What’s driving the billion-dollar retail industry forward?

The GCC retail industry sales are forecasted to grow at 5.7% CAGR between 2022 and 2026 to reach $370.0 billion, said Krishna Dhanak, Managing Director, Alpen Capital while sharing findings from Alpen Capital’s latest report at MRF 2022.

Rebounding business confidence due to reopening of borders, easing of travel restrictions and increase in tourist arrivals, vaccination strategy, rise in hydrocarbon revenues, coupled with rising population and high concentration of expatriates and HNWIs (high net worth individuals) are all factors driving the billion-dollar retail industry forward.

GCC retail sales are projected to grow in the range of 3.5% and 7.3% CAGR between 2022 and 2026. Saudi Arabia and the UAE continue to lead the retail sales regionally accounting for 78.5% of the total sales by 2026.

Qatar is expected to record the highest growth in the region during 2022 with retail sales estimated to rise by 36.0% y-o-y to reach $18.5 billion owing to influx of tourists for the FIFA World Cup 2022. However, growth is expected to normalise at a CAGR of 3.5% post World Cup.

Bahrain, Oman and Kuwait are expected to grow at a CAGR of 7.3%, 6.1% and 3.5%, respectively, during the forecast period.

Overall, in 2022 alone the GCC retail industry sales are expected to record a 15.7% y-o-y growth to reach $296.8 billion.

Despite being “stressed and a severe casualty” due to macro-economic headwinds, a slowing economy since the beginning of 2020 due to Covid-19 pandemic driven lockdown and closures, the GCC retail industry is now showing significant signs of recovery. The region’s GDP is likely to grow at 3.6% in 2023 and stabilise at around 3-3.2% over the next five years.

Duty free sales at select GCC airports (including Abu Dhabi, Dubai, Qatar and Bahrain) are expected to reach $3.0 billion by 2026 from $ 2.2 billion in 2022 implying an annualised growth of 8.4%. Retail sales of personal luxury goods in the Middle East, primarily led by the GCC nations, are forecasted to reach $11.8 billion by 2026 signifying an annualised growth of 6.5% since 2021.

At 80% completion of projected additions 4.5 million sqm of retail space is likely to come up in the GCC between 2021 and 2026 taking the total organised retail GLA in the region to 23.0 million sqm. At the same time, e-commerce is expected to grow at 15%, thrice that of retail sales in the next five years.

If anything, the industry is currently in a “transformation” phase with the pandemic impacting consumer behaviour and buying patterns while putting e-commerce at the forefront. Operators are looking to capitalise on this trend and companies are adapting to remain competitive. Such developments are likely to act as a “springboard” for the retail industry growth while also playing an important role in the region’s diversification strategy.

Looking ahead strong recovery will continue with 2022 being a “hallmark year” due to pent up demand following the pandemic. Free trade agreements are expected to boost the region’s economy, attract investments and provide more opportunities for local retail businesses to expand and diversify with global trade partners. Such agreements will not only increase the range of foreign food and non-food products within the domestic retail outlets but also expand the establishment of international brands in the region.