Indian brands aim to bridge Gulf retail market

Indian retailers are eyeing opportunities to expand in the Arabian Gulf, even amid the region’s economic slump because of lower oil prices.

Future Group, one of India’s biggest retail focused groups, headquartered in Mumbai, this month formed a joint venture with Oman’s Khimji Ramdas, a conglomerate, to make its debut internationally and open stores under its fbb clothing brand in the GCC. It will start with stores in Oman and the plan is to then expand to other countries in the GCC region, including the UAE.

Kishore Biyani, the billionaire retail tycoon behind Future Group, is confident that the company can turn the subdued economic situation to its advantage. The pricing of its children’s garments will start from about 85 rupees (just under Dh5), he says. It has sizeable ambitions. There could be scope to eventually open as many as 75 stores in the GCC, he adds.

“The markets are not at their best and that’s where the opportunity is,” says Mr Biyani, founder and chief executive, adding that he recognises that the Gulf region has taken a hit from lower oil prices. “When the markets are not good, there’s a churn of players which happens and there’s an opportunity for a new player come in. I think it’s always good to enter when the market is not at its best. The kind of price and fashion equation we can bring can be quite interesting. There is competition. We understand the competition.”

The company already operates in 27 out of India’s 29 states.

Mr Biyani says that “for us to get into the UAE and Middle East is a huge opportunity”.

“We thought of getting into a market, which is the Oman market, which is a very interesting market because there is a lot of ‘Indianess’ in that market. There are a lot of Indians there.”

The partners have committed 750 million rupees each to the joint venture, he said.

The GCC’s retail sales have suffered a knock-on effect in the past couple of years from the slump in crude prices, analysts say.

“As a result, the governments have been introducing austerity measures, which on one hand are curtailing the spending power of consumers, while on the other hand increasing the operating costs of retailers,” according to a recent report by Alpen Capital.

Still, there are some positive indicators. The GCC retail sector is projected to grow at an annual growth rate of 4.6 per cent to US$313.2 billion in 2021 from $250.5bn last year.

Toonz Retail, a Bangalore retailer which sells children’s clothes and other products for babies and children, has already opened two stores in Saudi Arabia and another one is soon to launch in the country, with aims to increase to a total of 10 shops in Saudi Arabia in the next two years. It has broader ambitions to expand across the Gulf region. Toonz is “exploring opportunities” for the brand to push into the UAE and Qatar, says Sharad Venkta, the managing director and chief executive of Toonz Retail.

He explains that the company is “currently gathering our learnings in KSA and plan to expand with more stores in this region”.

It is not an easy process.

“The GCC is a very mature market flooded with international brands across countries,” says Mr Venkta. “Thus competition is at its peak. But the market shows a lots of optimism for right product mix wherein if you catch up with understanding the customer taste and preference deeply, you can distinguish yourself from the competitors. This helps us work harder with our offering for the region.”

There are a number of factors working in the brand’s favour.

“The GCC has one of the fastest consumption of fashion and kids products,” he says. “The market conditions and the customer profile matches very well with our range and products line. Being a mature market consumption is very good. Plus, it has lot of NRIs [non resident Indians].”

Beyond the clothes market, Indian jewellers are also expanding in the GCC.

Malabar Gold & Diamonds, an Indian jewellery brand, has 90 stores in the region, about half of which are located in the UAE.

“We foresee more opportunity in the UAE and GCC region presently and hence we are in an expansion mode,” says Shamlal Ahamed, the managing director, international operations at Malabar Gold & Diamonds.

“GCC is a confluence of populations from all over the world which makes it a global business destination. Several untapped opportunities make the GCC region an attractive market for us. GCC has a varied clientele from the blue-collar workers to wealthy high net worth individuals and locals. NRIs comprise a key consumer segment for us across the GCC market.”

An increase in retail stores in the region could keep rents high, Alpen warns.

“With a large number of projects nearing completion, the region is set to witness an overhang of retail supply in the coming years,” according to the report. “The situation is more evident in Dubai, which has one of the highest per capita retail spaces in the world. Being a major cost component, high rents at shopping centres are affecting profitability of retailers.”

Future Group, through the joint venture with Khimji Ramdas, is expecting to sell 300 million garments across all its operations next year.

Mr Biyani says the Indian company’s move into the GCC could help it to reach African markets too.

Nailesh Khimji, a director at Khimji Ramdas, which has interests across consumer brands, logistics, and infrastructure, says that Oman will be the “test market” for the venture.

“Once we feel that Oman has achieved the KPIs (key performance indicators) that we expect, we are looking at expanding in the region, from all the Gulf countries,” says Mr Khimji. “This is the main goal behind the joint venture.”

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