November 2011

Alpen Capital's GCC Retails Industry report provides a perspective of the retail sector in the GCC by examining the current industry status and size, key market dynamics, and scope for growth in the future. In addition, it includes profiles of the six GCC nations identifying country-specific macroeconomic attributes, drivers for retail growth, and recent industry developments.

Industry Outlook

Alpen Capital´s GCC Retail Industry report expects retail sales in the GCC to grow at a CAGR of 8.3% between 2010-2015, reaching US$ 240.3 billion by the end of the forecast period. Growing per capita GDP and disposable income, expanding population base and consistent inflow of tourists will boost the region's retail sector going forward.

Retail sales of supermarkets and hypermarkets in the GCC are estimated to expand at a CAGR of 10.7% between 2010 and 2015, thus outpacing the broader retail industry.

Most GCC countries are experiencing rebounding economic activity. The region continues to diversify away from hydrocarbon dependence and have invested across varied sectors. The diversification has given way for robust growth in non-life insurance segment. With substantial projects underway in multiple sectors, the demand for financial services, especially insurance, is expected to rise steadily in the coming years. Non-life premium penetration is expected to increase from 1.12% in 2011 to 1.81% in 2015.

Middle East duty free and travel retail sales are projected to expand at a CAGR of 9.9% between 2010 and 2015. The Middle East luxury goods market looks poised for strong performance going forward. The region´s luxury goods sector is estimated to expand at a CAGR of 8.5% within the same period.

Having contributed substantially to overall retail sales expansion, the mid-market segment has broadly tracked the overall retail industry growth trajectory and is expected to continue on a similar trend going forward.

Key Growth drivers

There are several factors that are contributing to the growth of the retail sector. Largely urbanized consumer class with a young age profile is likely to drive demand in the retail market. The number of high net-worth individuals in the Middle East increased 10.4% y-o-y in 2010, while their financial wealth increased 12.5% during the same period. The number of individuals in the GCC with more than US$ 50,000 in onshore liquid assets is expected to increase and this will also contribute to the growth of the retail industry.

The region has seen substantial investments in the development of world class infrastructure, tourism, and hospitality sectors. Saudi Arabia is expected to see 9.3 million new visitors between 2011 and 2015, while there will be approximately 3.6 million new arrivals in the United Arab Emirates (UAE) during this period. There are a growing number of tourists from China and India and Chinese travelers have increased their total spending in the UAE by 155% y-o-y. in 2010. Various retail categories including the luxury segment are witnessing a robust demand from Chinese tourists.

Strategic geographic location and government focus on attracting tourists have given a massive boost to the growth of passenger traffic in the GCC. Apart from overnight tourist arrivals, the region´s airports are also witnessing a significant inflow of international transit passengers, making airport retail a flourishing business. Dubai Duty Free is already the single largest airport retailer in the world and Qatar Duty Free has also shown a very high growth rate.

Online retail is a relatively new concept in the GCC retail market however, online sales in the Middle East have registered a significant growth, and are believed to hold a strong potential in the future. We expect the GCC retail sector to continue its pace of growth leading to diversification and sustained economic development in the region.

For more details please click here to access the complete version of the GCC Retail Industry Report.