Kuwait Financial Centre “Markaz” recently published their GCC Retail report. In this research note, Markaz analyses the retail sector dynamics, identifies the current and potential market size for various sub-segments. The report also discusses the key drivers of demand, identifies emerging trends and characterizes the challenges in retail sector.
Markaz estimates the retail market in GCC to reach USD 221 billion by 2015 registering an annualized growth of 7.9% for the period 2012-2015. Food, beverages and tobacco accounted for almost half of the market in 2012 and we expect the trend to continue.
Retail Industry is one of the fastest growing sectors in the GCC region. Though the overall economic growth in the GCC region suffered a setback at the onset of the global financial crisis, the retail sector posted robust growth and continued its upward trajectory. The growing importance of retail in GCC can be gauged from the fact that the city of Dubai, along with London, shares the leading position for international retailers’ presence. American & European retailers, for their expansion of operations consider Kuwait City, Riyadh and Jeddah as their top choices outside their home turf.
The GCC consumer market is composed of two distinct categories, the growing nationals and increasing expatriates (especially in UAE & Qatar). Higher per capita income and younger demographic profile of the nationals has a positive implication for the demand of high value luxury goods and electronics goods while the working expatriate population supports the surging demand for consumer goods. Generous state subsidies in the form of grants, leads to increased disposable level of income aiding the retail industry.
Figure : GCC Retail Market Size (in USD billions)
Source: Markaz Research
Over the years, the retail landscape in the GCC has changed tremendously from traditional, small, independent, unorganized outlets in the form of souks to large, modern and organized retail chains in the form of malls. However, retail in the GCC is currently focused on very few retailing formats and is majorly skewed towards malls. The report expects the retail to evolve and accommodate other formats such as modern cash & carry, convenience stores and discount stores.
Luxury retailing is a thriving business in GCC region - consisting of affluent locals, splurging expatriates and deep-pocketed tourists. Luxury retail growth in Dubai has surpassed the growth in other developed markets.
The attractiveness of the retail market has resulted in wide spread competition with the entry of many international players. Establishment of newer, swanky malls results in cannibalization of consumers. Polarization of rentals and vacancy levels are seen.
Stringent laws to tackle counterfeiting and copyright infringement are required to instill a sense of security and business confidence among international retailers. Local talent has to be developed to tide over workforce scarcity and adoption of best practices particularly in inventory management could help distinguish winners in the long run.
About Kuwait Financial Centre “Markaz”
Kuwait Financial Centre S.A.K. 'Markaz', established in 1974 with total assets under management of over KD 888 million as of March 31st, 2013, is the leading and award winning asset management and investment banking institution in the Arabian Gulf Region. Markaz is listed on the Kuwait Stock Exchange (KSE) since 1997 under ticker Markaz.