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.
Luxury retailers had another good year. The UAE is a top importer of Swiss watches, with Dubai alone importing between 800,000 and 1 million premium watches per year. The country is the fourth biggest market for Rolls Royce.
Oman, meanwhile, joins the GRDI in eighth place. It is small (3.1 million people) and has a lower GDP per capita ($26,000) than other countries in the region, but it is on the radar of many international retailers.
The sector has changed dramatically in the past few years, thanks to infrastructure spending, greater consumer purchasing power, a rising number of expatriates and tourists, and more modern retail formats. Wholesale and retail trade contributes to 8.7 percent of Oman's GDP, the report said.
Meanwhile, heavy public spending helped Kuwait (12th) grow 6.1 percent. Kuwait's government implemented a five-year plan in 2010 to strengthen the country's private sector with investments in infrastructure, health, and education. The country’s urbanization — 98 percent of citizens live in cities — is driving the growth of the modern retail format. More foreign workers that cross the border from Iraq are adding to retail growth.
International brands are popular in Kuwait. Unlike other GCC countries, fashion sales are not driven by expatriates, but by locals with a lot of disposable income: GDP per capita in Kuwait is about $40,000. Many retailers are considering Kuwait, the report said.
Brazil is the top country in the GRDI for the second straight year, Chile is second once again, China climbs to the third place in the GRDI and Uruguay is fourth.