The document discusses omni-channel as a market entry strategy in the GCC region. It was prepared by Millennial Partners & Co in November 2016. The document provides an overview of retail and consumer products trends globally and in the GCC. It analyzes different market entry strategies, including direct selling, licensing, franchising, investing, and greenfield approaches. It also discusses omni-channel retail and evaluates countries in the GCC based on their strategic growth potential as retail markets. The UAE is identified as the top strategic growth market in the GCC.

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Omni-channel as a market entry
strategy in GCC
Prepared by Millennial Partners & Co LLC on November 2016

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Abbreviations
Item Description
Bn Billion
CAGR Compounded annual growth rate
JV Joint venture
GCC Gulf cooperation countries
GDP Gross domestic product
GLA Gross leasable area
Gross Before discounts or promotions
KPI Key performance indicators
LLC Limited liability company
M Million
MAF Majid Al Futtaim
Item Description
MENA Middle East and North Africa
MPC Millennial Partners & Co
P&L Profit and loss statement
RCP Retail and consumer products
ROI Return on investment
SKU Stock keeping unit
UAE United Arab Emirates
UK United Kingdom
USA United States of America
Y-o-Y Year on year

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Summary of key sector insights
Retail and consumer products (“RCP”) remains a high growth sector globally supported by the rising middle
class in emerging markets, the millennial consumer group and a digitally connected society. MPC’s strategic
market research aims to suggest market entry options for international retailers looking to expand in the Gulf
Cooperation Countries (“GCC”).
Traditionally, retailers entered new markets via a multitude of methods including direct selling, licensing,
franchising, investing and greenfield. A key consideration in selecting an appropriate market entry mode is to
asses the level of growth and maturity in targeted foreign markets. For example in GCC, international retailers
have relied on the franchise and JV model by developing traditional trade relationships with regional retailers
including MAF, Al Tayer and Fawaz Al Hokhair.
Globally, e-tailers and e-commerce players are outperforming the store based retailers by reporting double digit
sales growth. Hence, the omni-channel modus operandi is emerging as a successful market entry strategy and
allows digitally savvy consumers to quickly asses retail offerings. Omni-channel is becoming the operating
model of choice due to key drivers including internet infrastructure, consumer behavior and degree of
digitization.
The Middle East (including GCC) has been ranked by Strategy& amongst the top 10 global omni-channel
growth markets. Despite the fact that internet retailing in GCC remains low as compared to store retailing at
only 1% (as opposed to the global average of 7%), their growth factors include internet penetration of c. 59%,
mobile penetration of 150%, a high disposable income of c. USD 33,000 and a young population with c. 30% of
the GCC below the age of 14 years old.
The RCP sector in GCC is equal to USD 110 million with UAE and Saudi being the largest retail geographies
with a total retail sales value of USD 33 bn and 59 bn. This is expected to grow at a 6% CAGR by 2020. The
GCC region is one of the most attractive retail destinations globally with three territories ranked in the top 10
global retail growth markets, specifically:
• UAE - The most established retail market which remains the regional hub for new brands to enter the region
and is ranked 7th position by A.T. Kearney Global Retail Development Index.
• Saudi Arabia - The 8th most attractive global retail destination, renowned for its high growth rate in the retail
market in the GCC with an expected 8% CAGR by 2020.
• Qatar - Despite being a small retail market in terms of volume, it remains attractive mainly due to the high
disposable income per capital and the lack of brand penetration (compared to the other GCC retail markets).
We hope you enjoy our thought leadership and find it insightful!
Rajan Gill
Investment Analyst
Millennial Partners & Co LLC
Andreea Danila
Founder & Managing Director
Millennial Partners & Co LLC

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Global RCP sector themes
▪ Retail and consumer products in emerging markets reported a staggering growth of c. 350% since 2009.
Currently, 50% of the total global retail sales are derived from emerging markets.
▪ Wealth drives consumption supported by modern organized retail and global brand awareness for branded
products. As a result, international retailers are relying on emerging markets to fuel geographical growth and
expansion. In addition, digital strategies are implemented in order to boost omni-channel revenue growth.
▪ Brand entrants are focused on niches
supported by social media and digital
marketing campaigns
▪ Digital brands like Billion Dollar Shave
Club have capitalized via “out of the box”
social media campaigns and guerilla
advertising
▪ Stores for global retail giants are
shrinking due to lack of customer visits
(a 100% decline in visits since 2009)
▪ Retailers need to adapt their store
presence by including digital screens in line
with mobile and desktop interfaces to
which consumers are connected to
▪ E-commerce remains a key segment of
double digit growth globally where its
expected to achieve c. 15% y-o-y growth
by 2020
▪ USA is the #1 e-commerce market followed
by China and UK - supported by their online
retail infrastructure, increasing consumer
confidence and discretionary spending
▪ Omni-channel strategies are set to
transform the retail industry due to
increasing internet penetration and
constant change in consumer behavior
▪ Traditional retailers (including Neiman
Marcus) are adapt omni-channel
operations by integrating merchandising,
planning and marketing for offline and
online stores
▪ Giants need to personalize and localize
to succeed in international markets in an
effort to streamline omni-channel
presence
▪ Millennials and high income shoppers are
drawn in interactive shops which include
video displays, touch screens and
personalized fitting room among others
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Source: A.K. Keartney Report, Euromonitor, MPC Analysis

