The Middle East mainly Dubai has been known as one of the best retailer markets in the world. Everyone used to talk about the perfumes in Dubai, the handbags etc. well the middle east seems to be keeping up its image.
Middle East has emerged as a key market for retailers across the world. Retail has been one of the fastest growing industries in the region for the past few years. The favorable government policy frameworks and active participation of private sector have facilitated the regions retail industry to become one of the worlds most desirable retail environments in terms of investments and revenue generation.
Seven countries in the MENA region made it into the top 20, in the 2011 index of top-ranked emerging markets for global retail expansion, the 10th annual Global Retail Development Index (GRDI), compiled by leading management consultancy firm A.T. Kearney, said.
The AT Kearney 2011 Global Retail Development Index is an annual study that analyses 25 macroeconomic and retail-specific variables. It said that while Asia is leading the global recovery, South America has made the biggest jump in the 2011 retail index. Brazil topped the rankings with Uruguay second and Chile in third place.
The key leanings from the analysis of the last ten year?s GRDI rankings highlight that to succeed retailers must have an optimal mix of countries, formats and operating models. The GRDI results support the decision making of regional retailers looking to expand their business and assists international retailers devising their Middle East expansion strategies.
The 2011 GRDI ranking mirrors the dramatic changes that have taken place in global markets, and the varying impacts they have on different emerging economies. The MENA region has fared well this year and includes seven of the top 20 countries in the GRDI, and despite the region?s political turmoil, it remains a promising retail growth opportunity, the report said.
Three GGC countries, Kuwait, Saudi Arabia and the UAE ranked in the top ten on the report analyzing global retail expansion. AT Kearney said these three countries had not experienced the turmoil of some of their neighbors and were expected to remain stable.
“Political unrest in the Middle East and North Africa (MENA) region has dominated the headlines in 2011. While it may affect immediate plans of entry to some countries (particularly Tunisia and Egypt, where the leaders were ousted), we believe the region’s extraordinarily young and increasingly outspoken population could, eventually, lead to greater economic stability and more global integration,” the report said.
Retail sales for our set of Middle East and Africa (MEA) countries in 2011 are predicted to amount to US$204.60bn, based on the varying national definitions. Total consumer spending for the region based on BMI?s macroeconomic database is forecast at US$722.41bn.
Kuwait was the top ranked MENA country in the list at number five, “While Kuwait offers an exciting destination to international retailers, given its small population, entry will most likely make sense as part of a regional approach,” the study added.
In Kuwait, the report said retail sector growth of eight percent annually had been seen over the past five years. Overall, retail sales are expected to grow from $8.41bn in 2011 to $11.92bn in 2015 . Key factors behind the forecast growth in Kuwait?s retail sales are a favorable long-term economic outlook, a sophisticated consumer base and high levels of disposable income.
Kuwait?s nominal GDP is predicted to be US$153.4bn in 2011, with 2010?s growth rate of 2.0% expected to increase to 3.4% in 2011 as the economy continues its recovery. Average annual GDP growth of 3.9% is forecast by BMI between 2011 and 2015. With the population estimated to rise from 2.9mn in 2011 to 3.2mn by the end of the forecast period, GDP per capita is predicted to grow 17.0% to US$61,881 by 2015.
Approximately 80% of the Kuwaiti population are expatriates, while foreign workers crossing the border from Iraq also stimulate the retail market.
Saudi Arabia ranked the second in the GCC and the seventh in the world.
“Consumer confidence in Saudi Arabia is high; bullish sentiments mean greater spending and less saving. Consumer spending is increasing rapidly, with most disposable income spent on food, apparel, health and beauty,” AT Kearney added.
Many new brands and international players like the UK giant Boots already having a presence in UAE Kuwait and Bahrain arrived in Saudi Arabia in 2010. GAP is also another big name to enter the market and it plans to open 44 Gap stores and 10 Banana Republic stores in the Saudi Arabia by 2012.
Further the Indian handset maker Micromax plans to enter the market in 2011.
