What’s in store for the GCC retail industry? 

Every day, people from all over the world fly into the UAE and spend days exploring its malls, making the retail sector one of the country’s key economic drivers. Expanding populations and rising income levels are also contributing to the sector’s success, not just in this nation, but within the whole of the GCC region.

The latest economic indicators are a testament to the sector’s resilience. Retail industry sales in the GCC are projected to grow at a compound annual growth rate (CAGR) of 4.6% to reach $386.9 billion in 2028 from $309.6 billion in 2023, according to Alpen Capital. Saudi Arabia and the UAE lead the way, with retail sales in the two countries projected to reach $161.4 billion and $139.1 billion by 2028, respectively. Moreover, 3.9 million square metres of retail space is likely to come up in the GCC between 2023 and 2028.

“Retail is one of the most instrumental sectors in driving economic diversification across the GCC,” said Khalifa Bin Braik, CEO of Majid Al Futtaim Asset Management. “It creates a substantial multiplier effect by supporting a wide range of ancillary industries including logistics, real estate, technology and tourism.”

Holiday shopping spree

Who has never bought a last-minute present? This happens most often over the last couple of months of the year, be it for Diwali, Christmas, New Year, or any of the celebrations taking place around this time. As the holiday shopping season approaches, retailers are getting ready for this buzzing period of activity.

“The holiday season is a crucial time for retailers, significantly impacting annual performance. For many retailers, this period brings a surge in demand as consumers look for products at affordable prices for gifting, celebrations and seasonal needs,” said Ayman Beydoun, recently appointed CEO of BFL Group. “The revenue generated during these months can account for a substantial portion of yearly sales, making effective planning and strategy essential for capitalising on the holiday shopping rush.”

When someone buys a gift, they do so with a clear deadline. For this reason, meeting customers’ expectations for fast delivery and a seamless experience across both physical stores and online platforms is crucial. To rise to the occasion, retailers are focusing on operational efficiency, streamlined logistics and proactive customer service, ensuring the shopping experience remains smooth and satisfying during this crucial period.

The connection between the retail and logistics industries is such that large conglomerates such as Landmark Group are entering this sector. “We thought, ‘What are the opportunities linked to retail, where we can actually succeed and where we have expertise?’ That to us, was in logistics,” recalled Renuka Jagtiani Chairwoman of Landmark Group, UAE, during a recent press conference.

“Today, we don’t only run a lot of last-mile delivery for our business, but we also do it for third parties,” she added. The group now owns the MENA region’s largest privately-owned distribution hub, Omega Logistics and Logistiq, which delivers 20,000 daily shipments across Saudi Arabia and the UAE.

The latest retail trends

The expansion of e-commerce is reshaping how consumers engage with retail. The GCC e-commerce industry, excluding Bahrain, is estimated to have grown at a CAGR of 20.2% to reach $21.2 billion in 2023 from $8.5 billion in 2018. In the UAE alone, sales across e-commerce platforms reached $7.5 billion in 2023, according to Alpen Capital data. Meanwhile, e-commerce sales in Saudi Arabia grew at a CAGR of 23.2% between 2018 and 2023. Last year, the Kingdom accounted for 40.9% of the GCC e-commerce market.

“Overall, 2024 is characterised by adaptability, innovation and a strong consumer-centric approach,” Beyodun stressed. “E-commerce has highlighted the importance of data-driven personalisation, faster delivery options and an efficient returns process, all of which contribute to enhancing customer loyalty in the digital retail landscape.”

As the industry continues to mature and amid the growing prominence of e-commerce, traditional retailers are fast embracing omnichannel strategies and focusing on differentiating themselves through innovative offerings to offset the margin pressures arising from increasing competition.  

“Physical stores remain a vital part of the retail experience, and we continue to upgrade store design whilst we invest in e-commerce and the latest technology and innovation,” Jagtiani explained. The group operates 22 brands across more than 2,200 stores, of which 12 are independent e-commerce stores, accounting for 20% of total sales. “We believe that this is key to staying relevant to ensure a seamless customer experience, both on and off-line.”

