Economic development and trade policy remain the most significant factors in shaping retail growth in consumer markets, indicate research firm AT Kearney’s Global Retail Development Index (GRDI) 2019.
Taxation policies dictate discretionary consumer spend, impacting everything from cost-of-goods to the consumer to the cost of doing business in a country; and lead certain companies to operate or not operate in individual markets; and even determine the quality and quantity of goods for sale. In 2018, to diversify away from its dependence on oil revenues, Saudi Arabia adopted a value-added tax (VAT) of 5% across a broad range of goods, causing a decline in spending.
Geopolitical instability and growing power of local and regional competition in emerging markets are forcing global retailers to rethink their strategies continually. While social media and e-commerce fuel the evolution of global consumers, local realities such as internet connectivity and availability and cost of labour, continue to shape retail developments in the Middle East.
The Middle Eastern spotlights
The bi-annual study of the global retailing landscape also revealed that the UAE remains a resilient retail environment with an overall growth rate of 3-4%. This year, retail in the UAE is seeing a new era of disruption, with e-commerce growth estimated at upwards of 20% per year.
A key theme in this year’s findings is also the ‘Arrival of the Middle East and Africa’ – 10 of the top 30 countries fall into this bucket, suggesting that emerging economies are maturing, and the next wave of retail development and growth will undoubtedly be in the broader region.
Economies in the region have made significant gains in the GRDI rankings. They have caught the attention of leading retailers driven by government-led economic reforms, a large and digitally connected youth consumer segment and growing purchasing power. In addition to local retailers investing in-country, many regional names – including Majid Al Futtaim, Landmark Group, Lulu Group – as well as international brands – such as Zara, IKEA – are investing in both brick-and-mortar and digital across these markets.
Among other significant findings from the MENA region included in GDRI:
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