Kuwait Financial Centre “Markaz” recently published its report on GCC Luxury Retail. In this report, Markaz analyzed the major segments of luxury retail and their presence across the GCC. The report also provides an overview on various entry modes, formats of the luxury retail, and retail infrastructure of each GCC country. Additionally, the report examines the fundamental growth drivers, challenges faced, and details of existing and upcoming prominent malls in the region.
Luxury retail is a thriving business in GCC region, propelled by affluent locals, splurging expatriates, burgeoning brand-aware youthful population, and deep-pocketed tourists. GCC has opened up exciting growth possibilities for key industry players, and continues to be a major destination for a wide range of luxury brands. Four GCC countries are present in the list of top 20 countries based on Global Retail Development Index (GRDI), which signifies the preference of international retailers.
Affluent population, higher per capita income, grand malls, growing expat population, swelling tourist numbers, and favorable environment for franchise act as growth drivers for luxury retail. However, counterfeiting, rising rental costs, unavailability of workforce, and increasing competition are a few challenges faced by the sector.
The Middle East as a whole, benefits from young population, with more than 65 per cent being under the age of 35. This offers tremendous potential for the luxury market, not only in the sheer numbers, but also in the opportunity for retailers to overcome the fickleness of consumers, and build brand loyalty early.
The 2013 GDP per capita in the GCC ranged from USD 29,813 for Oman to USD 98,813 for Qatar, well ahead of emerging countries, such as China (USD 9,844), and compare favorably with developed countries, such as the US (USD 53,101) and the United Kingdom (USD 37,306). Youthful population and large disposable incomes in the GCC have drawn the attention of international retailers from across the world.
High average incomes, low to nil taxes, and subsidized fuel prices make it easier for consumers to choose top brands and large sports utility vehicles, compared to Europe, and many Asian markets. Watches & Jewelry are increasingly considered sound investments, and are valued as heirlooms. People in GCC also spend heavily on cigars, spas, luxury dining, scented candles and handicrafts.
Luxury brands can enter into GCC market either by franchise model or joint venture model. The latter has been on the rise in the region over the last few years, and there is every sign that this will continue as businesses seek to minimize the inherent risks associated with entering new markets. The legal framework is still in its nascent stages and it is appropriate for joint ventures to consider an off-shore holding structure, through which it can invest.
Luxury retail operates through malls, hypermarkets and online shopping. Malls offer a unique proposition of entertainment plus shopping, and continue to be the most preferred destination for shoppers, as it offers a wholesome experience. Demand for retail space is increasing and occupancy rates in prime malls are very high. Some cities are at saturation; hence new concepts are being developed, such as district or neighborhood malls, which target specific group of residents. Nevertheless, super-sized destination malls continue to be developed in some markets. Also, increasing number of shoppers are turning to the internet to purchase goods as they hunt for attractive deals, with the convenience of not having to step out of their homes. Growth in the online retail segment is supported by a growing number of internet users in the GCC, and is expected to grow in the coming years.
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About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre K.P.S.C “Markaz”, established in 1974, is one of the leading asset management and investment banking institutions in the Arabian Gulf Region with total assets under management (AUM) of over KD 1 billion as of June 30th, 2014 (USD 3.82 billion). Markaz was listed on the Kuwait Stock Exchange (KSE) in 1997.
For further information, please contact:
Osama Al Musallam
Senior Communications Officer
Media & Communications Department
Kuwait Financial Centre S.A.K. "Markaz"
Tel: +965 2224 8000 ext 1819
Dir: +965 2224 8075
Fax: +965 2241 4499
Email: [email protected]