Gulf retail growth can be managed

08 August 2008
As a mainstream retail market emerges in the Gulf, it must not be allowed to stifle small business.

With consumer spending in the West falling, it is no surprise that many of the world’s biggest retail chains are increasing their interest in the Gulf.

Consumer spending on food and consumable goods in the GCC is growing at 10-20 per cent a year. And with massive population growth anticipated in Dubai, Abu Dhabi, Doha, Riyadh and Jeddah, growth in the Gulf retail sector will remain strong for several years.

This is driving a boom in shopping mall construction. According to Gulf projects tracker MEED Projects, the value of mall projects planned or under way in the Gulf is about $3.1bn.

The region is also experiencing a significant change in the way people shop. In a pattern that has been seen around the world, supermarkets are increasingly dominating the retail landscape.

In the region’s largest market, Saudi Arabia, the share of sales accounted for by supermarkets has risen to 37 per cent, up from 32 per cent in 2003. In the UAE, the figure has reached 49 per cent, up from 43 per cent five years ago.

The principal losers are small shopkeepers. In Saudi Arabia, their share of the market has fallen to 20 per cent from 23 per cent over the past five years. In the UAE, the fall has been even steeper, to 18 per cent from 25 per cent .

Supermarkets offer convenience and their well-marketed brands inspire trust in their produce. But critics say their dominance stifles local businesses and removes consumer choice in the longer term.

The issue has been vexing consumers and politicians in the West for years. With a mainstream retail market still emerging in the Gulf, now is the time for politicians to set out how they would like the sector to develop.

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