Consumers are keeping an eye on value

The retail market in Kuwait is characterised by a fairly large luxury segment, as well as a large mid-market segment. This reflects the country’s high GDP per capita and young population. In general, Kuwaitis tend to occupy well-paid positions in the public sector, while much of the work in the private sector is undertaken by expatriate workers, of whom the majority come from Asia, with significant populations from Western countries and fellow Arab states. However, the luxury segment appears largely saturated at the moment, while the mid-market segment is poised to enjoy further growth. Shahzad Gidwani, the general manager of the Morad Yousuf Behbehani Group’s trading division, told OBG, “There has always been a steady market in luxury goods; however, most recently the mid-level retail sector is booming. This stems from heaving spending by expats and the rise of the Kuwaiti middle class.”

Major Trends

While Kuwait has a large demographic of wealthy consumers with a taste for high-end products, many in this group tend to hold off purchasing such items for trips abroad. Foreign travel is itself a major article of consumption, with Kuwaitis travelling abroad frequently – largely to weekend destinations such as Dubai or further afield to the UK. As at home, shopping is a popular pastime on holiday, with prestige purchases made abroad often costing less than the same items at domestic retailers. Moreover, while Kuwait has many outlets for luxury goods (fashion, fragrances, jewellery etc.), the range on offer does not fully compare with major tourist cities that are fashion and retail centres in their own right, such as London or Paris.

By contrast, many of the expatriate workers in Kuwait are earning significantly higher salaries than at home, but are looking to save or remit their money home, which constitutes a certain brake on their expenditure levels. Moreover, pay levels in the private sector tend to be lower than in the public sector. According to figures from the Kuwait Central Statistical Bureau, in 2013 some 1.25m expatriates were employed in the private sector, compared to just 56,829 Kuwaiti nationals. The result is that while Kuwait has a fairly large pool of consumers, the majority, or two-thirds, are expatriates who tend to shop with at least one eye on value for money. Mid-range fashion brands appeal to both demographics, as young Kuwaitis who have not entered the labour market are also likely to shop here for everyday items.

New Opportunities

One mid-market area that has witnessed strong growth is food and beverages, particularly the hypermarkets and casual dining sectors. Hypermarkets combine convenience with fairly low pricing across a broad range of goods, and have been witnessing strong growth in recent years. A December 2012 report from investment bank Alpen Capital on the retail sector in the GCC forecasts food sales to increase at a compound annual growth rate (CAGR) of 8.8% between 2011 and 2016, with non-food purchases set to rise at a CAGR of 6.6%. Sales by hypermarkets and supermarkets are expected to witness even stronger expansion, with a CAGR of 10.5% over the same period to reach a total value of $59bn across the GCC.

Room To Grow

Alpen also noted that Kuwait is relatively underserved by super- and hypermarkets. For instance, the French chains Carrefour and Groupe Casino run one hypermarket each in the country, with the latter also operating six Geant Easy supermarkets. Gulfmart, owned by UAE group BMA International, has 20 stores, while Kuwaiti independent Sultan Centre runs 15 supermarkets. Compared to developed markets in Europe, where even cities of 30,000 boast one or two hypermarkets, there is ample scope for further penetration, given the growing popularity of the format.

More overseas chains have been entering the Kuwaiti market. For instance, Canadian food and beverage chain Tim Hortons opened its first outlet in Kuwait in The Avenues Mall in September 2013, while British retailer Marks & Spencer opened a 6689-sq-metre store in Kuwait in February 2014. In terms of restaurants, brands such as Chili’s and Saj Express, and fast-food chains such as McDonalds, Hardee’s and Kentucky Fried Chicken tend to be popular with Kuwaitis and expatriates alike.

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The Report: Kuwait 2014

Retail chapter from The Report: Kuwait 2014

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