Gulf retailers 'facing new stores setback'.

MANAMA: Although there are still some opportunities in new districts or in smaller cities for further retail development in the GCC, the potential for new store openings is inexorably decreasing.

Currently, it does not stop competing retailers from continuing to open a high number of new stores but the risk is that additional supply outpaces the market growth in the coming years, with new stores cannibalising existing ones, and retailers facing significant challenges to maintain their sales per square metre and their profit, according to research by consultancy Bain & Company.

"As the existing retail concepts mature, retailers will need to innovate to achieve a sustainable profitable growth," said Bain & Company Middle East chairman Jean-Marie PAan.

"The comparison between the state of development of the GCC retail industry and that of more established markets like the US suggests there are several areas for innovation.

"First, winning retailers will innovate in their existing formats.

"To do so effectively, retailers will need to invest in understanding their shoppers and in adopting a more segmented approach.

"As a first step in this direction, many retailers in the GCC such as Jarir, Landmark and MAF Carrefour have recently launched loyalty programmes to better understand their shoppers," he said.

"The next step will be to tailor their offerings and promotions to the needs of the customer mix living in the catchment area of each store. This segmented approach is still in infancy in the region.

"But retailers also need to consider seeding new sources of growth, outside of their existing core business," he added.

"There is a significant scope for innovation in format, brands and geographies.

In format, the region is still focused on few models including supermarket, hypermarket, big box specialised retail, and large malls.

"What about modern convenience stores, cash and carry, hard discounters, outlet malls and e-commerce?

All of these globally successful concepts are still vastly under-developed in the region.

"Besides, despite the high number of brands available in the region, there are still significant gaps in some market segments," he said.

"For instance, in fashion, low-end and high-end international brands are extremely well represented but there are few medium-end brands available.

"Another area for opportunityis the region's stores offer few local brands.

"GCC retailers also have a tremendous potential for innovation in their core and adjacent businesses," he said.

"Capturing this potential will require a focused strategy as well as the development of a stronger organisation able to manage a more complex business model," he added.

Copyright 2012 Al Hilal Publishing & Marketing Group

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