The GCC is recognized for its seamless visa policies, affordable travel, diverse attractions, economic diversification strategies, an increase in mall construction and retail space expansions, population growth, and the ability to dream big.

Besides, its strategic central location, a crossroads between Europe, Asia, and Africa, makes the region more accessible than traditional shopping hubs like New York and Paris, with shorter, cost-effective flight options that appeal to international shoppers.

It only makes sense that the GCC region’s growing retail sector has spurred potential rivalry with the world’s top shopping hubs. 

This growth has also boosted the GCC cities’ economies and created jobs.

A recent Strategy& Middle East report revealed that retail spending in the GCC is expected to increase by 37% from 2022, reaching $300 billion by 2028. The report stressed endless possibilities for expansion in the region’s retail sector. 

The UAE and Saudi Arabia are leading this surge, boasting CAGRs of 5.4% and 5.1%, respectively. This dynamic expansion positions cities like Dubai and Riyadh as global retail powerhouses.

Strategy&’s report shows that Dubai stood out as the only GCC city on the list with a retail spend per capita of approximately $14,000, trailing only New York City. The emirate’s retail sector accounts for 24% of its GDP and employs 21% of its workforce.

“The region is developing its identity and promoting the development of local brands, some of which are starting to make their market globally. Key cities in the region are positioning themselves as regional hubs – and factors like increasing tourist traffic and greater settlement/migration into the region are contributing to the region becoming more competitive in its offering to cities like New York, LA, London, Paris, and Singapore,” says Mohammed Dhedhi, Partner, Consumer and Retail Practice, Kearney Middle East and Africa.

Mohammad A. Baker, Deputy Chairman and CEO of GMG, says the region is a premier destination for luxury shopping and distinctive retail experiences. “The region’s skillful blend of high-end retail spaces and entertainment continues to draw tourists and residents, cementing the retail sector’s prominence on the global stage.”

While several factors drive growth in the GCC’s retail sector, challenges remain.

INTENSE COMPETITION

Many residents of the region still prefer to shop abroad. The Strategy& survey notes that Riyadh, Jeddah, and Doha residents spend between $3,500 and $5,000 per capita annually on retail, with 50-60% shopping abroad at least twice a year. 

Baker says, “Intense competition, driven by a concentration of local and international brands, adds another layer of complexity for retailers,” adding, “The entire sector is undergoing a lot of transformative changes – from global supply chain complexities to digital transformation and a more price conscious consumer.”

Other challenges include current geopolitical tensions, fluctuating oil revenues, and evolving consumer preferences with sustainability and digital experiences. This forces brick-and-mortar stores to adapt and shift from their traditional ways.

THE SOLUTIONS

Effective governance and strategic measures can mitigate these issues.

“Factors such as youth-driven urban populations, projected doubling of disposable income by 2040, and favorable government policies contribute to the regions’ high potential for retail sector growth. This is coupled with an emphasis on fostering a local entrepreneurship culture across several sectors that make it exciting,” says Dhedhi.

The report suggests that expanding brand and product offerings, enhancing retail talent training, strengthening supply chains, and improving customer technologies could be possible ways to overcome such hurdles. It reiterates the need for new investment regulations and highlights the need for creating more enriching shopping experiences with culinary, entertainment, and cultural venues.

The report explains that developing a comprehensive retail master plan, curating an engaging retail calendar, and delivering tech-enabled shopping experiences can help establish GCC cities as global shopping destinations. 

At the same time, supporting small and medium-sized retailers, building a robust retail talent pool, and simplifying regulations with targeted incentives are crucial for enhancing the retail sector’s global appeal.

GOING FORWARD

The region has the potential to emerge as a global retail leader through its already existing economic diversification and technological advancements. 

The GCC has established leadership in luxury goods and electronics retail, owing to its high disposable incomes, expanding middle class, and predominantly young, tech-savvy population.

In fact, luxury goods and duty-free sales in the GCC are expected to reach $5 billion by 2028, as stated by Alpen Capital at the Middle East Retail Forum (MRF) 2024, primarily fueled by increasing tourist arrivals and modest population growth. Meanwhile, the e-commerce sub-sector is expanding at a CAGR of nearly 10% and is projected to reach $46.88 billion by 2029. 

“The region’s strategic position as a global transit hub has also proved invaluable, allowing retailers to serve a diverse international clientele. Government initiatives and forward-thinking economic policies promoting diversification have further strengthened the retail landscape,” says Baker.

Sustainability goals and consumer awareness is of critical importance for the region’s retail sector. Therefore, adopting green retail practices and government-led policies aimed at incentivizing sustainable development may act as a possible driver for further growth. 

The future of retail in the GCC is positive. “Sustainable business practices will become increasingly central to retail operations, as well as enhancing community well-being and environmental stewardship. Digital transformation will continue to revolutionize shopping experiences. Customer engagement will become increasingly personalized, driven by sophisticated omnichannel capabilities and data-driven insights,” says Baker.

Dhedhi says that the future of GCC retail is bringing more localized tastes and preferences to the global market. “Large brand operators and entrepreneurs alike are leveraging the uniqueness of the region’s residents, locals and expats alike, to create compelling offers that are succeeding locally but also beginning to resonate globally. We expect this trend to continue in the future.”