Despite the rise of e-commerce, the GCC region continues to see strong growth in physical sales. In H1 2024 alone, Majid Al Futtaim malls welcomed 112.6 million visitors and its leasing occupancy rates were at 96%. “These figures highlight the success and resilience of our malls, even in today’s rapidly changing retail landscape,” Bin Braik noted. Nonetheless, he still predicts a trend in which “the lines between digital and physical retail continue blurring, with omnichannel retail becoming the norm”.

Showcasing technology

The retail sector is rapidly adopting new technologies to keep pace with changing consumer expectations and improve operational efficiency. This innovation goes far beyond e-commerce and buy-now-pay-later schemes. Some of the key advancements include the use of AI-driven data analytics to better understand consumer behaviour and optimise inventories. Many retailers are also increasing automation within their supply chains, allowing for faster and more accurate fulfilment in warehouses and distribution centres.

“RPA (Robotic Process Automation) is increasingly used to streamline administrative tasks, such as HR and finance and reducing manual effort in areas like inventory management, invoicing and customer support,” Beydoun noted. “Together, these technologies are enabling retailers to respond to market trends quickly, meet consumer demand more effectively and remain competitive in an evolving industry.”

However, technology is not only relevant in the field of e-commerce. Increasingly, retailers are leveraging innovation to enhance customers’ shopping experience and boost mall footfall. Recently, Dubai opened a completely artificial virtual shopping centre, “The Mall of the Metaverse”, housed in Decentraland. Majid Al Futtaim has also integrated art, technology and innovative design to make shopping malls destinations in their own right.

“Experiential retail is becoming increasingly significant, with consumers seeking immersive, interactive shopping environments,” Bin Braik explained. “Malls are evolving into lifestyle hubs where retail is paired with entertainment, dining and wellness offerings to create holistic customer experiences.”

From new AR and VR experiences to cultural and entertainment offers, Bin Braik’s vision for the mall of the future includes “a seamless blend of physical and digital experiences”. To achieve it, the company is working to develop new capabilities, from advanced data analytics to personalised shopping experiences powered by AI.

“In the future, malls will know your preferences from the moment you walk in, offering tailored recommendations and exclusive offers in real-time,” he added. “The demand for seamless online-to-offline experiences will grow, and retailers who invest in technologies like AI for hyper-personalisation and data-driven insights will set themselves apart. These will likely drive the next wave of growth and creating unique shopping journeys.”

What’s in store for 2025?

Looking ahead to 2025 and beyond, the retail sector in the GCC is set for further success. As the region’s economies diversify away from oil, retailers are driving the development of consumer-driven economies, which generate sustainable growth through job creation, tourism and foreign investment. Strong tourism, a young population and high consumer spending are all key drivers of this growth.

“As we look to the future, I believe the retail industry has an exciting path ahead,” Bin Braik said. “The GCC’s unique position as a global tourism and shopping destination offers boundless opportunities, particularly as the region continues to diversify its economy

As consumer demand for convenience grows, retailers are likely to see further investment in omnichannel capabilities. E-commerce is expected to continue its rapid expansion. Sustainability is also a rising area of interest, due to increasingly eco-conscious consumers. Finally, the rise of data-driven use cases is clear, with technologies like AI and automation becoming standard for efficient operations and improved customer experiences, blurring the lines between digital and physical retail offerings.

“The retail sector is at a pivotal moment, with ongoing transformations driven by technology and evolving needs,” Beydoun said. “As we look to the future, it’s important for retailers to remain adaptable, focusing on sustainability, innovation and enhanced customer experiences whether online or in-store.”

In the months to come, the GCC retail sector is projected to witness growth due to the influx of high-net-worth individuals, a flourishing tourism industry and strong economic activity. The sector’s adoption of new technologies might provide a new look, but its significance for the region will not go out of style.