GCC Retail Industry Bounces Back from Covid

Alpen Capital predicts that the retail industry this year in the GCC will surpass pre-pandemic levels and generate $297 billion in revenue. If Alpen’s market forecasts come to pass, that is a gain of 15.7%. As major drivers of the increase, the World Cup in Qatar, returning visitors, and expanding populations are all mentioned.
Shop-loving Before 2026, growth is predicted to be led by Saudi Arabia and the UAE, with a compound annual growth rate of 5.7%. In four years, according to Alpen, the industry will be valued $370 billion.
According to Sameena Ahmad, Managing Director of Alpen Capital, “the GCC retail business is positioned to grow at a healthy rate due to favourable demographics, improved macroeconomic fundamentals, and resurrection of the tourism industry.”
“The sector is also expected to benefit from the governments’ push towards economic diversification and a growing prominence of omni-channel business models. The industry was severely hit by the restrictions imposed during the pandemic; however, retailers were responsive to the changing demands and innovated to sail through difficult times.”
Saudi Arabia and the United Arab Emirates continue to dominate regional sales, with a combined share of 78.5% by 2026. This is largely a result of their sizable and diverse demographic base as well as a rising need for distinctive retail opportunities.
Qatar will experience the greatest growth in the near future, thanks to the FIFA World Cup. Football fans and tourists will spend $18.5 billion in retail sales this year, a 36% increase over last year. According to Alpen Capital’s most recent report, retail sales across the GCC will increase 15.7% year over year to $296.8 billion by the end of 2022, driven by a booming retail sector in the UAE and Saudi Arabia. The rebounding business confidence following the reopening of borders, easing of travel restrictions, and increase in hydrocarbon revenues is fueling the retail buoyancy further.
The GCC is quickly becoming a major hub for international business, entertainment, and sporting events, and a number of events are planned to increase traveller numbers. Additionally, one of the main factors propelling the expansion of the GCC retail industry continues to be the rising population, which includes a high concentration of expatriates and HNWIs.
According to a report presented at the Middle East Retail Forum, the recently concluded free trade agreements (FTAs) with India and Israel will expand the establishment of foreign brands in the region as well as broaden the variety of foreign food and non-food products available in domestic retail stores.
The UAE-based investment banking advisory firm stated in the research that regional retail sales are expected to increase at a compound annual growth rate (CAGR) of 5.7% to $370 billion in 2026, with the UAE accounting for $113.8 billion and Saudi Arabia contributing $176.5 billion.
The GCC retail sector is anticipated to expand at a healthy rate as a result of favourable macroeconomic conditions, rising demographics, and a rebound in the travel and tourist sector. The government’s quest for economic diversification and the rising popularity of omnichannel business models are also anticipated to be positive factors for the sector. Between 2022 and 2026, it is expected that non-food retail sales would increase at a CAGR of 6.2% while food retail sales will rise at an annualised pace of 4.9%.
Saudi Arabia and the United Arab Emirates continue to dominate regional retail sales, accounting for a combined 78.5% of all sales by 2026. This is partly because of their sizable and diversified population, rules that have been liberalised, and a growing desire for unusual shopping opportunities. Between 2022 and 2026, retail sales are expected to increase in the kingdom and the UAE at a CAGR of 6.5% and 5.1%, respectively.
On the other side, Qatar is anticipated to experience the biggest growth in the area throughout this period. Due to the influx of tourists for the FIFA World Cup 2022, retail sales are predicted to increase by 36% year over year to reach $18.5 billion. After the World Cup, growth is anticipated to return to normal at a CAGR of 3.5%. The projected period is expected to see growth in Bahrain, Oman, and Kuwait at respective CAGRs of 7.3%, 6.1%, and 3.5%.
The analysis predicts that duty-free sales at GCC airports (Dubai, Abu Dhabi, Qatar, and Bahrain) will increase by 65.5% year over year to reach $2.2 billion in 2022 and then increase again to $ 3.0 billion by 2026, representing a CAGR of 8.4%.
The GCC economies are projected to develop by 6.2%, which is significantly faster than the global average and will benefit the retail industry. According to the report, digitalization and e-commerce industry expansion will support the increase.
According to Dhanak, the recent initiatives by the governments of the GCC countries to reduce visa requirements and ease air travel have encouraged the tourism business, which would support the expansion of the retail sector in the years to come.
Retail is one of the top three contributors to the GDP of the Gulf countries, contributing to a significant number of jobs, according to Justina Eitzinger, CEO of Images Group Middle East, which organises the Middle East Retail Forum and Images RetailME Awards.
The reopening of borders, easing of travel restrictions, and increase in hydrocarbon revenues are all cited in the report as reasons why business confidence in the region is improving. With a number of events planned that will increase visitor numbers, the GCC is quickly developing into a major global hub for business, entertainment, and sporting events. Furthermore, one of the main factors propelling expansion of the GCC retail business continues to be the expanding population, which includes a significant number of expatriates and HNWIs. Additionally, the recent FTAs with India and Israel will not only broaden the establishment of foreign brands in the area but also boost the variety of imported food and non-food items available in domestic retail establishments.
The report also points out that the industry is now under more strain as a result of fewer revenues brought on by a severe decline in oil prices combined with global inflation. It has forced retailers to implement aggressive promotional tactics by providing discounts to further boost revenues. Additionally, there is more competition in the retail industry now due to the growing number of multinational companies operating in the area.
Consumers have begun to turn to online channels as a result of the COVID-19 health crisis, and local businesses are acting quickly to meet the sudden increase in demand. Operators may benefit from digitization by streamlining processes, cutting costs, reducing worker workloads, improving overall customer satisfaction, and maybe increasing revenue generating. Players are seeking scale, concentrating on creating new business models, and rethinking their pricing tactics in light of the market’s increasing maturity and competitiveness.
The International Monetary Fund predicts that Saudi Arabia’s economy will expand at its strongest rate in ten years and rank among the fastest-growing in the world this year. According to Jadwa Investment, the kingdom’s GDP will grow by 8.7% this year after growing by 3.2% in 2021.
On the back of increased new business and output, business activity in Saudi Arabia’s and the UAE’s non-oil private sectors improved in October. The seasonally adjusted S&P Global purchasing managers’ index for the UAE increased from 56.1 in September to 56.6 in October. The index value, which supported the strength of the nation’s non-oil economy, was just a hair below the three-year high of 56.7 reached in August. According to the UAE Central Bank, the second-largest economy in the Arab world is expected to grow by 5.4% this year.
Due to an increased estimate for the production of the energy sector and the “strong growth” of its non-oil sector, Emirates NBD predicts that the GDP will grow by 7% this year, making it the nation’s fastest annual expansion since 2011, when output increased by 6.9%.