Driven by a robust retail sector in the UAE and Saudi Arabia, retail sales across the GCC will see a 15.7 per cent year-on-year increase, reaching $296.8 billion by the end of this year, according to a new report by UAE-based investment banking advisory company Alpen Capital.
In the foreseeable future, retail sales in the GCC are predicted to grow at a compound annual growth rate of 5.7 per cent to $370 billion till 2026, with the UAE accounting for $113.8 billion and Saudi Arabia bringing in $176.5 billion, as Alpen Capital report said.
One of the vital factors behind the retail sector’s resilience is the reopening of borders and easing of travel restrictions, Alpen Capita highlights.
Moreover, a high concentration of expatriates, especially high-net-worth individuals, persists as one of the primary factors for boosting the growth of the GCC retail industry.
Additionally, the recently inked free trade agreements with India and Israel are bound to diversify the range of imported food and non-food as well as attract more international brands to the region.
“The GCC retail industry is poised to grow at a healthy pace due to favourable demographics, improving macroeconomic factors, and revival of the tourism industry. The sector is also expected to benefit from the government’s push towards economic diversification and a growing prominence of omnichannel business models,” the report said.
Managing director at Alpen Capital Limited, Krishna Dhanak, said the region’s retail industry is undergoing a seismic shift, with e-commerce growing apace.
“Operators have shifted their focus on brand acquisition to strengthen their geographical presence as well as expand and diversify their product offerings. Larger e-commerce players are likely to acquire niche operators offering customized products and services. Going forward, we expect consolidation in the industry to intensify to drive earnings, gain market share and improve operational efficiency,” said Ms Dhanak.
Noteworthy, non-food retail sales are set to grow at a compound annual growth rate of 6.2 per cent between this year and 2026. At the same time, food-related sales are expected an increase at an annual rate of 4.9 per cent during the forecast period.
Saudi Arabia and the UAE continue to lead retail sales regionally, cumulatively accounting for 78.5 per cent of the total sales by 2026. This is largely due to their diverse population base and an insatiable appetite for unique shopping experiences. Retail sales in the kingdom and the UAE were forecasted to grow at a compound annual growth rate of 6.5 per cent and 5.1 per cent, respectively, between this year and 2026.
Qatar, on the other hand, is expected to record the highest growth in the region during 2022 with retail sales estimated to rise by 36 per cent y-o-y to reach $18.5 billion owing to the influx of tourists for the Fifa World Cup 2022. However, growth is expected to normalise at a CAGR of 3.5 per cent post-completion of the World Cup.
Bahrain, Oman, and Kuwait are expected to grow at a compound annual growth rate of 7.3 per cent, 6.1 per cent and 3.5 per cent, respectively during the forecast period.
The report estimates that, for this year, duty free sales at the airports in Dubai, Abu Dhabi, Qatar and Bahrain are expected to see a 65.5 per cent year-on-year increase to cross $2.2 billion. The sales are also projected to reach $ 3 billion by 2026, implying a compound annual growth rate of 8.4 per cent.
On balance, the GCC economies are predicted to increase by 6.2 per cent – outpacing the rest of the world average. This growth trend will namely be buttressed by relentless digitalisation and the strides in the e-commerce business, the report noted.
Ms Dhanak said that by virtue of boosting the tourism industry through a spate of recent measures, the GCC countries equally contributed to the growth of the retail industry in the coming years.
CEO of Images Group Middle East and the organiser of the Middle East Retail Forum and Images RetailME Awards, Justina Eitzinger, said: “Tourism, trade and retail will dictate the economic growth of the GCC region in the next few years and that makes the 11th Middle East Retail Forum a very significant meeting of industry leaders from which the rest of the retail sector will get direction for growth.”