UAE ranks 5th in global retail
Retail sales in the UAE exceeded $73 billion in 2016.
The UAE remains the most attractive market in the region for retailers, with strong growth opportunities beyond Dubai, the latest A.T. Kearney retail study has found.
According to the 2017 A.T. Kearney Global Retail Development Index, the UAE is ranked fifth this year, even though its retail market is showing the first signs of cooling from over a decade of double digit growth. The country remains very attractive to retailers, as 86 per cent of the population lives in urban centers, and retail sales exceeded $73 billion in 2016. The UAE also remains a low risk destination as other countries in the region battle the effects of low oil prices.
The report further predicts that the country's economy should grow about 3.4 per cent annually through 2022, and while a new VAT will likely have an impact on retail sales, analysts remain bullish on the UAE's long-term prospects.
"This year's study finds global retailers faced with intensifying competition from local and regional retailers that have grown increasingly more sophisticated. Advancements in retail technology and e-commerce, requires retailers across the world to stop up and rethink their strategies," said Yana Petrova, co-author of the study, A.T. Kearney.
Several retailers are also changing their approach in the market. Past attempts to increase top-line revenue with a larger store footprint have been replaced with a focus on managing expenses, opening digital channels, and improving operational efficiencies. Innovation was the main theme for the UAE last year - strip malls, unique format, entertainment centers, outdoor cinemas, all aiming to spark and sustain consumer interest. E-commerce growth has averaged 30 per cent over the past few years, and experts expect to see more activity and growth in this space in the coming years.
"Mobile shopping is challenging the ways retailers think about global expansion, as well as about their role in the value chain," says Mike Moriarty, an A.T. Kearney partner and co-author of the study. "We are expecting more retailers to use mobile as part of their future expansions plans."
In addition, the report also states that the GCC region, specifically the UAE and Saudi Arabia, is developing new ideas for growth. Saudi Arabia, the other major retail market in the region, ranked 11th. Despite the challenging economic situation in the country, the retail sector was quite resilient and grew by 4.6 per cent on 2016. The sector is one where the government aims to create a lot of new Saudi jobs and is focusing on growing modern formats and e-commerce. Recent regulatory changes, such as allowing 100 per cent foreign ownership in retail and increased financing to small retail enterprises, will strengthen the further development of the sector.
The report ranks India as the top developing country for retail investment, while China enters the ranking at a second place despite its slower overall economic growth. The market's size and the continued evolution of retail still make China one of the most attractive markets for retail investment.