With pay rises across both the public and private sectors in Oman producing higher levels of consumer spending, some analysts are now revising their forecasts upwards for the Sultanate’s retail sector in favour of solid growth.
Consumer demand in Oman was largely expected to stay flat in the short and medium term, leading to fears that parts of the Sultanate’s rapidly expanding retail space could remain empty until stronger growth returned.
But with consumers enjoying higher incomes on the back of rising oil prices, demand is now expected to increase as well, paving the way for strong growth in the industry throughout 2012 and into next year.
A report by the international real estate consultancy Cluttons said Oman’s retail sector should also benefit from more stable rent prices as inflationary pressure shows signs of easing off. In its findings, which were released in April, the report found that an increase in new retail space, together with more stable rents, was balancing a growing demand for shopping outlets, especially in the high-end segment.
The report said new mall projects, which are set to be rolled out in the coming 18 months, would play a key role in meeting demand for retail units, particularly among smaller outlets operating in the food and beverage segment. More than 100,000 square metres of retail space is currently under construction in Oman, including the 60,000-sq-metre Muscat Grand Mall and the Opera Galleria, which measures 6500 sq metres.
While new mall space will broaden the choice of shops for consumers, the report points out that it will also increase competitiveness across the sector, as new developments vie with well-established malls for business. “Demand will remain strong for established shopping malls with proven footfalls,” it said.
Oman’s shoppers have already begun changing their shopping patterns, moving away from small retail outlets and opting instead for large-scale centres, usually anchored by a brand hypermarket. The trend is attracting an increasing number of Gulf and international retailers who are setting up shop in the Sultanate, keen to tap into these new dynamics, according to A V Ananth, the regional director in Oman for hypermarket chain Lulu.
“The most striking trend is the mushrooming of retail outlets, seeking a share in the Omani market,” he told local media in mid-April. “Many who have established a name in the GCC are opening their stores in Oman, which means that there is going to be increased competition, which in turn will lead to benefits for the customer.”
The upbeat sentiment in Oman was reflected in the results of the latest MasterCard Worldwide Index of Consumer Confidence, released in mid-April, which once again ranked the Sultanate top in the Middle East for its positive outlook, along with Qatar. Both countries were awarded 93.6 in the survey, placing them well ahead of the other Gulf states and among the top contenders globally.
While consumer confidence is riding high in Oman, smaller, independent retailers will inevitably face tough competition in their efforts to retain customers and attract new shoppers. Confronted with challenges in areas such as pricing and the value-added experience that a mall offers, they will need to build on their advantages, which include customer loyalty, convenience and the ability to offer tailored products, to maintain their place in the market.
Although some independent stores may see some challenges going forward, observers point out that with the sector riding high on a wave of increased consumer spending, there is certainly room for retailers across the spectrum to strengthen their foothold in the market and flourish in a period of anticipated growth.