Lulu group ranks among 25 fastest growing retailers

The top 250 global retailers generated aggregated revenues of US$4.5 trillion in fiscal year 2014, representing a steady growth of 4.3 percent compared with 4.1 percent in 2013, according to Deloitte’s Global Powers of Retailing 2016: Navigating the new digital divide. This is a positive signal for the industry which had not so long ago witnessed revenue declines in 2011. However, the picture is uneven by region with retailers in North America and Africa/Middle East enjoying revenue growth, while those in Asia Pacific, Europe, and Latin America enduring declining growth.

“Slower economic growth in several markets, lower inflation, falling oil prices, and a stronger US dollar, were among dynamics which generated mixed fortunes for retailers across different regions,” explains Dr. Ira Kalish, Deloitte Global Chief Economist. “For US retailers the strength of the US dollar meant increased purchasing power for US consumers, helped also by better economic growth and improving employment conditions in the US. The Chinese economy on the other hand slowed considerably during this time, mainly due to weak exports and weakening investment. Nevertheless, consumer spending held up fairly well, although the luxury sector faltered.”

“Despite plummeting oil prices and its impact on the economies in the Gulf, one of the region’s retailers, the Lulu Group not only achieved revenue growth but it also managed to retain its position as one of the fastest growing retailers in the world,” explains Herve Ballantyne, partner and Consumer & Industrial Products leader at Deloitte Middle East.

“According to the Deloitte “Global Powers of Retailing 2016” the eight retailers representing the Africa/Middle East generated composite growth of 19.4 percent, which is 4.5 times greater than the “Top 250” as a whole. The emerging markets have done a lot to immunize their economies from the effects of the global economic crisis in 1998. Governments reduced deficits and “Debt to GDP” levels, accumulated vast foreign currency reserves and also improved the solvency and transparency of their financial institutions. It appears those efforts were not enough as they were still not immune to global issues. The end result has been substantial slowdown in growth in many countries. On the other hand, since the past year, oil prices have plummeted which has resulted in disinflationary pressure in many countries thereby boosting consumer spending in major markets. For the world’s leading retailers, the weakness of oil process has mostly been good news”, remarked Abbas Ali Mirza, Audit Partner, Deloitte Middle East.

Bottom-line performance was also uneven across the geographic regions, but the overall direction was down. The report indicates that the top 250 retailers posted a composite net profit margin of 2.8 percent in 2014, compared with 3.4 percent in 2013.

The impact of digital technology

Global Powers of Retailing 2016 also highlights the impact of technology on in-store shopping, indicating the rapidly increasing digital connectivity of shoppers. Digital behaviors and expectations of consumers are evolving faster than retailers are delivering on those expectations, says the report, creating a “digital divide.” Three important trends are identified:

• No single path toward digital adoption. While all markets are moving toward widespread digital adoption, some are taking somewhat different routes. Some emerging markets, for example, are entirely skipping adoption stages previously experienced by developed markets.
• One digital “size” does not fit all customers. Digital behavior varies depending on demographic factors such as age and income, and also by the product type being sought.
• Consumers are demanding better digital tools. Digital tools and channels can both extend a retailer’s reach and increase revenue, but customers are currently feeling unsatisfied and underserved by many retailers’ current digital offerings.

“There is a gap between what consumers expect and what retailers are currently delivering in terms of the consumer’s evolving desire to incorporate digital into their in-store shopping experience,” explains Ballantyne. “Some retailers may underestimate the digital influence, while others recognize the real opportunity to capitalize on this digital divide.”