By Parag Deulgaonkar
Retail sales will slow down in 2017, but is set to rise from next year, according to new report
The size of the GCC retail sector is expected to grow by 25 percent, from $250.5 billion (AED919.33bn) in 2016 to $313.2bn (AED1.15 trillion) by 2021, driven by economic and population growth, and increase in tourist arrivals, according to a new report.
Alpen Capital, in its GCC retail industry 2017 report, said after witnessing a decline in 2016, retail sales are likely to grow at a slower pace in this year due to the prevailing economic environment such as lower oil prices and government-initiated austerity measures.
“Nevertheless, the sector is expected to recover in 2018 and grow steadily through 2021 driven by the anticipated rise in population, international tourist arrivals and per capita income,” it said.
During the five-year period, total retail sales in the GCC nations are projected to grow by 3.3 percent to five percent with Saudi Arabia and Bahrain growing the fastest.
“The GCC retail sector continues to remain an active contributor to the region’s economic development. Although the sector is experiencing a slowdown, the long-term fundamentals of the sector remain strong and are expected to grow steadily through 2021,” Sameena Ahmad, managing director, Alpen Capital (ME) Limited, said.
The consultancy said the GCC is expected to get 6.2 million square metres (sqm) of retail space is in the next five years, taking total retail gross leasable area to 18.6 million sqm.
The rapid rise in supply amidst the economic slowdown may create an oversupply in the UAE, Qatar and Oman, the report said, adding the currency peg of most of the GCC nations to the appreciating US dollar has made the region an expensive tourist destination.
The retail e-commerce market in the GCC is expanding, driven by increasing use of internet and social media, better access to secure payment gateways and improvement in the delivery system.
Alpen Capital said the region’s e-commerce sale is expected to touch $41.5bn by 2020 with the UAE becoming the largest online retail market in the GCC with a market share of 53 percent, followed by Saudi Arabia (14 percent), Oman (12 percent) and Qatar (10 percent).
As demand increases, the region is likely to see emergence of new online retailers and revamp of online portals by traditional retailers, the report said.
Airport-based duty free sales in the Middle East are projected to grow at an annualised average of 7.9 percent as passenger traffic increases at the international airports.
Tourist inflow will continue to rise, as the region is witnessing a spate of infrastructure and tourism-related developments such as Expo 2020 in Dubai and 2022 FIFA World Cup in Qatar, the consultancy said.
Completely contradictory report.
How can the introduction of VAT in 2018, as well as additional online players assist sales in B&M when combined with an over supply of retail space?