A Wakeup Call For GCC Retail

Amid shifting consumer habits and the imminent arrival of Amazon, Gulf retailers are warned to adapt or face a similar fate to their global peers

- Robert Anderson

For many Gulf retailers, the events of March this year may go down in history as the beginning of a shift in the region’s retail landscape.

Amazon – the online shopping giant that had brought so many traditional stores to their knees in North America and Europe – announced that is was finally coming to the region, and it would be doing so via an already established platform.

The company’s estimated $650m acquisition of Souq.com, a site that commands an estimated four fifths of the Middle East and North Africa e-commerce market, is expected to take away sales from traditional retailers in much the same way as it has elsewhere.

“Without a doubt, Amazon is the single most significant force depressing margins for traditional retailers in those markets [Europe and North America],” says Tony Stockil, CEO of retail strategy consulting firm Javelin Group – part of Accenture Strategy.

“They take far more than their fair share of what little growth there is in the retail market. And the same will apply here too so it's a serious wake-up call for retailers here in this region.”

To date, the Gulf and wider Middle East has lagged behind other markets in e-commerce, with consultancy firm A.T. Kearney estimating in a 2015 report that it contributed just 0.4 per cent to the GCC region’s GDP compared to 3.5 per cent in the UK. But given the region’s attractive fundamentals and high mobile penetration the company believes the Gulf is on the verge of becoming the world’s fastest growing e-commerce playground.

It predicts that e-commerce will grow more than three times faster than traditional retail over the coming years at a compound annual growth rate of 30 per cent from $5.3bn in 2015 to $20bn by 2020.