GCC cities can join the world’s elite shopping destinations, significantly contributing to urban GDP and employment, improving residents' quality of life, and enhancing offerings to tourists.

This is according to research by Strategy& Middle East, part of the PwC network.

With retail spend in the region expected to increase by 37% from 2022 to reach $300 billion by 2028, Strategy&’s latest report titled “Shopping for growth: How to build an urban retail destination” identifies the strong growth potential for the sector to significantly contribute to economic development.

“We see major cities in the GCC region pursuing urban transformation and expansion with mega-projects, diversifying economies with the aim of achieving growth,” said Ramy Sfeir, Partner at Strategy&, and the leader of the family business, investments, and real estate practice in the Middle East. “Within this transformation and expansion is tremendous opportunity to realise the potential for growth in the retail sector, translating to significant opportunity to boost economies,” he added.

Global retail impact

Strategy&’s analysis of six leading shopping destinations — Dubai, London, Milan, New York City, Seoul, and Tokyo — shows significant direct retail spending per capita of $8,000 to $18,000 annually. This includes a contribution of up to 24% to urban GDP in these cities, as well as the employment of up to 20% of the urban workforce in the sector.

According to Strategy&’s analysis, Dubai, the only GCC representative among the six listed cities, records a retail spend per capita of approximately $14,000, second only to New York City. Additionally, around 21% of the emirate’s workforce is employed in the retail sector—the highest of all six cities—and the sector contributes an impressive 24% to the urban GDP.

The report notes that retail sectors in these cities support growth of other local businesses, especially in creative industries such as design and fashion, and subsequently boost progress towards broader economic goals, including economic diversification and resilience.

“It is clear that investment in the retail sector in major cities across the GCC region can, and would, have far-reaching impact,” said Makram Debbas, Partner at Strategy& Middle East. “Beyond the fiscal benefits, establishing global shopping destinations across the GCC would advance the region’s tourism ambitions. Positive impact would also be felt in an improvement of quality of life for citizens and residents as well as bolstering the overall reputation of the city itself.”

Challenges and opportunities

While the retail sector in the GCC shows potential for economic impact, it faces significant challenges. The ease of foreign travel poses a risk of shoppers seeking unique retail experiences abroad. A recent Strategy& survey indicates that residents in Riyadh, Jeddah and Doha spend $3,500 to $5,000 per capita annually on retail, with a staggering 50-60% of them shopping abroad at least twice a year. However, with proper governance and strategy, GCC cities can address these challenges effectively.

Notably, the report highlights opportunities to expand brand and product offerings to encourage local shopping. Dedicated training for retail talent would improve service satisfaction. Strengthening supply chain management, logistics, and customer technologies is essential. New investment regulations are needed to attract retailers. Additionally, enhancing the shopping experience with culinary, entertainment, and cultural venues would enrich the overall journey.

Governance and vision

The report identifies two crucial elements for creating a global shopping destination; a dedicated governance and a clear vision. A governance entity ensures policy decisions align with the city's goals, establishes key partnerships, implements initiatives, and tracks progress. The city's vision should reflect its identity, history, culture, and broader ambitions. It should define the type of shopping destination, scale of retail ambitions, target shoppers, and metrics for success.

“With the scale of development currently underway and in the pipeline, major GCC cities show tremendous potential to capitalise on opportunities and gradually join the ranks of global shopping destinations in Europe and North America,” concluded Sukalp Tipre, principal at Strategy& Middle East. “The adoption of a measured, systematic approach is imperative for the growth and development of GCC’s retail sectors, which can become a key contributor in the region’s economic transformation,” he added.

The way forward

With a strong governance model and vision in place, the report proposes that cities undertake six key initiatives to develop its retail sector. These include the development and implementation of a retail master plan; the activation and curation of a retail calendar; the delivery of retail innovations and tech-enabled shopping experiences; support for small- and medium-sized retailers; the creation of a deep pool of retail talent; and the simplification of regulations and the offering of targeted incentives.

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