Retail sales in the Middle East are susceptible to lower oil prices and falling consumer demand, but international retail chains still view the region’s long-term investment prospects positively.
Back To Supplement
Rocked by the dramatic drop in oil prices and a fall in the purchasing power of Chinese and Russian tourists, retail sales in the Middle East are experiencing a difficult period. However, investors remain positive on the medium and long-term outlook, with projects for new gigantic shopping malls unchanged and major Western brands still planning their debut, or a renewed expansion, in the region.
“We do see a bit of a slowdown in retail sales, but the slowdown is not equal across markets [and] different segments,” says Shamail Siddiqi, principal of the consumer and retail practice at global management consultancy A.T. Kearney Middle East. “Saudi Arabia, which is still heavily dependent on oil, is the one hit the most; UAE and even Qatar, which are more diversified as far as their economies go, are less impacted; and then there are markets like Egypt, which were disrupted by the Arab Spring [but] are now attracting more investments.”
The outlook for the future, however, is less rosy than it was in the past. London-based economic research firm Capital Economics sees a trend toward much weaker rates of consumption growth in the Gulf over the coming years, perhaps in the region of 2% to 3%, compared with 6% to 7% over the previous decade, says Jason Tuvey, Middle East economist at Capital Economics.
But Dubai, which is preparing to host the 2020 World Expo, remains a major tourist hub. Its airport is the third largest in the world, following Atlanta in the UnitesdStates and Beijing in China. Likewise Qatar, which is billed by A.T. Kearney as the fourth-most-promising retail market among emerging markets, expects to benefit from the 2022
“The slowdown is temporary; people are still quite optimistic,” concludes Siddiqi. “They are positioning themselves ahead of the expo.” Local retail champions in the UAE, including Landmark Group, Panda and Majid Al Futtaim, which owns and operates shopping malls, are still expanding across the region, along with large international brands. Macy’s is planning to open its first department store outside the US in Dubai in 2018, and its luxury arm, Bloomingdale’s, which opened a store in Dubai in 2010, recently announced plans to open one in Kuwait in spring 2017. Macy’s and Bloomingdale’s are in partnership with local fashion retailer Al Tayer, which defines itself as the largest luxury retailer in the Middle East.
Luxury department store Harvey Nichols is also set to open a store in Qatar, and the UK retail chain John Lewis announced in February 2016 its first shop-in-shop in Dubai, to open in spring 2017.
Italy’s upscale food chain Eataly opened its first 2,000-square-meter store at the Dubai Mall in 2013 in a franchising arrangement with Azadea, a retailer that owns and operates more than 55 international franchises in 13 countries across the Middle East and Africa. “We are very satisfied [with] this experience because we are the most visited within the Dubai Mall,” stated Dino Borri, Eataly’s international brand ambassador, adding that the group also plans to open another restaurant in Dubai in a couple of years—and then a third in Doha (Qatar).
However, Tariq Qaqish, managing director, asset management, at Al Mal Capital in the UAE, says there is a change in the region’s purchasing power. “People are starting to feel the uncertainty and buying less. The car sector is already feeling the heat.” Large chains are experiencing sales declines of up to 20%. But these declines are not causing
retreats from long-term investments plans, Qaqish adds.
No comments yet
Add a Comment
You must be a registered user with Global Finance Magazine to comment.