Retail sector essential factor in economic growth despite competition

KUWAIT: The cooperative sector in Kuwait uniquely characterizes the economic and social aspects of the state and is a key factor in shaping the economic structure of the country, especially in terms of retail sales and consumer goods, despite the competition of hypermarkets.

Kuwait’s retail sector has grown by an average of about 10 percent in the past five years despite the spread of parallel markets and the launch of world-renowned brands in the field, competing to enter the local market to gain a share of this growth. The financial report of the contribution and capital data, sales and profits of cooperative societies for the year 2016 showed that the total sales of these coop-socities amounted to 990 million Kuwaiti dinars (about $3.2 billion) compared to 850 million dinars (about $2.7 billion) in the previous year, an increase of 13 percent.

Fierce competition
On the impact of hypermarkets on cooperative societies, a number of specialists and citizens were interviewed on the fierce competition between the two sectors, Dr Nayef Al-Shammari, professor of economics at the Faculty of Administrative Sciences at Kuwait University said the competitiveness of any commodity or service market depends on the availability of a sufficient number of commercial units through which they can influence the size of supply in the market.” He pointed out that the aim of the cooperative societies in Kuwait is to activate the economy, specifically in the retail markets, by enhancing the concept of individual contribution, with participation in the administrative decision of the elected board of directors besides a government supervisory role.

He expressed his belief that the spread of parallel markets in the country and their entry as a competitor to cooperative societies is necessary to create a competitive market with diverse products, quality and competitive prices. He added that the relationship of coops with traditional consumers began to decline during the past 10 years, “with the significant emergence of these markets in most of the country’s areas.”

He noted that the hypermarkets have affected the selling and buying operations in the market, saying that hypermarkets have come up with new commodities not available at ordinary cooperative societies.

Shammari said that parallel markets offer consumer goods at prices lower than those of cooperative societies, which encouraged many cooperative societies to discount their goods in order to attract consumers and not lose their traditional customers. He added that parallel markets have a greater diversity in goods compared to cooperative societies, especially foreign goods. Moreover, they have more freedom and flexibility in the direct contracting process compared with the cooperatives. Shammari attributed the reason for the apparent disparity in prices between cooperative societies in various areas to “non-application of the laws in force by the Federation of Cooperative Societies and absence of the role of concerned authorities in controlling prices.”

Advantages
Omar Al-Mayaan, a consumer, said that parallel markets offer many advantages compared to cooperative societies in terms of offering coupons that give discounts on certain purchases, adding that the cooperative societies rely more on the shareholders, which gives better advantage to the markets and an opportunity to attract more consumers.
He explained that parallel markets also give more offers and reductions in the prices of consumer goods as well as many new products compared to cooperative societies. He said that parallel markets are more flexible in attracting and exhibiting new and diverse foreign products compared to cooperatives, which still showcase traditional products.
Meanwhile, Aseel Al-Fahad expressed her belief that the cooperative societies seek to provide all the goods needed by the consumers and are eager to reduce their high prices. She pointed to the importance of the role of cooperatives in the provision of local goods and products and their encouragement of the national product, in addition to their role in supporting Kuwaiti youth for their small and medium projects. – KUNA

This article was published on 27/09/2017