Large-format retail chains expand in Kuwait

Although the hypermarket format is nothing new for Kuwaiti retail, penetration remains relatively low by regional standards. According to A.T. Kearney’s latest retail report, the Kuwaiti groceries market is fragmented, with the top five retail groups accounting for just 10% of the market. Traditional retailers – cooperatives, local corner shops and markets – dominate the grocery business. However, this looks likely to change in the coming years with the growth of super- and hypermarket chains. Indeed, a recent report from Alpen Capital forecast that sales at supermarkets and hypermarkets in Kuwait would grow at a compound annual growth rate (CAGR) of 9.6% between 2013 and 2018.

HYPING THE MARKET: Among the main hyper- and supermarket groups in Kuwait are Geant, Carrefour, Lulu, Sultan Center and the Kuwaiti Union of Cooperative Societies. Carrefour Group, a leading global retailer, is based in France but operates over 10,000 stores in 34 countries. In Kuwait, Carrefour operates in partnership with Majid Al Futtaim Group, a UAE-based retail group with over 100 hypermarkets and supermarkets in 12 countries in the Middle East and North Africa. Carrefour Kuwait operates a hypermarket at The Avenues, which is one of the largest and busiest malls in Kuwait.

Also in partnership with Majid Al Futtaim, UK retail group Marks & Spencer (M&S) in March 2014 opened a 6700-sq-metre store in Kuwait – its largest store outside the UK and Ireland, bringing its total in the region to 26. Although not a hypermarket as such, M&S generally caters to a higher-income demographic, selling food and clothing and competing on the basis of quality rather than price. Geant Kuwait, a partnership between France’s Groupe Casino and Retail Arabia, operates seven stores in Kuwait: a hypermarket at 360 Mall and six smaller-format Geant Easy stores.

Lulu Hypermarkets, part of the UAE-based chain EMKE Group, in February 2015 opened two stores in Kuwait. The first, a 11,150-sq-metre hypermarket at Al Salam Mall in Salmiya, an affluent suburb of Kuwait City, was Lulu’s fifth store in the country and brought the worldwide total for the group to 113. The second was a 21,400-sq-metre hypermarket at Dajeej – the sixth store in Kuwait. The company plans to open another hypermarket at Fintas by the end of 2015, and two more stores at Jahra and Fahaheel by the end of 2016.

LOCAL FLAIR: Among the local retailers, Sultan Center operates five large wholesale centres as well as many smaller convenience stores. Founded in 1976, it has a presence in Oman, Jordan, Lebanon and Bahrain, in addition to Kuwait, and is listed on the local bourse.

The Kuwait Union of Cooperative Societies, meanwhile, has been in business since the early 1970s. The bulk of co-ops tend to be small neighbourhood stores, which offer less variety than the large hypermarkets. However, co-ops devote a quarter of their profits to social and charitable projects in the vicinity, giving consumers an additional incentive to shop locally. In 2012, the latest year for which figures are available, the Central Statistics Bureau (CSB) estimated the value of coop sales in the country at KD635m ($2.19bn), with profits of KD62m ($213.6m).

CHANGING TIMES: One reason hypermarkets have proven less popular in Kuwait compared to in some neighbouring countries is the continued preference for shopping locally, especially where the customer and shopkeeper have a rapport. However, this is slowly changing. While shopping in hypermarkets usually entails a longer drive, they also have the advantage of stocking a broader range of products, spanning not just foodstuffs but also clothing, electrical equipment and household goods, among other things. With the average size of a Kuwaiti household at around 6.75 people, according to 2012 figures from Euromonitor International, Kuwaitis tend to have large families – meaning that the children’s clothing segment is a particularly big business. Hypermarkets have the advantage of offering reasonable quality combined with competitive pricing. A further advantage of hypermarkets is that they normally host supplementary businesses, such as hairdressers, moneychangers and hardware suppliers.