Dubai: Alpen Capital estimates in its latest report that the Gulf retail demand will grow at an annual rate of 9.5 per cent over 2010-12 due to growing population and rising per capita expenditure. For 2010, the industry growth is projected at around 8.3 per cent.
The population is expected to grow at an annual rate of 2.9 per cent till 2012 while per capita expenditure is expected to grow at the rate of 5.6 per cent until 2012.
The modern shopping malls anchoring state-of-the-art hypermarkets, highly developed free trade zones, various shopping festivals/events and relaxed tax provision for individuals provide further growth impetus to the sector.
The report said that along with significant growth, there has been a qualitative shift in retail consumer behaviour in the Gulf. The key trends developing in the region are — rising acceptance of modern retail format, increased preference for international brands, growing prominence of online retailing and better appreciation of innovative ideas and offerings. "The plethora of opportunities is punctuated by a few challenges that the industry is currently facing," the report says.
"Considering the potential in the region, many international retailers have expanded their presence within the Gulf to sustain their global business growth. As a result, competition has significantly heightened for the local industry participants over the past couple of years. In addition, there is an ongoing threat from relatively low consumer finance availability in the region — a high credit card interest rate compared to the global average due to higher default risk and lack of credit bureau data."
Although the region has witnessed huge expansion in organised retail space over the last decade, the per capita GLA is still very low compared to developed market, with the exception of Dubai. Looking at the region as a whole, the demand is expected to grow at a sufficient pace to absorb the healthy pipeline of new space.
The GCC retail players reported average revenue growth of 6 per cent year-on-year in 2009, compared to 33 per cent year-on-year in 2008 and accounts for 1 per cent of the global retail market. Despite its small size, per capita retail spending in the Gulf is relatively high.
The report said that the Gulf's GDP growth has outpaced its population growth consistently over the past several years providing a significant boost to people's disposable income in the region. Also, a higher disposable income translates into higher consumption expenditure — conducive for retail sector growth.
The overall income level for residents in the Gulf has risen over the last decade due to a sharp rise in oil prices. The Gulf's combined GDP stood at $868.5 billion in 2009, compared to about $342 billion in 2000.
