x Abu Dhabi, UAETuesday 25 July 2017

Retailers target new frontiers

But locations such as Iraqi Kurdistan and Kazakhstan could be tough to succeed in

Store brands are finding opportunities outside their comfort zones, expanding into markets such as Iraqi Kurdistan, Kazakhstan and Azerbaijan.
Store brands are finding opportunities outside their comfort zones, expanding into markets such as Iraqi Kurdistan, Kazakhstan and Azerbaijan.

Retailers are increasingly setting their sights on frontier markets such as Iraqi Kurdistan, Kazakhstan and Azerbaijan but analysts say their success may be hampered by a lack of consumer information and infrastructure in these new shopping territories. The large populations and nascent retail centres in these countries, combined with increasing political stability, make them attractive targets for major names such as Land Rover and the Saudi Arabian retail conglomerate Fawaz Alhokair.

Simon Marshall, the chief executive of Fawaz Abdulaziz Alhokair Fashion Retail, said its first Zara shop in Kazakhstan, which opened in February, took ?290,000 (Dh1.3 million) on its opening day. "It actually opened with the largest turnover for an opening day for a Zara store anywhere in the world to date," Mr Marshall said. Michael Atwell, the head of Middle East operations at Cushman and Wakefield consultancy in Dubai, said many investors were eyeing these markets, but with few experienced retailers in those regions it was murky territory.

"A lot of people see this as the next developing markets. But I think you need to proceed with a lot of caution," Mr Atwell said. "There are a lot of unknowns there. What's the affordable spending power? What's the ability for retailers to go in and trade?" That has not stopped Land Rover. Sardar Trading Agencies, its regional franchisee, said earlier this year it would start selling the 4x4 vehicles in Erbil, Iraq. The French retailer Carrefour recently announced it, too, would open a hypermarket in the same region of northern Iraq, as part of the upcoming Family Fun Mall, The Kurdish Globe newspaper reported. And Fawaz Alhokair has just signed leases for 68 more stores in Kazakhstan and Azerbaijan, said Mr Marshall.

The company is also looking at northern Iraq. "Everybody is," he said. "But at this moment in time it is not in our immediate plans. We're getting approached by a lot of our brand partners who are interested in the region." Developers are getting into the game as well. Mane Mall, which will house 150 brands, will open its doors at the end of next year in Erbil. Jamie Majid, an investment director with BTWShiells, which is building and managing the mall, said there had been a big demand for retail space.

"There has been an increase in disposable income, there is obviously not much competing retail as it is an emerging market," he said. "It's quite easy to set up over there with tax breaks and no duty to bring goods into the country. And the Kurds are like any other people around the Middle East - they like to shop and go into leisure places and restaurants." Mr Atwell said he expected retail in these markets to follow the model used in eastern Europe, where the supermarket chains such as Tesco and Carrefour entered first and helped to build demand for additional shops around their stores.

"It's often the food retailers, the hypermarkets ? everybody needs to eat," he said. But Majid Al Futtaim Properties, which is planning a US$4 billion (Dh14.69bn) regional expansion to build shopping centres in countries such as Syria and Egypt, is holding off on these new markets until the rewards outweigh the risks and it has the local knowledge and structures in place. "It takes a lot of elements to do things successfully," said Shahram Shamsaee, the senior vice president of retail at Majid Al Futtaim shopping malls. "And you need to be set up for it. If you try to do everything, you end up doing nothing very well."