Has the Middle East's retail sector reached maturity? (page 1 of 2)

Retail sales in the Middle East are now equal to Eastern Europe and higher than those of India and China, according to Richard Reid, SVP Development Al Futtaim Group.

Sales across the GCC and Egypt have doubled in recent years with 40% of the trade coming from tourists.

However, the retail scene in the region varies from one country to another depending on the size and disposable income of the population, and the brands which are operating there.

The number of consumers in the Middle East now totals almost 1.4 billion, according to Sevil Ermin, Director of Retail Services for research group Nielsen.

This number is increasing by 38 million every year, a faster growth rate than in any other part of the world.

Reid sees Egypt as an interesting market due to the size of its population - 80 million people with over half of them able to afford to shop with retailers like Carrefour.

Yet not all people in this group can afford to shop in a mall, Reid argues.

On the other hand: 'The Saudi retail market is challenging and relatively mature, being the largest market in the region. It has very high levels of supply and a high percentage of the population is young. But when it comes to resources, the United Arab Emirates remains more affluent, although smaller.'

Retail space in the GCC is expected to triple in the coming five to ten years, depending on the speed and reliability of developments.

Currently, 145 million sqft of retail space are under construction, with a further 45 to 70 million sqft being planned. Between 2011 and 2016, the retail space that is expected to be available in the region is estimated at between 250 million sqft and 280 million sqft.

Food offers opportunities

Key factors will continue to support the rapid growth in the Middle East's retail sector.

A report issued by Bharat Book Bureau recently said that the increasing population and rising per head household consumption will remain one of the key drivers for the growth of the retail industry in the UAE.

The report noted that the food sector offers a glut of opportunities, especially as the UAE alone imported around 80% of its food items in 2007.

Banking services were also directly linked to the growth in the retail industry, which will create a plethora of opportunities for the credit card market.

Organizing shopping events has a great impact on driving consumers into the malls. This is why Reid sees leisure and entertainment as powerful anchors for the retail industry in the region.

Great examples of that are Dubai Shopping Festival, Dubai Summer Surprises, and Dubai Duty Free (DDF), which are seen as major contributors to the UAE's retail industry.

Sales in DDF accounted for more than 9% of total retail sales in the country in 2007.

Big retailers are mostly based in North America and Europe, and are not involved in emerging markets at the present time. But, according to Dr. Ira Kallish, Director of Global Economics and Consumers for Deloitte Research, the saturation and maturity of developed markets will eventually make these unattractive for retailers. They will then look into benefiting from the strong opportunities offered in the emerging markets.

'Emerging markets are becoming more stable and this can be attributed to the large currency revenues.