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KUWAIT: Despite its relatively small population, Kuwait is firmly placed among the world’s most attractive and popular markets for international retail franchises. With a strong consumer and shopping culture and a young, growing and affluent population with an affinity for international brands, Kuwait offers an attractive market for leading retailers seeking to expand their footprint. Management consultants AT Kearney recently placed Kuwait second in its 2010 Global Retail Development Index, which evaluate
d 25 macroeconomic and retail-specific variables to rank the world’s 30 top countries for retail expansion.

While the ranking is a testament to Kuwait’s ability to absorb new retailers, this is not to suggest that the country is not already home to some of the world’s most well-known brands. International real estate consultancy CB Richard Ellis, in its annual survey measuring the participation of foreign brands in international retail markets, recently put Kuwait in 17th place out of 69 countries- up from 28th a year earlier. Since Kuwaiti law prohibits foreign firms from opening branches in the country and doe
s not specifically recognize or regulate franchise relationships, retail chains looking to enter the market typically do so via joint ventures or partnerships in locally incorporated companies. In the case of all partnerships and companies, at least 51% of the equity must be held by Kuwaiti nationals.

In this respect, selecting the right local partner is critical to an international retailer’s market success in Kuwait. Retailers would be well advised to seek out partners who can use retail experience and knowledge of local consumer tastes to complement the company’s existing strategies.
Mohammad Al Yousifi, a director at Easa Husain Al Yousifi & Sons, a trading company that represents electronics brands such as Panasonic and Sharp, stressed the importance of securing local agents that specialize in and understand their retail category, and retain retail as their core business. “You have some brands that work well here, and some that inexplicably have failed,” he said. “And a lot is down to whether they received the proper marketing attention from their local partner.

While brands the world over continue to earmark Kuwait as a potentially lucrative expansion destination, with this comes the inevitable concern over the possibility of eventual market saturation. “Kuwait is a restricted market because of its population size,” Adel Al-Shamali, the general manager for Kuwait’s Al-Homaizi Group, which represents brands such as Ikea, Burger King and Pizza Hut, told OBG. “Unless new government projects bring in increased retail demand through the arrival of more expatriates, th
e market is not growing and competition among brands will intensify.

Andrew Denby, the chief executive for Union Trading Company, a leading Kuwaiti retail group, similarly expressed concern over the potential for overcrowding. “Many of the larger Kuwaiti retail groups represent brands that cannibalize each other,” he told OBG. “It is important to identify market gaps and secure brands that complement rather than compete with each other.” While high disposable incomes and an affinity for travel have boded well for Western brands, especially those in the luxury category, most
retailers also point to a movement towards greater value consciousness.

Today, the market is shifting and is less about brand names as consumers are becoming more price-sensitive,” Al- Yousifi said. This has certainly been driven somewhat by the impact of the global financial crisis. But according to Denby, “Kuwait has always been a very promotion and sales focused market. Even the wealthiest Kuwaitis like to feel that they are getting a bargain.” – Oxford Business Group