Gulf shop tills set to ring up $297bn of sales this year

Christian Charisius/dpa via Reuters

• Retail sales are forecast to pass pre-pandemic levels this year
• Year-on-year growth estimated at 15.7% across the Gulf
• ‘GCC retail industry is in a transformation phase,’ says analyst

Retail sales across the GCC are likely to surpass pre-pandemic levels this year, driven by a revival of the region’s tourism industry, according to new research.

Alpen Capital’s latest report on the retail sector projects year-on-year growth of 15.7 percent, to reach total revenues of $296.8 billion. 

The industry is expected to record a compounded annual growth rate (CAGR) of 5.7 percent by 2026, the report added.

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Alpen, an investment banking advisory firm based in the UAE, said the sector was also expected to benefit from Gulf governments’ push towards economic diversification and the rise 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,” said Sameena Ahmad, managing director, corporate affairs, at Alpen Capital.

“As the retail industry continues to recover, there is an urgent need for retailers to upscale their digital presence to stay relevant as well as compete with regional and international players.”

She added: “The GCC retail industry is in a transformation phase with the pandemic impacting consumer behaviour and buying patterns while putting e-commerce at the forefront of retail.

“Operators have shifted their focus on brand acquisition to strengthen their geographical presence as well as expand and diversify their product offerings.”

Alpen’s report predicts that larger e-commerce players are likely to acquire niche operators offering customised products and services.

“We expect consolidation in the industry to intensify in order to drive earnings, gain market share and improve operational efficiency,” said Krishna Dhanak, managing director at Alpen.

According to the firm’s research, GCC retail industry sales are forecast to reach $370 billion in 2026, largely driven by the anticipated rebound in economic activity and tourism, increase in population, upcoming mega-events and rising adoption of digital technologies. 

Alpen also highlighted significant investments by Gulf governments to enhance the leisure and entertainment sector as well as tourism and hospitality infrastructure.

Saudi Arabia and the UAE are forecast to continue to lead the region in retail sales, cumulatively accounting for 78.5 percent of the total by 2026.

The biggest growth of 2022 is expected in Qatar, where the Fifa World Cup begins on Sunday. Sales are tipped to rise by 36 percent year-on-year to reach $18.5 billion. After the month-long tournament, growth is expected to normalise at a CAGR of 3.5 percent.

Bahrain, Oman and Kuwait are expected to grow at CAGRs of 7.3 percent, 6.1 percent and 3.5 percent respectively up to 2026.

Alpen estimates that duty-free sales at key airports in the GCC – Dubai, Abu Dhabi, Qatar and Bahrain – are expected to grow by 65.5 percent to reach $2.2 billion in 2022. By 2026, sales are projected to reach $3 billion.

It added that a further 4.5 million sq m of retail space was likely to become active in the region by 2026, taking the total to 23 million sq m.

Neeraj Teckchandani, CEO of Dubai’s Apparel Group, said: “The pandemic had severe impact on the retail industry, with lockdowns lasting up to six months in certain markets.

“However, it was a great opportunity to acquire market share and grow our portfolio and we have opened over 500 stores in the year 2021-22. 

“The biggest challenge facing the retail industry is the global headwinds of inflation [and] supply chain challenges but, with all the other positive regional factors, we feel the impact will be much lesser in the region.”

Ramesh Prabhakar, vice chairman and managing partner of luxury retailer Rivoli Group, said: “The region and the UAE in specific are experiencing a rebound in 2022 due to the innovation, growth strategy and flexible structures that are now in play – all of it originating from the safe and secure approach to handling the Covid-19 pandemic.”