A study released by a global management consultancy firm said four Gulf countries feature among top global emerging markets for retail expansion.
The Global Retail Development Index (GRDI) ranks 30 countries on market attractiveness, market saturation, country risk and time pressure on an annual basis.
Martin Fabel, partner at A. T. Kearney Middle East, said the Gulf Cooperation Council (GCC) states are attracting strong interest from international and regional retailers thanks to high GDP per capita figures, increasing population and rising tourism numbers.
“We are seeing GCC retailers grow exponentially,” he said.
“Some have reached their 100th store opening milestone in a third of the time compared to developed markets and some are experiencing growth rates three to four times faster than their mature peers–we call it hyper-speed evolution,” Fabel added.
The GDRI included Oman for the first time whereas Qatar failed to feature because the country’s population growth was below the required threshold.
The UAE ranked the highest within the MENA region, scoring 60.6 on the Global Retail Development Index (GRDI). The country’s position improved one rank, standing at 7th on the index, compared to last year. The report said that the move “reflects strong consumer confidence and increasing retail sales of over five per cent in 2011 (compared to 2010).”
The study noted that the UAE benefitted during the Arab Spring due to its status as a safe and welcoming nation for tourists and investors. The Global Retail Expansion report said Dubai Mall is the world’s most-visited shopping and leisure destination, with more than 54 million visitors in 2011 (up 15% from 2010) and a 35% increase in average retail sales.
Oman was the Middle East’s second and world’s eight growing market, with a GRDI score of 58.9. The global study highlighted the Gulf nation as a “small gem.”
Muscat’s boosting of infrastructure spending has led to a greater consumer purchasing power, rising number of expatriates and tourists, and more modern retail formats, the study revealed while adding that wholesale and retail trade contributes to 8.7% of the country’s GDP.
Although modern outlets are gradually replacing the traditional souks (open-air marketplaces) and small shops, especially in the capital, Muscat, the expansion of supermarkets and shopping malls is slower than other Gulf countries, the findings noted.
Next on the Middle East ranking is Kuwait which embarked upon a heavy public spending which helped it grow 6.1% annually and clinch 12th position on the GRDI with a score of 56.6. According to Emanuele Savona, principal at A.T.Kearney, Kuwait dropped its position because of the increasing market saturation.
The report said that popularity of hypermarkets is increasing, with a 7.5% increase in sales during the past year, with young people spending more on consumer electronics.
The Avenues Mall, Kuwait’s largest shopping centre, opened in 2011 and features the largest number of international brands in the country. The Gulf state is opening doors to two other modern shopping centres, including 360 Kuwait, with more than 800,000 square feet of retail space, and Mall of Kuwait, with more than 1.6 million square feet. The new malls are pushing many secondary malls toward renovation as a way to attract international brands, the Global Retail Expansion findings suggested.
Saudi Arabia, the biggest Arab economy, stood at 14th position this year as its GDP and population increased a rise. The report said that the desert kingdom is the largest and among the most attractive markets in the Middle East with 28 million citizens.
“Rising disposable incomes and acceptance of modern formats and foreign brands are driving consumer spending,” the report said while adding that a government stimulus plan will inject about $110 billion into the economy in the next five years.
Religious tourism is driving sales in many sectors, as millions of Muslims make the annual pilgrimage for Hajj.
The report praised Jordan for a ‘strong debut’ which entered the table with a GDRI score of 51.1, placing it 18th on the list.
“Although Jordan is in the early stages of growth, opportunities will increase as consolidation and strong economics change the playing field. The government is on a mission to boost the economy, applying to join the GCC and investing in developing the country. While retail is gaining strength in the country, Jordan’s status as a gateway to Iraq makes it even more attractive to retailers,” the study noted.
The GDRI index recorded Lebanon’s fall of 10 spots from last year to 22nd position this year due to political instability and the uprising taking place in Syria. Despite being a low-income country, A.T Kearney report said that Lebanon’s capital, Beirut, is ‘home to a vibrant and trendy bourgeoisie’ who follow international fashion trends and prefer shopping in high-end malls for products from renowned international designers, including wristwatches and luxury cars.
Morocco ranked 27th on the index, with a GDRI score of 44.8. The North African nation’s ranking dropped from last year because of increased political instability, the report revealed.
Last on the index at the 30th spot, Tunisia also fell 12 positions from last year because of unrest in the country.
“While the government still supports a favourable environment for foreign investment, international retailers are hesitant to enter this recovering market,” said the report.