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Opening Peaking Maturing Closing
Market
classification
▪ Rising middle class
▪ Organized retail
format
▪ Relaxed regulatory
framework
• Demand for global
brands
• Retail infrastructure
being developed
• Real estate is
affordable and
available
• Consumer spending
expanded significantly
• Desirable real estate is
difficult to secure
• Local competition is
sophisticated
• Modern retail
infrastructure
• Discretionary spending
is higher
• Real estate is
expensive
Mode of entry
▪ Minority investment
in local retailer
• Organic through
directly operated
stores
• Organic but focused on
tier 2 to 3 cities
• Acquisitions
Labor
approach
▪ Local skilled labor
for management
roles
• Hire and train local
talent and balance
expatriate mix
• Change balance from
expatriate to local staff
• Use mostly local staff
Market entry strategies
Source: A.K. Keartney Report, Oliver Wayne, MPC Analysis
Market entry strategies depend on the lifecycle of the local retail market. The chart below, developed by MPC
using the general guidelines of A.T. Kearney classification, defines the retail market growth stages and
appropriate mode of entries in terms of labor, investment type and economic and demographic constraints.
Direct exporting
Licensing
Franchising
Joint ventures
Investing
Greenfield
Means selling products through distributors or agents in a new country with a minimal
investment requirement
Is a relatively sophisticated arrangement where a firm transfers the rights to the use of
a product or service to another firm
Typical North American process used to rapidly gain market expansion is popular and
suited for repeatable business models
Arrangement of two companies that agree to work together in a particular market,
either geographic or product, and create a third company
The most costly of all market entry strategies. It involves buying a company that either
has substantial market share, a direct competitor or is the only option to enter the
market
Refers to a capital project in which one party provides capital and the other party
provides the operating experience in a foreign market
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Retail omni-channel overview
Omni-channel mode is expected to fuel retail growth due to the fact that millennial and high income consumers are
looking for a multitude of shopping channels in line with their digital connectivity. According to Strategy&, global
retailers are enhancing customer relationships with the use of digital, physical store presence and social media
marketing strategies in key markets. They are then ranked in terms of omni-channel attractiveness based on the
following criteria:
Source: Bloomberg, PWC Retail TOP 100 report 2015
Consumer
behavior
Degree of
digitization
Omni-channel
potential
Internet
infrastructure
1 2 3 4
According to market research conducted during 2014 and 2015, the global omni-channel markets are ranked in
terms of attractiveness on a scale of 1-100. Middle East is situated in the top 10 globally most attractive omni-
channel retail market with an overall score of 39.
Key retail categories for retail omni-channel purchases are ranked in terms of attractiveness on a scale of 1-100
(100 = most attractive).
Electronics51 Media products49
Apparel &
footwear
43
Home décor &
furniture
42
Toys & games40
Home
improvements
39
Accessories &
eyewear
37
Beauty &
personal care
35
Consumer
healthcare
35 Grocery31

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Omni-channel operating model
▪ Global brands develop market entry strategies which are customized to local operations in order to cater to
customer preferences. The table below illustrates key customer preferences analyzed in terms of online vs. off-
line levels of consumer engagement across the selected retail categories:
Omni-channelpreference
Discover Explore Buy Receive Service Interact
Stores
Online
Electronics
and
accessories
Jewellery
and high end
products
Ease of
testing
products
Testing
online
cumbersom
e
High end
value items
such as
beauty and
care
Mid end
value items
such as
personal
care
Instant
receipt of
perishable
products
such as food
Non-
perishable
products
Service at
the highest
level
Medium
service and
returns
option
Items such
as home
appliances
Fast moving
consumer
goods such
as
electronics
Source: A.K. Keartney Report, MPC Analysis, Kurt Salmon
Channel development Omni-channel
integration
Advertising and
promotions
E-commerce
Store
Store
E-commerce Advertising and
promotions
1 2
▪ While the traditional metrics are essential, the omni-channel approach is designed to support growth for
brands looking to enter new markets whilst maximizing ROI
▪ The omni-channel retail value creation strategy enhances customer experience by offering a variety of
purchasing methods
▪ New KPI’s such as: omni-channel sales growth, customer conversion, traffic per store, traffic per site,
returns and deliveries, basket price and average customer spend - aims to support revenue growth and
market share expansion

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Appendix: Strategic growth
Markets matrix for GCC

