GCC retail industry sales are expected to grow at a compound annual growth rate (CAGR) of 4.6 per cent to reach $ 386.9 billion in 2028 from $ 309.6 billion in 2023, new research showed on Thursday.
According to a report by Alpen Capital Saudi Arabia and UAE will continue to lead the industry growth. Retail sales in Saudi Arabia and UAE are projected to grow at a CAGR of 5.1 per cent and 5.4 per cent between 2023 and 2028 to reach $ 161.4 billion and $ 139.1 billion, respectively.
Non-food retail sales are anticipated to grow at a CAGR of 4.3 per cent while food retail sales are expected to rise at a pace of 5.0 per cent CAGR between 2023 and 2028, the report said.
At 80 per cent completion of projected additions, 3.9 million sq. m. of retail space is likely to come up in the GCC between 2023 and 2028, taking the total organised retail gross leasable are (GLA) to 24.3 million sq. m. “This is a modest growth scenario, wherein organized retail GLA is anticipated to grow at a CAGR of 2.9 per cent during the period,” the report said.
Personal luxury goods sales in the Middle East, primarily led by GCC, is forecasted to reach $ 20.2 billion by 2028, growing at a CAGR of 6.5 per cent since 2023.
Duty free sales at the airports in the GCC (Dubai, Abu Dhabi, Qatar and Bahrain) are expected to reach $ 4.7 billion in 2028, growing at a CAGR of 9.3 per cent between 2023 and 2028. This growth can be attributed to the anticipated rise in passenger traffic, largely driven by government initiatives to promote tourism.
Rising population, with a high concentration of expatriates and HNWIs, remains one of the primary factors for driving growth of the GCC retail industry. The region’s population is expected to grow at a CAGR of 1.8 per cent between 2023 and 2028.
Amid expanding infrastructure developments, the GCC economies are establishing themselves as a hub for global business, entertainment, and sporting events, the report noted. “Consequently, international tourist arrivals are anticipated to grow at a CAGR of 6.1 per cent between 2023 and 2028 to reach 109.8 billion,” the report said, which will add to the retail sales figures.
Existing free trade agreements coupled with ongoing negotiations with several countries from across the globe are expected to increase the range of foreign products within the domestic retail outlets and also expand establishment of international brands in the region, the report noted.
Among key challenges, the report stressed while the GCC states have made major progress towards diversification of their revenue sources, vulnerability in hydrocarbon revenues due to oil production cuts, coupled with rising geopolitical concerns and global macro-economic headwinds might put the industry under pressure.
In addition, the region relies heavily on external sources of supply to meet domestic food demand. “This has left the GCC vulnerable to supply-side shocks, leading to inflationary pressure on the economies. This may impact the spending power of consumers, leading to a slowdown in the GCC retail industry,” the report said.
Renuka Jagtiani, Chairwoman, Landmark Group, UAE, said: “GCC retail is benefiting from buoyant economies and strong consumer confidence. E-commerce especially is being supported by significant investments in logistics and improved digital infrastructure. Consequently, retailers are increasingly adopting omnichannel formats. However, high inflation in living costs has led to constrained discretionary spending, forcing many consumers to choose between experiences and shopping, and seek greater value.”
Rohit Walia, Executive Chairman and CEO, Alpen Capital, said: “Digital transformation across the region’s retail industry is escalating at a rapid pace with operators investing in implementing new technologies to create better customer experiences, optimize business processes, reduce costs, lower staff workloads, and build a flexible and growth-oriented business model. . Moreover, the need for businesses to remain competitive amid proliferation of e-commerce and online channels is likely to enhance the retail M&A landscape in the GCC.”
Economic activity in the GCC is expected to pick up as business confidence in the region regains momentum with the rise in oil revenues and robust non-hydrocarbon growth, driven by government-led reforms to diversify the economy. Moreover, improvements in per capita income will increase domestic consumer demand and discretionary spending. The anticipated rise in spending power is also likely to improve the appetite for global brands and luxury items.