Discusses pricing formula and other fees, value-added tax (VAT), etc.
Since 1981, the Saudi Arabian Monetary Agency (SAMA, equivalent to a Central Bank), has pegged the Saudi riyal to the U.S. dollar to facilitate long-term planning and minimize the impact of exchange risks. As such, Saudi importers expect American producers to practice a more stable pricing policy than their foreign competitors. SAMA has consistently stated that it has no intention to adjust or abandon the peg; given SAMA’s substantial stock of foreign reserve holding, 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 is 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 American supplier, some give-and-take is expected in preliminary negotiations.