Retail clients, including investors, producers, marketers, retailers and all other participants in the retail markets benefit from our in-depth understanding of the regional consumer needs and preferences. ValuStrat is proud to serve the retail sector which is becoming the corner stone of the regions’ economies.
The GCC’s retail industry grew at a brisk pace of over 20% annually during 2004-2008. Thereafter, the rate of expansion slowed down considerably in 2009 due to the global financial crisis and UAE’s debt concerns, only to recover partially in 2010. Healthy growth returned in 2011 as regional governments’ spending supplemented the fundamental factors supporting retail sector’s progress such as increasing purchasing power, growing expatriate population, changing lifestyle and an expanding tourism & hospitality industry. At the regional level, penetration of modern retail concepts is still lower, especially in smaller cities, thus leaving room for further growth. However, the eagerness of retailers to open new stores is limited by concerns that supply may outpace demand in the forthcoming years. In order to achieve a sustainable profit growth, retailers will have to constantly look for ways to innovate and efficiently manage their businesses. The GCC’s retail sector is maturing gradually under a wave of consolidation as numerous regional and international retailers compete for market share. The industry is likely to continue to expand at a healthy and sustainable rate in the future.
Retail industry has thrived in the GCC region over the last several years largely due to increasing purchasing power, growing expatriate population, changing lifestyle and an expanding tourism & hospitality industry. Implementation of governments’ progressive policy agenda and increasing private sector contribution to the overall economic growth has made the Gulf one of the widely pursued retail destinations in the world. The industry grew in 2011 despite political uncertainty in some countries within the region and a global economic deceleration, reaching a market size of US$ 186.7 billion. Its fundamental structure remained broadly unchanged, with the region’s two largest economies, Saudi Arabia and the UAE, primarily fuelling the sector’s growth.
Robust spending power supported by sustainably high oil prices makes the local population partly insensitive to prices, a strong positive for retailers in the country. While Qatar is one of the wealthiest countries globally, GDP per capita (PPP) of the UAE and Kuwait is comparable to that of major developed economies and significantly higher than personal income levels in the leading emerging markets.
Whilst rising prosperity and an expanding consumer base continued to be the backbone of the retail market in 2011, increased government spending also supported private consumption. The region’s retail sector has been displaying strong resilience in the face of global economic uncertainties and varied domestic issues, thereby attracting new investments.
Completed GLA in shopping centers increased over 10% y-o-y to 11.4 million sq m in 2011, with nearly 80% of this area located in the UAE and Saudi Arabia. Despite easing to certain extent, regional imbalance with respect to retail development still prevails in the GCC. Until recently, development of modern retail infrastructure was principally concentrated within the major commercial cities like Dubai and Jeddah. This resulted in other key cities like Abu Dhabi, Doha, Makkah, and Medina experiencing a shortfall in retail space. However, with a surge in development of retail space in the relatively under-developed regions, this imbalance is likely to correct over time.