Saudi Arabia
- U.S. Embassy – Riyadh
- Local Law Firms
- American Chamber of Commerce Saudi Arabia
- U.S.-Saudi Business Council
- Federation of Saudi Chambers
- Ministry of Media
- Communications and Information Technology Commission
- Ministry of Commerce
- Ministry of Investment
- Saudi Central Bank
- Saudi Food and Drug Authority
- Saudi Standards, Metrology and Quality Organization
- Zakat, Tax and Customs Authority Saudi Customs