Saudi Arabia occupied the 14th rank in the Global Retail Development Index (GRDI) for the year 2012, according to data released by management consultancy firm A.T Kearney.
Four GCC countries, including Saudi Arabia, are found in the list’s top 20. The United Arab Emirates (UAE) ranked seventh, and Oman and Kuwait ranked eighth and 12th, respectively, the report said.
Saudi Arabia continues to exhibit a strong market, evident in rising GDP and population, increased government spending, and a more stable political environment, the report pointed out.
According to the report, Saudi Arabia is the largest and among the most attractive markets in the Middle East. Saudi Arabia's drop of four spots from last year's GRDI rankings is the result of new countries entering the ranking rather than a change in the Kingdom's attractiveness.
Rising disposable incomes and acceptance of modern formats and foreign brands are driving consumer spending. Furthermore, a government stimulus plan will inject about $110 billion into the economy in the next five years, the report said.
Saudi Arabia's large population and its relatively low GDP per capita compared to its neighbors suggest that the Saudi middle class could be a source of growth as incomes rise. Moreover, religious tourism is driving sales in many sectors, as millions of Muslims make the annual trek for Haj, according to the report.
Several brands announced expansion plans to capture Saudi spending. Gap plans to open 44 Gap stores and 10 Banana Republic stores by the end of 2012. Savola Group, owner of Panda Hypermarkets, plans to have 120 supermarkets and 40 hypermarkets by 2012, and the group has also acquired 11 Geant stores. Burberry entered Saudi Arabia a year ago through a joint venture, the report said.
On the other hand, increased tourism, population growth, and government stimulus put the UAE back on the map for many retailers. After two years of stagnation, overall retail sales increased by more than 5 percent and consumer confidence rose, the report said.
During the Arab Spring, the UAE benefited from its perception as a safe and welcoming nation for tourists and investors. Dubai Mall is the world's most-visited shopping and leisure destination, with more than 54 million visitors in 2011 (up 15 percent from 2010) and a 35 percent increase in average retail sales, according to the report.
Convenience formats are becoming more popular in the UAE. While big format stores are still dominant, convenience formats are a way for retailers to expand their local footprints. Abu Dhabi-based LuLu Hypermarket Group is planning 50 neighborhood stores across the Gulf region over the next three years, and Carrefour is expanding its express convenience stores across the country.
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