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Driven by booming retail sectors in the UAE and Saudi Arabia, retail sales in the GCC will grow 15.7% year-on-year to $296.8 billion by the end of 2022, according to a new report from Alpen Capital.
In its latest GCC retail report, Alpen Capital said the retail boom was further fueled by a rebound in business confidence following the reopening of borders, easing of travel restrictions and higher hydrocarbon revenues.
The GCC is fast becoming a global hub for business, entertainment and sporting events, with a host of events to boost visitor numbers. Moreover, growing population, along with high concentration of expatriates and wealthy individuals, remains one of the major factors driving the growth of the GCC retail sector.
In addition, the recently signed free trade agreements with India and Israel will not only increase the range of foreign food and non-food items in domestic retail outlets, but also expand the establishment of international brands in the region, said in a report released mid-term by the Oriental Retail Forum.
Looking ahead, retail sales in the region will grow at a compound annual growth rate (CAGR) of 5.7% to reach US$370 billion by 2026, with the UAE accounting for US$113.8 billion, Saudi Arabia contributing US$176.5 billion, and UAE-based investment banks the consultancy said in a report.
“The GCC retail sector is expected to grow at a healthy pace due to favorable demographics, improving macroeconomic factors and recovery in tourism. The sector is also expected to benefit from the government’s push to diversify the economy and omni-channel business models increasingly prominent,” the report said.
Krishna Dhanak, managing director of Alpen Capital (ME) Limited, said the region’s retail sector is in a transition phase, with the pandemic impacting consumer behavior and buying patterns while putting e-commerce at the forefront of retailing.
“Operators have shifted their focus to brand acquisitions to strengthen their geographic presence as well as expand and diversify their product offerings. Larger e-commerce players may acquire niche operations offering customized products and services Going forward, we expect intensified consolidation in the industry to drive profitability, gain market share and improve operational efficiencies,” Dhanak said.
Non-food retail sales are expected to grow at a CAGR of 6.2% from 2022 to 2026, while food retail sales are expected to grow at a CAGR of 4.9% during this period.
Saudi Arabia and the UAE continue to lead regional retail sales, accounting for a cumulative 78.5% of total sales by 2026. This is mainly due to its large and diverse population base, liberalization of policies, and growing demand for unique shopping experiences. Retail sales in Saudi Arabia and the UAE are expected to grow at a CAGR of 6.5% and 5.1%, respectively, from 2022 to 2026.
Qatar, on the other hand, is expected to record the fastest growth in the region in 2022, with retail sales expected to grow 36% year-on-year to $18.5 billion, due to the influx of tourists for the 2022 FIFA World Cup. However, growth is expected to normalize at a CAGR of 3.5% after the 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.
The report estimates that duty-free sales at GCC (Dubai, Abu Dhabi, Qatar and Bahrain) airports are expected to grow by 65.5% year-on-year to reach US$2.2 billion by 2022 and further projected to reach US$3 billion by 2026, This implies a CAGR of 8.4%.
The GCC economy is expected to grow by 6.2% – well above the average for the rest of the world, which will provide a further boost to the retail sector. However, the report noted that growth will be underpinned by the digitization and growth of e-commerce businesses.
Dhanak said the recent steps taken by GCC governments to ease visa regimes and ease air travel have boosted tourism, which will help retail growth in the coming years.
Justina Eitzinger, CEO of Images Group Middle East and organizer of the Middle East Retail Forum and Images RetailME Awards, said the retail industry is one of the top three contributors to the GDP of the Gulf countries and provides employment to a large portion of the population.
“Tourism, trade and retail will define economic growth in the GCC region in the coming years, making the 11th Middle East Retail Forum a very important meeting of industry leaders from which other retail sectors will gain direction.”
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