Index shows Middle East and Africa are retailing’s next big global hot spots

Entering a new market or deciding to expand as a retailer, is a move that carries with it very high stakes and very real risks. Success can never be guaranteed. Given the high stakes, the smart retailer would make his or her decisions based on objective data and informed insights.

“The biennial Global Retail Development Index (GRDI), established in 2002, has been pivotal in shedding light on the evolving landscape of emerging economies. According to Kearney partner Prashaen Reddy, the latest edition of the report paints an optimistic picture for Africa and the Middle East (MEA).

The GRDI assesses the top 35-40 emerging economies, gauging their attractiveness to retailers through a comprehensive analysis encompassing economic stability, government policies, competitive landscape, eCommerce penetration, consumer behavior, and socio-cultural dynamics.

This year’s GRDI highlights the MEA region as the next significant global “hot spot” for retail. With youth-dominated urban populations, a projected doubling of disposable income by 2040, and supportive government policies, MEA countries exhibit immense potential for retail sector expansion.”

“Since its inception, the countries ranked on the GRDI have tracked closely as the top destinations for retailers. This shortlisting ensures that the analysis focuses on the most successful emerging markets of today and those that therefore offer the highest potential down the road,” says Debashish Mukherjee, Partner at Kearney Middle East & Africa – Consumer & Retail Practice Lead. 

Globally, the GRDI identified six key trends that had the most significant impact on developing nations: 

• Macroeconomic uncertainty: The hope for a “New Normal” is not all that normal and global economic uncertainty remained high across large developing economies which weighed on GDP growth and purchasing power.   

• Inflationary pressure on consumers is forcing them to trade down: Even though luxury and premium products have an established consumer base at the economic top of MEA nations shoppers in these emerging markets including KSA, Egypt, and Türkiye, are increasingly opting for less expensive, local, and private label items, as substitutes for pricier imported and branded products. 

• The ongoing journey of eCommerce growth continues: Globally, eCommerce is expected to grow at twice the rate of brick-and-mortar retail with a CAGR of ~10-12% until 2027.  In emerging markets, most of this growth is the result of growing access to digital marketplaces which continue to take root and rapidly change consumer behaviour, especially when those consumers are younger and living in cities.  

• Omnichannel continues to define retailers’ strategy: While omnichannel is considered table stakes in most developed economies, in many developing nations an omnichannel approach is still in its nascent or early evolutionary stage. While that is true, it is also true that store-based retailers in developing markets are continuing to invest in developing omnichannel capabilities, particularly in terms of fulfilment and customer services including in-store pick-up, curb-side pickup, etc. 

• The increasing rise in e-payments and Buy Now Pay Later (BNPL) options: Customers in emerging markets are moving quickly to new payment options. Shoppers in the APAC region are rapidly adopting digital wallets, while MEA customers have eagerly embraced the adoption of BNPL. 

• Rise of Retail AI: Retailers in MEA are increasingly turning to emerging technologies to leapfrog traditional market evolution to create new, vibrant experiential marketing approaches designed to attract, entertain, educate, and better service consumers. The use of Artificial Intelligence (AI) generated virtual avatars and live streaming by some of China’s largest retailers are examples of the kinds of innovations being introduced. 

“Across the globe – especially in emerging economies – retail markets continue to face strong headwinds, especially in terms of macroeconomic factors such as inflation and currency fluctuation, political conflicts, the impact of changing demographics, and of course environmental factors from superstorms to droughts,” says Mukherjee. 

“Of course, each of these challenges also offers opportunities. To leverage these opportunities global retailers, need to carefully match their strategic ambitions and investments against the balance of their portfolios and that requires careful thinking and data-based decision making.”