As Oman’s retail sector recovers from the disruption of the Covid-19 pandemic, government efforts are under way to boost the contribution of local producers, particularly small and medium-sized enterprises (SMEs). Indeed, while wholesale and retail trade began to decline in 2015 – with negative macroeconomic trends and headwinds being compounded by the pandemic in 2020 – forecasts for future growth are positive.
Retail Revitalised
After a relatively long period of subdued performance and uncertainty, the retail sector is well positioned to capitalise on elevated oil prices and a steady economic recovery aligned with the goals of Oman Vision 2040, the country’s longterm economic development framework. Between 2015 and 2020 Oman’s retail sector registered a compound annual growth rate (CAGR) of -3.7%, with an 11.7% contraction in 2020, according to a November 2022 report from regional investment advisory firm Alpen Capital.
In line with wider economic recovery, retail sales are expected to expand by a CAGR of 6.1% during the 2022-26 period, outperforming the GCC average of 5.7%. This positive outlook is being driven by the highest population growth rate in the bloc, a significant increase in GDP per capita – from $8320 in 2000 to $19,500 in 2021, according to the World Bank – a rise in tourism activity, the development of organised retail space and the expanding role of e-commerce. These positive factors are helping to offset many of the pressures arising from inflation.
In terms of brick-and-mortar retail, the expansion of retail space in Oman accelerated in recent years as major developers – mostly pan-GCC retailers and developers of large-scale shopping centres – entered the market. In August 2022 Salalah Grand Mall, developed as a partnership between several government investment funds and Al Madina Real Estate Company, opened its doors. The following February UAE-based retail conglomerate Majid Al Futtaim inaugurated the Mall of Oman in Muscat, the biggest shopping centre in the country, with an estimated $467.5m in investment.
Online retail is expected to be another source of growth, as the shift towards online shopping sparked by the pandemic has led to lasting changes in consumer behaviours. In 2020 Oman’s e-commerce market was valued at $2.2bn; however, even though the country had one of the highest smartphone penetration rates in the region, just 8% of the population reported mobile shopping that year. While e-commerce activity is at an early stage of development, the segment is projected to record a CAGR of more than 20% between 2023 and 2028.
Local Ecosystem
As the retail sector recovers, the government is making significant efforts to facilitate both the production and marketing of locally produced consumer goods. To that end, the Public Establishment for Industrial Estates, also known as Madayn, in cooperation with the Small and Medium Enterprises Development Authority, created turnkey industrial sites with shared facilities that can accommodate multiple SMEs in the country’s industrial zones. Madayn also launched an Industrial Innovation Academy in January 2022 to expand value-added activities, with a focus on factors such as sustainability and innovation. Harnessing new and evolving technologies should help Omani companies compete in emerging retail segments.
Another notable development in the domestic retail market was the 2020 launch of the Made in Oman programme and subsequent campaigns targeting both local and regional markets, as well as the February 2023 creation of a bar code system for locally produced goods. The bar code system is expected to facilitate the sale of Omani products at home and abroad, allow manufacturers to enter new markets and unify the Made in Oman brand.
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