Kuwait, Saudi rank high in global retail index
Dubai, June 7, 2011
Seven countries in the Mena region make it into the top 20 in the 2011 index of top ranked emerging markets for global retail expansion, compiled by leading management consultancy firm A.T.Kearney.
In the 10th annual Global Retail Development Index (GRDI), Kuwait on 5th place remains the Middle East’s highest ranking country.
“Saudi Arabia, on 7th position in the GRDI this year, is clearly a retail hot spot worth watching. With the largest population in the GCC, Saudi Arabia offers retailers many opportunities,” said Dan Starta, partner and managing director, A.T. Kearney Middle East.
New brands and international players arrived in Saudi Arabia in 2010, and current operations expanded in most retail sectors, including fashion, electronics, digital products, furniture, home products, automotive, health and beauty products. Several international retailers also entered the market in the past year. Boots, the UK health and beauty retailer already present in the UAE, Kuwait, Bahrain and Qatar, opened its first Saudi store in Jeddah in 2010.
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.
“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.
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.
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. 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 per cent 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 of the country evolves.
“The GRDI is a great study to assist global and local retailers identifying new markets and expansion opportunities, concluded Starta.-TradeArabia News Service