Hypermarkets Create Large Footprints in GCC

    High income levels, large expatriate communities and strong urbanization have reinforced growth of the GCC retail sector. Modern retail outlets such as hypermarkets and supermarkets have proliferated in the region. These large organized establishments offer a wide array of food products at competitive prices in a convenient set-up, to provide an overall hassle-free shopping experience to consumers. Sales of supermarkets and hypermarkets in the GCC are expected to grow at an annual average rate of 10.5 percent between 2011 and 2016, according to a report by Alpen Capital. Saudi Arabia and the UAE are the largest markets in the GCC, accounting for three-fourth of the region‘s total food retail market.

    Retail sales in the Gulf region were expected to reach USD270.3 billion by 2016, according to Alpen Capital. "The region's retail sector has displayed strong resilience in the face of global economic downturn and is expected to continue to grow at a steady pace given its attractiveness to tourists and residents in terms of geographic location, developed logistics and availability of diverse and quality shopping options. While the sector presents attractive opportunities, it is highly competitive and retailers need to continue to innovate, so that they can achieve sustainable growth and profitability," said Mahboob Murshed, Managing Director, Alpen Capital. The food retail market in the Emirates has grown substantially to meet the needs of diverse communities, with penetration of modern grocery outlets at over 60 percent, second only to Bahrain. Several international retailers such as Spinneys, Carrefour and Geant have created a large footprint in the UAE, alongside homegrown giants like Lulu Group, Choithrams and Al Maya Group. These large retailers are further widening their reach by opening new outlets in the upcoming commercial / residential complexes set to open ahead of the Expo 2020 event. Due to busy lifestyles and increasing road traffic, people prefer to purchase their daily grocery from stores located within their vicinity, even as they visit hypermarkets for bulk shopping. To capitalize on this trend and enhance revenue, the big brands are focusing on opening smaller format convenience stores. They are also looking at offering a variety of organic and high-quality foods to meet the growing demand for such products. Online food retail is also gaining traction in the UAE, and a growing number of brick-and-mortar retailers are establishing digital presence to battle out the mushrooming grocery start-ups. The retail food market in Saudi Arabia has huge room for expansion, considering only 52 percent penetration of modern retail stores. Technavio’s market research analyst predicts the food retail market in Saudi Arabia will grow at a CAGR of around 5 percent by 2020. Food retail outlets in Saudi Arabia carry a broad range of options for consumers such as domestically processed foods, imported specialty food products, and organic food products. Consumers prefer to shop at supermarkets and hypermarkets as these food stores also provide an outing for families. Retailers in the food market are trying to increase their presence to gain more market share and consumer segments. With the rise in the influx of tourists in the country because of pilgrimage to Mecca, the demand for packaged food in this region will see tremendous growth in the coming years. With the popularity of such formats, major food retailers have laid down plans to expand presence in the Kingdom. In June 2016, the Kingdom permitted foreign investors to own 100 percent interest in retail and wholesale businesses, subject to certain terms, according to Alpen Capital. This regulation is likely to intensify competition with additional stores opening in the country, as new players enter the market and existing players look at increasing market share.

    Fatima Saab
    Content Editor & Researcher