The Middle East market is witnessing retail boom offering profitable business scenario for local as well as global supermarkets/hypermarkets brands. Read on to know more about the present organised retail scenario in the region.
The Gulf retail sector has been growing at phenomenal rate for last many years. According to analyst reports, the estimated CAGR for retail sales will be around 8.3 per cent during 2010-2015. Another report says that the retail industry in the Middle Eastern trend at 10 percent (CAGR) between 2011 and 2014. Thus, the projected industry size will be approximately USD 1,000 Billion by 2014. Further, the organised retail in form ofsupermarkets and hypermarkets will witness major growth. The experts believe that the expansion in this segment can be 10.7 per cent (CAGR) in this time period. Therefore, many global and local players have set up their supermarkets and hypermarkets to leverage the burgeoning retail sector in the Middle East.
The Middle Eastern retail scenario has sea changed in the recent years. Several big shopping malls, hypermarkets, supermarkets, and organised chains have established presence in the region. The consumer’s response to these retail points has been encouraging. It has given necessary impetus to the international and local players to float their supermarkets or hypermarkets. The presence of large expatriate population, ample buying power and cash rich locals and heavy tourist influx offers a thriving retail market for these companies. Further, capital infusion and the retail floor space with construction of new malls is also growing. It will provide further business scope to the retailers to grow in the region.
Organised retailing in Middle East has been present in the region for past few years and the model is undergoing consolidation for now. Several recognisable organised retail brand names among hypermarkets, supermarkets and discounters are Spar, Pick n Pay´s, Geant, Carrefour, Lulu, Fmart. Some of these brands have presence through franchise model.
SPAR: Amsterdam based SPAR International has recently launched its first SPAR supermarket in Abu Dhabi. By 2015, the company is aiming to mark its presence in the UAE and other Gulf countries. The Abu Dhabi supermarket located in the Khalidiya business district has a sales area of 2,200m sq. It offers wide variety of quality products to the locals. The company will also launch second SPAR location in the UAE which will be a compact in the Khalifa district of Abu Dhabi, before the end of the year. Later, SPAR will expand its foot print by opening more stores in 2012. It targets to have nine stores, hypermarkets and supermarkets, operational by the end of 2013.
Carrefour: Carrefour hypermarket was first introduced in the Middle East by the Majid Al Futtaim Group in 1995. Dubai-based Majid Al Futtaim Holding (MAF), exclusive franchisee of hypermarket chain Carrefour in the Gulf, is planning further expansion of the brand in the region. The company is set to launch its Carrefour franchise to Iraq and Lebanon in the next year. MAF already operates the brand in countries such as Bahrain, Egypt, Jordan, Kuwait, Iran, Saudi Arabia, Syria, Qatar, and UAE etc. The new openings will take the count of the total number of Middle East & North Africa (MENA) states in which it operates to 13.
Geant: Group Casino a giant French multi-national corporation has business interest in retail and distribution in hyper and supermarkets. Casino is planning to launch over 30 Geant stores across the Middle East. The company is eyeing aggressive growth and will open these stores over the next three years in the region. Also, the retailer has plans to open five hypermarkets and 30 smaller stores across the Gulf in countries such as Bahrain, the UAE and Kuwait. Additionally, the chain is mulling foray into other Middle Eastern markets including Qatar and Oman in the next two years.
Lulu: Lulu Hypermarkets, the retail division of the multi-national EMKE Group has established presence in the Gulf market. Lulu has 95 stores in almost all major cities of the GCC, Yemen and Egypt. It is a leading hypermarket / supermarket catering to the multi-ethnic and diverse consumers of the region. It has innovative ultra modern shopping ambience for the shoppers. The brands’ hypermarkets cater to all conceivable needs of the consumers along with ample parking space, play area for children, food court, money exchange and bank counters. Lulu Hypermarkets have presence in the several cities in the UAE. They also have strong presence in Oman, Qatar, Kuwait, Bahrain, Yemen and Saudi Arabia.
Spinney’s: The leading supermarket chain, Spinneys Group is all set to open 16 stores across the Middle east region by 2013. On an aggressive expansion spree, the retailer is looking to launch supermarkets in Qatar, Lebanon, Egypt and debut in the Jordanian market. It will also be targeting new opportunities in Saudi Arabia and Kuwait. Spinneys Group operates seven outlets in Lebanon, three in Egypt and one in Qatar. Groups’ first Jordan outlet is expected to open soon, with three stores scheduled to open in Lebanon in 2012. Also, the company is planning to launch five stores each in Egypt and in Qatar by 2013. Further, Spinneys is expected to enter Saudi and Kuwait markets in 2013.
F-Mart convenient stores:Families Group the owner of supermarkets chain having presence in several parts of the UAE will introduce a new chain of shopping boutiques namely F-Mart stores. It will cater to the wealthy Dubai residents. Offering wide assortment of products to the European, American and Asian expatriates, the chain plans to have 15 such stores in Dubai Marina, Burj Khalifa and other posh locations. The Burj Khalifa store will be launched shortly. The company may adopt franchise model for expansion of the brand. The company plans to position its convenient stores differently from express retail chains of other brands like Carrefour of Lulu which are mini models of their big markets. Unlike others, F-Marts will be target selective consumer segment through its exclusive products.
Challenges for new investors
The hypermarket/supermarket ventures are highly capital intensive. The investors wanting to enter this sector have to face some challenges. Other than the strong financial capabilities, the factors such as good location, acquiring licenses, obtaining equipments and other infrastructural facilities and taking care of other operational aspects is very critical. The ideal location for such markets is in close vicinity of the city or town for attracting higher footfall. For opening the supermarket/hypermarket biz, the owner may need permissions and licenses from the authorities. The other important factors may include, hiring competent staff to offer quality service to the consumers and good marketing strategy to attract more clients. They will have to compete with already established brand names in this sector that have a large consumer base.
The success of the retail industry in the Middle East has opened a window of opportunity for lucrative business for the international retail companies, brands seeking expansion as well as new investors looking to start their organised retail ventures. Also, due to the favourable business environment and federal support along with growing consumer confidence, the region’s market has evolved as a preferred retail destination. Brands such as Landmark, Lulu and F-mart are growing their retail space in the region. Falling rentals and other costs make it an ideal time to launch or expand these markets. The growth momentum of the retail sector in the Middle East seems sustainable for years to come. Thus, the global retail players can benefit immensely in terms of ROI’s and overall business success.
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