This is what GCC cities should do to stop retail sales ‘leakage’

The GCC retail sector is growing fast, presenting an opportunity to transform major regional cities into global shopping destinations. Already, GCC retail sales are expected to reach $300 billion by 2028, up 37 per cent from 2022.

With proper governance and a six-step strategy, GCC cities can join leading shopping destinations, creating value and jobs, and enhancing quality of life for residents and tourists.

Retail contributes substantially to urban GDP and employment in global shopping hubs. For example, in six leading shopping destinations—Dubai, London, Milan, New York City, Seoul, and Tokyo—there is significant retail spending per capita annually of $8,000 to $18,000, contributing up to 24 per cent of GDP and 20 per cent of the employment in these cities.

Strong domestic retail demand, however, does not guarantee that GCC cities can become global shopping destinations. Residents in Riyadh, Jeddah and Doha spend $3,500 to $5,000 per capita annually on retail, with a staggering 50-60 per cent of them shopping abroad at least twice a year.

Given easy foreign travel, rising domestic demand has led GCC shoppers to seek unique retail experiences overseas.

Fix the supply-side

To prevent such demand leakage, and seize the retail opportunity, GCC cities should tackle two main challenges: supply issues, including limited brand and assortment offerings, insufficient talent, and absence of holistic experiences; and enablement issues, including fragile supply chains, underdeveloped customer technologies, and cumbersome regulations.

GCC cities can overcome these challenges with a systematic approach. It starts with a governing entity to steer the city’s retail priorities, such as the public sector led Dubai Festivals and Retail Establishment. This ensures coherent policy decisions aligned with the city’s larger goals.

The governing body articulates the city’s distinct retail vision aligned with its identity, culture, and ambitions. The vision should define the kind of shopping destination the city wants to become - offering everything to everyone, or specializing - and determine the scale for the city’s retail ambitions, the shoppers it will attract, and measures of success.

With its governance and vision in place, a city can undertake six initiatives to develop its retail sector.

• First, urban planners and the governance entity need a retail masterplan. This plan defines and connects the retail clusters, channels, and brands in a manner that provides and streamlines unique shopping journeys.

• Second, the governing entity should develop a calendar of events and promote the destination. Events can be city-wide sales and promotions, such as the Black Friday sales in New York City, or specialist gatherings, such as Tokyo’s Comiket, the world’s largest self-published comics fair.

• Third, the city’s retailers should pursue technological innovation—such as frictionless checkouts, augmented and virtual reality use-cases which create immersive shopping experiences.

• Fourth, the governance entity should coordinate support of small and medium-sized retailers. That means facilitating connections to business accelerators, capability development, and market access support. Saudi Arabia’s Fashion Commission created a Saudi 100 brands program, providing mentorship and taking brands to fashion hubs such as Milan and Paris.

• Fifth, GCC cities can develop retail talent. GCC retailers, including the Chalhoub Group, and mall operators, such as Majid Al Futtaim, already offer some training programs. Cities can assist by establishing talent standards, and bringing together universities, and employers to attract, and develop high-quality talent.

• Sixth, governments can use policy tools—specifically they can reduce the time and cost of business setup by streamlining and digitizing licensing processes. They can also consider targeted incentives to attract major brands and curate a shopping destination.

As Dubai has demonstrated, GCC cities can enter the ranks of global shopping destinations, rivaling those in Europe and North America. With a careful, systematic approach, shopping can become a key driver of regional economic transformation.