Growing population in Qatar and the UAE and higher per capita income are among the key drivers of the GCC retail market, which is expected to reach $221bn by 2015, a new study has shown. According to Kuwait Financial Centre (Markaz) the GCC retail market is set to register 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 Markaz expects the trend to continue. Retail industry is one of the fastest growing sectors in the GCC region, the study says.
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 Dubai, along with London, shares the leading position for international retailers' presence. American and European retailers, for their expansion of operations consider Kuwait City, Riyadh and Jeddah as their "top choices" outside their home turf. According to Markaz , the GCC consumer market is composed of two distinct categories, the growing nationals and increasing expatriates, especially in Qatar and the UAE.
"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," the study shows. 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" and convenience 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," Markaz said. 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.