|The middle classes in Saudi Arabia and the United Arab Emirates are much more optimistic in their outlook than their counterparts in Bahrain, according to a McKinsey survey on this key consumer group.
Management consultancy firm McKinsey commissioned public-opinion research company Zogby International to survey people in three Gulf countries – Bahrain, Saudi Arabia and the United Arab Emirates – in order to try and define the mood of the middle class population. Surveying nearly 2,400 people, initial findings have discovered an upbeat mood among Saudi Arabian and the UAE’s middle class but a bleaker outlook among the Bahrainis. Two thirds of those questioned described themselves as middle class. The monthly salary range covered by those defining themselves in this class was wide, spanning 5,000 to 30,000 dirham (US$1,350 to US$8,200). Generally these are salaried employees including professionals, teachers, sales people and healthcare and office workers.
Around three quarters of the middle classes in all three states say they feel secure in their jobs, with over half claiming to be better off than they were four years ago. Saudis are nearly twice as likely as Bahrainis or Emiratis to expect to be better off in the next four years. This reflects national developments and regional tensions, according to the report. “Saudi Arabia and the UAE have the Gulf Cooperation Council (GCC)’s largest and most dynamic economies, and middle class Saudis and Emiratis are more satisfied with their jobs than are their Bahraini counterparts,” according to the report. Emiratis report the most satisfaction and recognition from work and are most confident that hard work and ambition, rather than family status or connections, will bring career development. However Emiratis don’t think they are paid enough or have enough time off, whereas the Saudi middle classes seem to be more financially secure, saying that they receive fair salaries. “More than half of the Saudi middle class respondents list sources of income in addition to their jobs, such as families, stocks, and rental properties. As a result, almost two thirds of the Saudi middle class report having extra income to spend or save,” says the report.
More than 20% of the middle class respondents are unemployed and looking for work, compared to less than 10% in the other states. Some 16% say they lost their jobs in the past two years. The upshot is that there is little spare income for shopping in many Bahraini households. “The pattern continues throughout the survey, with Bahrainis indicating that they are less well off, less optimistic, less satisfied and less confident than their middle class counterparts in the other two GCC states,” concludes the report.
Retail spending patterns
The UAE has seen disposable income rise 35%, from $33bn to $44bn between 2000 and 2005, according to Euromonitor International. By contrast, the growth in Saudi Arabia was slower, rising 15% over the same period from $76bn to $88bn. People in the UAE also spend more per head with an average of $6,769 in 2005, compared with $3,345 in Saudi Arabia the same year. Following the same trend, retail sales in the UAE grew by a massive 88% between 2000 and 2005 to just under $22bn. In Saudi Arabia, retail sales also grew over the same period, but by a more modest 25% to $44bn. Spending on clothing and footwear makes up roughly the same percentage of consumer expenditure in both states, with 10% in Saudi Arabia and just under 12% in the UAE. However, per capita, consumers in the UAE spent over double the amount the Saudis did on clothing and footwear in 2005. Consumers in the UAE spent just under $800 each, compared to $336 per head for their Saudi counterparts. The total spend on clothing and footwear in the UAE in 2005 was $3.5bn, compared to the larger market in Saudi Arabia, which was worth $8.1bn.
Retailers targeting the GCC
The six markets that make up the Gulf Cooperation Council (Bahrain, Kuwait, Qatar, Omn, Saudi Arabia and the United Arab Emirates) offer huge potential for retailers. Speakers at the World Retail Congress in Barcelona in March told delegates: “if you’re in the retail business, your brand should be in the Gulf”. Recent openings and retail plans reported by WGSN’s new service include: