Details

Urbanisation, technological development fundamental for retail sector growth

-AED 60 billion retail sales in Abu Dhabi in 2017

 -Saudi retail sector accounts for 42% of total retail market in Gulf region

 -Over 6 million square metres of retail space expected in Oman by 2021

The Gulf region’s retail sector is now getting geared to global competition. Many shopping centres have been recently established to meet growing demand, with the regional countries currently investing heavily in establishing glitzy and sophisticated malls to join the race towards global completion, with regional retail trade estimated at $300 billion this year.

However, traditional retail trade needs more innovative techniques to meet customer expectations. Within this context, it’s worth mentioning that integrated capabilities and high-end infrastructure play a significant role in maximising the attractiveness of the sector and in providing a business-friendly environment conducive to drawing global retailers.

Major financial and economic sectors hinge on the performance of retail sectors in the regional countries. Growth and economic diversification plans are also associated with the direct relationship between the strength of retail sectors and the ability of other primary sectors to achieve the targeted growth rates and to ensure integrated economic performance based on short, medium and long-term plans. This comes in the wake of the headwinds faced by the region that have affected the ability of the sector to contribute to local economies. The main role of primary sectors is to maintain sustainable momentum for the retail sector, with the public and private sectors relying on retail sectors to further grow and resist local, regional and global pressures. Overall, upbeat sentiments persist as economies are seriously grappling with the issue of integration in a way that has led to the achievements made hitherto.

Al Mazaya Holding’s weekly real estate report emphasised the need to integrate and develop marketing mechanisms and tools in line with the huge expansion of e-commerce with a view to reducing its impact on traditional retail markets in the region. This comes at a time as e-commerce is sweeping traditional and direct trading. Retailers now have to develop their own innovative shopping experiences to meet the challenges posed by this massive expansion of e-commerce.

It is important to note that the development of the retail sector has become a necessity rather than a luxury as it is considered a major contributor to the national economy. The report indicates that traditional stores operating in the shopping centres face major challenges as drawing customer attention requires the robust, customised, and easy techniques employed by e-commerce to reach out to buyers.

At the level of the GCC domestic markets, it is clear that retail markets in the UAE are able to maintain their growth compared to other markets in the region thanks to their investment values, diversity, and expertise, which contributed to increasing their contribution to GDP and to the growth of  other financial and economic activities.

Dubai’s retail trade has attracted more than 15 million visitors in 2017. In the meantime, the distribution of new real estate projects across the emirate has directly contributed to the expansion of retail activities and the construction of many shopping centres, with the government’s decision allowing a 100% foreign ownership having attracted more global investors in a way that contributed to increasing the influx of visitors, residents and tourists. The retail sector in the Emirate of Abu Dhabi has achieved significant growth as well over the past years. Retail sales exceeded AED60 billion in 2017 in the UAE capital, with a growth rate of more than 7%. Retail sales are expected to grow at an annual rate of 5% to reach AED 260 billion in 2021, despite economic pressures affecting commercial and production performance.

The report said that the retail sector in Saudi Arabia has ushered in a long-term restructuring process and is undergoing a lot of changes, with a series of financial and economic decisions and stimulus plans being implemented now and until 2030. The sector is attached with significant importance by the Saudi government, with industry data indicating that the sector accounts for 42% of the total retail market in the Gulf region. Its strength stems from the powerful purchasing power of the Saudi citizen on the back of high wages and the high purchasing power of the youth. Therefore, it is clear that the retail sector in the Kingdom still has untapped investment opportunities.

The report pointed out that in the coming period, there will be a focus on doubling employment rates in this sector, to provide more than one million jobs for Saudis. There are also persistent plans to move from traditional shops to modern ones, so that the latter can make up to 80% of stores by 2030. Within this context, challenges of digitisation seem more demanding in the Saudi retail sector, with performance indicators confirming that more than 60% of retailers are still resisting e-transformation, which puts them out of the competition.

In the Omani market, the report touched on the real estate movement and the parallel expansion of the retail sector in the Sultanate.

Retail space in Oman is further expanding as a result of increasing demand from emerging markets and the growth in the number of tourists. More than 6 million square metres of retail space is expected to be added by 2021. This sector has become one of the income streams that national economy depends on to achieve economic development and wean the state off oil.

The results of Oman’s stimulus plans indicate that economic growth of 3% could be achieved by the end of the year with the direct support of the tourism sector, which is the most important contributor to accumulated economic growth. The sector seems promising and is set to attract more investors and big retail brands to show up in new large-scale shopping malls expected to open over the coming period.

The report said that the retail sector across the region is doing well up to the moment in terms of expansion plans, performance and its positive impact on major production and service sectors. The success of this sector depends primarily on the expansion of real estate projects from which the sector draws its strength. At the same time, expansion in the region’s retail sector is dependent on diversity and high-tech to attract more demand despite the fact that the sector is still lagging behind in terms of global competition. However, it remains the main contributor to other economic platforms, primarily real estate and banking sectors.