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GCC strategic growth markets matrix
▪ MPC has developed a strategic retail growth matrix by analyzing and ranking GCC territories in terms of
economic & sector growth and easiness of doing business. Based on preliminary analysis, MPC suggests the
following segmentation:
▪ Tier #1 or strategic growth market - Stable economic outlook and business friendly environment
▪ Tier #2 or large market - Potential with a high market attractiveness
▪ Tier #3 or regional retail market
▪ UAE is ranked in Tier 1 category mainly due to the projected GDP growth and retail market attractiveness.
Saudi Arabia is positioned in Tier 2 category with a lower market saturation which results in a higher than
expected sector growth but at a higher risk of doing business. Kuwait and Qatar are grouped in Tier 3
category.
Source: A.T. Keartney Report, IMF, World Bank, BMI
Investment
geography
GDP per capita
(USD "000")
GDP growth (%)
Consumer prices
(y-o-y)
Doing business
easiness
Country risk
UAE 66.1 4.0 4.1 27 84
Qatar 114 3.7 3.1 74 89.4
Saudi Arabia 25.9 3.5 2.0 96 64.4
Kuwait 34.3 1.1 3.8 98 68.1
Investment
geography
Market
attractiveness
Market saturation Time pressure
Retail sector
size (USD bn)
Retail sector
growth (%)
UAE 97.6 16.5 33.9 33 8.0
Qatar 100.0 34.2 12.8 12.1 6.0
Saudi Arabia 78.6 30.4 27 59 9.0
Kuwait 81 33.2 0 15.4 4.0
Note: (1) scale of 0 to 100 with the highest being the most attractive
(2) based on A.T. Kearney 2015 report for market attractiveness, market saturation and time pressure criteria
▪ Retail and consumer sector in the GCC region is estimated at c. USD 110 bn and expected to grow at a CAGR
of 6% by 2020
▪ Key categories such as footwear, electronics, beauty and personal care are expected to grow at double digit
rates whilst e-commerce ranks as #1 top performing sub sector with an expected 20% y-o-y growth rate by
2020
▪ Continuous government investment in retail infrastructure along with young population and high disposable
income are key drivers of sector growth in GCC. A.T. Kearney Global Development Retail Index ranked five of
all six GCC countries in the top 30 most attractive retail geographies worldwide with Qatar on the 4th position
and UAE on the 7th position for 2015.

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Retailing in UAE at a glance
Retail and consumer products key insights
▪ UAE’s retail and consumer products sector is equal to USD 33 bn and is expected to reach USD 46 bn by
2020 - driven by non oil sector growth and healthy indicators in tourism, financial services and Dubai Expo
2020
▪ UAE’s consumer confidence index indicated a 5 year average of 108, with an all time high of 115 during
2015. The consumer confidence index measures the level of optimism that consumers have about job
prospects, personal finances and spending intentions (above 100 figures signal a strong interest in spending)
▪ UAE ranks among the highest in the world in terms of smartphone penetration with a 62% rate; the high level
of connectivity leads to a sustained m-commerce activity, which accounted for 28% of all online purchases
▪ Non-grocery retailers continue to dominate the retail value chain thanks to inbound tourists, high fashion
consciousness and high disposable income per capita, while grocery retailers face growth challenges due to
government price controls
Retail sector growth categories
Electronics
Beauty and personal care
Apparel & footwear
Beverages
Sector value, expected growth and distribution channels
Grocery retailers
31%
Non-grocery retailers
63%
Mixed retailers
4%
Luxury retailers
2%
Top players by market share (% of total sales value)
Source: A.T. Keartney Report, Euromonitor, Alpen Capital Retail Report, MPC Analysis
Bubble size represents market size
CAGR
6.8%

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Retailing in Saudi Arabia at a glance
Retail and consumer products key insights
▪ The retail and consumer products sector in Saudi Arabia is valued at USD 59 billion and expected to grow at
a CAGR of 9% by 2020 to reach USD 90 billion with strong spending on apparel and footwear, beauty &
personal care and electronics categories
▪ The digitally connected society in Saudi Arabia is re-shaping the retailing sector, mainly due to strong
internet penetration of c. 60% and massive social media subscriptions that lead to growth in internet retailing
▪ Store based retailers are also adapting marketing campaigns by using social media channels to understand
and connect with local consumer. Using social media channels increases the variety of data metrics
available of individuals, thus enabling retailers to create unique customer profiling
▪ Non-grocery retailers outperformed grocery retailers, supported by key drivers such as high disposable
income and a young population age
▪ Local players emerge as the leaders in a highly fragmented market with key players including Fawaz Al
Hokhair, Aziz Panda, Al Bandar Trading and Abdulla Al Othaim, on leading positions mainly due to quality
products, aggressive marketing and sales campaigns, promotions and strong distribution networks
Sector value, expected growth and distribution channels
Top players by market share (% of total sales value)
CAGR
9%
Grocery retailers
30%
Non-grocery retailers
62%
Mixed retailers
5%
Luxury retailers
3%
Apparel &
footwear
Beverages
Homecare
Tobacco
Electronics
Beauty and personal
care
Retail sector growth categories
Source: A.T. Keartney Report, Euromonitor, Alpen Capital Retail Report, MPC Analysis
Bubble size represents market size

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