With growing interest in the mid-tier retail market and an upswing in credit card spending recorded at the end of last year, Kuwait is looking to bounce back from a period of subdued consumer confidence and slowing credit growth.
Although the luxury market has traditionally been one of Kuwait’s most significant retail strengths, interest from well-known mid-tier brands in large mixed-use developments has recently picked up, as evidenced by a number of such companies rushing to rent space in Al Kout Mall.
Scheduled to open by the end of the year, the shopping centre is part of the Ahmadi Governorate’s Al Kout project, which will be the largest mixed-used waterfront development in southern Kuwait when completed. Managed and operated by mall-management firm GLA Management, Al Kout Mall will cover an area of 100,000 sq metres.
In October 2016 Al Kout developer Tamdeen announced 70% of the mall’s retail space had been leased.
Further positive developments were unveiled in January this year, when the Tamdeen Group announced it had signed a leasing agreement with MH Alshaya – a local retail franchise operator – to open 22 outlets in the mall, meaning it will be fully leased when open.
This deal will see the entrance of numerous international retailers, including brands that have yet to start operating in Kuwait.
Businesses slated to open stores under the agreement include American Eagle Outfitters, Bath & Body Works, Victoria’s Secret, Boots, Claire’s, H&M, Mac, Next, Starbucks, The Body Shop, Top Shop, Vision Express, Mothercare and Foot Locker.
Kuwait’s retail sector ended 2016 after consecutive monthly reductions in credit growth, with the Central Bank of Kuwait (CBK) reporting that private credit expansion fell from 6.5% year-on-year (y-o-y) in October to 4.4% y-o-y the following month.
Though private credit growth dropped further to hit 2.9% y-o-y in December, according to the CBK, the average for the year was a healthy 7%. Running contrary to this downturn, credit card spending at point-of-sale terminals bounced back to 9.1% y-o-y in the final three months of 2016, following a 0.7% contraction in the third quarter of 2016.
The downward trend in private credit was also starting to reverse at the beginning of this year, with the CBK reporting that it had increased to 3.3% y-o-y in February
Consumer confidence remains subdued, however, despite having overcome a six-year low in October, according to Ara Research and Consultancy. According to the firm’s Ara index, consumer confidence rose from just under 85 in October to 98 last month, though 12-month averages have fallen steadily since a score of 128 was recorded in early 2013.
While shopper sentiment has not reached the levels seen in previous years, the retail sector continues to benefit from strong macroeconomic fundamentals.
According to IMF estimates, Kuwait’s purchasing-power-parity (PPP) per capita GDP was $71,887 last year, putting it second in the GCC after Qatar with $127,660 and fifth highest in the world.
As a result, the country’s luxury retail market continues to attract high-end brands. The most recent addition was luxury US department store Bloomingdale’s in mid-March. Only the second Bloomingdale’s to open outside the US, the three-floor apparel, beauty and accessories store spans more than 8600 sq metres in Kuwait City’s 360 Mall.
In June 2015 AT Kearney Middle East reported in its Global Retail Development index that Kuwait was home to 14 of the top 15 luxury brands, with demand remaining strong in the luxury market even in the face of subdued global oil prices and a macroeconomic slowdown.
This has seen real GDP growth fall from a high of 10.9% in 2011 to 2.1% in 2015 and an estimated 2.5% last year. However, with the IMF forecasting an economic contraction of 0.2% this year, the country’s traditionally high levels of spending power could be impacted.
While the luxury segment has shown resilience in the past, the proliferation of mid-tier retailers and greater diversity could help safeguard the industry against any negative growth in expenditure.
Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.
Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.
Register Here×Once again signalling the government’s intent to realign the local labour market, officials announced on February 8 that the Kuwaiti Manpower Restructuring Programme has targeted the placement of...
To what extent has the Covid-19 pandemic changed the business environment, and how is Oman helping companies adapt to new realities?
The Turkish Prime Minister Bulent Ecevit has spent the last week in the US hoping to garner support for economic reforms at home and trade concessions for Turkish exports to the US.