“Getting Micomax into the Gulf’s largest market is logically the next big move that we can make in this territory,” said Vikas Jain, business director at Micromax Informatics, the operating company. “It relies extensively on the customer feedback that we have had to date from our operations here
Retail sales is expected to grow from an expected US$26.99bn in 2011 to US$37.35bn by 2015. Principal factors behind the forecast growth in Saudi Arabia?s retail sales are: strong underlying economic growth, rising disposable incomes, increasing acceptance of the concept of modern retailing, a youthful population and an enlarged consumer base created by the improved position of women in society.
Saudi Arabia?s nominal GDP in 2011 is predicted to be US$414.2bn, with growth of 3.9% expected. Average annual GDP growth of 3.6% is predicted by BMI between 2011 and 2015. With the population increasing from 26.5mn in 2011 to an estimated 28.6mn by 2015, GDP per capita is predicted to rise 21.4% to US$18,961 by the end of the 2015.
The retail sector benefits from the large number of Muslim tourists visiting the country to take part in the hajj and umrah pilgrimages every year. Sales of gifts and souvenirs in 2009 were estimated to have risen by at least US$2.5bn due to shopping by hajj pilgrims.
The UAE is recovering quickly from the economic downturn, reflected by the second-highest ranking in market attractiveness of all countries in the GRDI. Tourism, sizeable household consumption and ample retail space is boosting the retail sector. Still, the UAE dropped from 7th to 9th place this year. One cause is a rapidly maturing market as many foreign entrants have already set up operations in the country.
It also said that consumer spending in the UAE grew a healthy nine percent last year, a good indicator of stabilising confidence.
“For many international retailers the UAE remains the preferred entry point into Mena for new products and brands, and we now see this market maturing and retailers expanding into the northern Emirates and Al Ain and Abu Dhabi,” added Dr. Omar Sawaya, principal, A.T. Kearney Middle East.
The economic downturn gave UAE retailers pause for thought. Until recently, many of them established outlets in whatever mall space was available, failed to consider the market position, adjacent facilities or store location within the mall, and as a consequence paid the price. Now, retailers are paying more attention to consumer profile and location and the selection they offer in each location.
However its not all gloom. The UAE?s retail continued to grow in double digits. With surging consumer confidence, increasing public & private sector consumption, encouraging government policies, and rising purchasing power, the retail sector in the country is expected to rapidly grow at a CAGR of around 13% during 2010-2013.
The UAE?s retail sector will grow from an estimated $21.5bn this year to $28.1bn by 2015, according to a report by Business Monitor International.
Key factors behind the forecast are strong underlying economic growth (despite the recent problems in Dubai), increasing household consumption, growing acceptance of modern retailing concepts and expatriate wealth. Tourism is also a massive factor in stimulating retail growth, with the UAE expecting the number of tourists to have totaled more than 12m in 2010.
The UAE?s nominal GDP in 2011 is predicted to be $299.1bn, with growth of 3.9 percent predicted for the year. BMI said it expected average annual GDP growth of 3.9 percent between 2011 and 2015.
Lebanon, new to the GRDI-ranking, entered at an 11th place. It is an attractive market for many retailers, thanks to the liberal mindset of its consumers and recent investment in new malls.
While GDP grew at a 7 percent CAGR for the past five years, several challenges remain and the GDP is expected to slow down to 6% in 2010.
Additional infrastructure investment is needed to repair insufficient road networks and communications lines outside of Beirut, and disposable income remains fairly low. Further, Lebanon?s stability, measured by the country risk score, is lower than most of its neighbors on the GRDI – a factor to gauge when evaluating the market for entry, the report said.
Egypt moved up one spot this year, to 12th place. Egypt?s retail market is expected to grow 10 percent over the next five years, driven by a large, active and growing population of more than 80.4 million that is gaining purchasing power.
Still, Egypt has a low share of modern retailing compared to other North African countries such as Morocco and Tunisia. This, coupled with low levels of market consolidation and growing consumer demand, continues to make Egypt attractive for large global retailers, as stability
The country?s retail sales will grow from an expected US$30.30bn in 2011 to US$48.30bn by 2015, with long-term political stability the only question mark.
Egypt?s nominal GDP is predicted to be US$242.87bn in 2011, with growth of 3.2% forecast for the year. Average annual GDP growth of 4.3% is forecast by BMI between 2011 and 2015
However there is a long way for the MENA to go to take over the South Americans.