Qatar is emerging as the most attractive market for retailers in the Middle East, according to a new index produced by AT Kearney.
The Gulf state was a new entry at fourth in the latest Global Retail Development Index (GRDI), ahead of the region's shopping hub of the UAE which boasts two of the world's largest retail hubs.
The GRDI placed a total of six Middle East countries in the top 30 most attractive markets for development opportunities in retail.
Following a year that saw oil prices drop, AT Kearney said the region has remained an attractive destination for retailers.
As well as Qatar (4) and the UAE (7 down 3 places on 2014), Saudi Arabia 17 (down 1), Oman 26 (down 9), and Kuwait 27 (down 19) all featured in the index.
The report said: "In the past year, the Middle East has faced substantial economic and political upheaval, and the ranking drops in this year's GRDI reflect the varied environment - market saturation (UAE), increased country risk (Jordan), and GDP slowdown from falling oil prices (Kuwait).
"Despite the record drop in oil prices, retail sales growth is expected to continue. Indeed, the retail space pipeline remains strong, with several major projects underway in Qatar, the UAE, and Oman. Kuwait has felt the impact disproportionately, due to its high reliance on oil and relative lack of diversification."
The study added: "The Middle East continues to welcome international brands such as Macy's (in the UAE) and Harvey Nichols (in Qatar), and expansion from existing retailers."
Shamail Siddiqi, principal of the Consumer and Retail Practice, AT Kearney Middle East, said: "The Middle East has once again demonstrated its strength as a region of opportunity for the retail sector. It's clear that strategies implemented by each country has allowed it to flourish. The demographics and mega-projects make this is a very exciting time for retailers in the region to develop long-term success in the Middle East."
Last month, shopping centre expert Phil McArthur told Arabian Business that retailers in Qatari malls could make as little as one-third of the sales recorded in Dubai's Mall of the Emirates and only half that of stores in Dubai Mall.
The ultra-luxury brands, such as Chanel, Prada and Gucci, also are uninterested in opening second stores in Doha, despite having an average of three in Dubai, the founder and managing director of shopping centre analysts McArthur+Company said, speaking on the sidelines of Cityscape Qatar.
McArthur said retailers in Mall of the Emirates – the most successful super-regional mall in the world – earn an average of $1800 in sales per square foot each day.
The world's largest mall, Dubai Mall, recorded an average $1000-1200 in sales per square foot, with stores on the lower levels achieving the higher results.
Qatar: Total retail sales: $12.4 billion
With population growth and an increasing number of expats, Qatar is no longer a market to ignore. The 2022 FIFA World Cup is also leading to infrastructure projects that will benefit the economy in the long term, such as the airport expansion and the construction of Doha Metro. Until recently, international brands were limited by insufficient retail supply. This is changing as Doha welcomes 1 million square meters of retail space in the next two to three years. Qataris' affinity for luxury goods has also triggered entry plans by high-end retailers such as Harvey Nichols, which will open its first store in 2017 in Doha Festival City.
UAE: Total retail sales: $70.9 billion
The UAE's retail market continues to grow steadily with retail space growing by 7 percent in 2014 to reach 1.6 million square meters and sales growing 6 percent to $70.9 billion. Although the market is near saturation, Dubai is cementing its position as the Middle East's retail hub. Macy's and Bloomingdale's plan to open outlets in Abu Dhabi's Galleria mall by 2018—Macy's first store outside the United States and Bloomingdale's second in the UAE.
Saudi Arabia: Total retail sales: $103 billion
The retail sector in Saudi Arabia is still growing fast: retail space grew 5.6 percent to 2.1 million square meters in 2014, and sales increased 6.4 percent. Traditional markets (bakalas) still own much of the market, so there remains plenty of room for modern retail to grow. Regulatory developments in the past year could positively impact the Saudi retail sector. A proposed law limiting working hours is in its final stages; if approved, would encourage job growth and improve working conditions.
Oman: Total retail sales: $11.9 billion
While the outlook for Oman is fairly positive and the market still shows plenty of retail potential, retail development has been slower than other markets in the region and remains quite capital-centric. Retail sales are expected to grow at a steady 6 percent per year through 2020. One notable entrant this past year was Netherlands-based SPAR International, which opened two stores in Muscat in partnership with local company Khimji Ramdas and plans to open nine more by the end of 2016.
Kuwait: Total retail sales: $16.4 billion
Kuwait's real GDP is forecast to grow less than 2 percent over the next two years, the lowest growth rate among Middle Eastern countries in the GRDI. Oil accounts for 94 percent of Kuwait's export revenues, and the country projects a budget deficit of $24 billion for this fiscal year, despite spending cuts on fuel subsidies and infrastructure projects. Kuwait's retail sales grew only 2.1 percent per year between 2012 and 2014, compared to 5.7 percent for the UAE and 10.5 percent for Qatar, with few notable market entries this year. Retail sales are projected to grow at 6 percent annually through 2020, driven by ongoing urbanization, a growing expatriate workforce, and a rising population of the young and affluent.
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