Global COVID-19 Update
The daily number of confirmed cases and deaths in Europe surpassed the number of cases in China and the other parts of the world on the 19th of March. Italy, Spain, and France led the number of cases and deaths since the 19th of March wherein they registered 166,054 deaths (62% with 104,186, deaths recorded in Italy). The United States of America followed Europe’s widespread infection and death toll count where it surpassed China’s cases and death toll count on the 28th of March and the 1st of April respectively. China continues to loosen its measures by closing all the temporary hospitals and reopening its economy while the rest of the world remain to be in lockdown and has implemented strict social and business distancing measures. The lockdown measures worldwide started in mid-March and continued till date. Many governments around the world are slowly announcing plans to reopen their economies gradually to be able to manage future outbreaks if they happen. Many countries that registered the highest rates of infections and deaths have also announced steps to resume their economies and other relaxing measures to social distancing.
Regional COVID-19 Update
Despite the drastic measures being implemented by the governments in the GCC at an early stage of the infection levels in the region, the daily confirmed cases and the death count has been increasing across all six GCC countries. Currently, the infection started to increase significantly since the time where low skilled labor camps and low-income neighborhoods registered their first cases. The high number of residents within small and confined spaces were causing the infections to spread at a fast pace.
The business and consumer ability for consumption declines significantly with higher lockdown measures as a result of higher infection rates. Kuwait and Saudi Arabia are maintaining a comprehensive daily infection update of localized infection count with demographic and geographic details while the other countries maintained a total count of infections, recoveries, and death counts.
Lockdown measures by country
All GCC countries implemented measures to curb the spread of the virus at different levels. All countries-imposed business restrictions and closures on all businesses except for supermarkets, pharmacies, and few other essential activities. Oman and Qatar implemented the most flexible measures where no movement restrictions were imposed (except for Wilayat Mutrah). Government guidance was to apply social distancing and let the people stay home unless necessary. Kuwait, Bahrain, and UAE (except Dubai) imposed partial curfews for at least 10 hours a day. Saudi Arabia imposed 24-hour curfew with limited and necessary movement that is only permitted to nearby supermarkets. The government established checkpoints around the main cities and prohibited entry and exit from the main governorates such as Riyadh, Mecca, Jeddah, Medina, Qatif, Dammam, Hufof, Al Khobar, and Dhahran. Dubai imposed the strictest curfew measures where Dubai residents were only allowed outside their homes if they apply for an electronic permit to shop at nearby supermarket. Saudi Arabia was the first country to impose area lockdowns where it imposed a 24-hour curfew and prohibited entry and exit from Qatif on the 8th of March. Qatar followed second on the 20th of March when an outbreak in the industrial area in Doha was registered. Dubai imposed a localized strict curfew on Naif and Al Ras in Deira prior to National Sterilization Program.
|Flexible||Oman + Qatar|
|Semi Flexible||Kuwait Bahrain UAE (except Dubai)|
Kuwait Market Performance Update
The government’s lockdown and social distancing efforts are continuing to affect the fashion, foodservice, and entertainment sectors since the last week of February. In February, all three industries dipped to as low as 87% but slightly recovered in the first few days of March. At that time, COVID-19 was a new and an unfamiliar crisis that led a large consumer segment to shift their spending towards necessary goods despite having all retail malls and entertainment facilities open. The government took serious measures to contain the arrivals and manage their exposure to the virus which developed consumer confidence that pushed the different industries to climb towards recovery. This short-lived growth was shattered after new governmental measures and public announcements of the importance of social distancing were initiated.
The performances declined severely as a result of two main events, retail malls closures and the partial curfew. Retail Malls, parks, restaurants dine in, Friday market, and Ice cream trucks were shut down on the 4th of March. The curfew on the other hand started on the 22nd of March. The curfew restricted movement of all residents except essential workers from 5 PM to 4 AM which then was extended several times to 4 PM To 8 AM until the 28th of May. The curfew also includes government offices shutdown. The Kuwaiti government announced an extension of the curfew measures until the 28th of May to avoid viral outbreaks as a result of Ramadan social gatherings and events. The curfew extension would result in extending the government offices shutdown and a large portion of the private sector. Additionally, retail malls, health clubs, salons, and other major consumer related industries remained closed until the end of Ramadan.
Ramadan is known for as a month of mixed performance attributes where the fashion industry is developing momentum in preparation for two major shopping events, Gargee’an (mid of Ramadan) and Eid. Those events will have low positive impact as a result of the lockdown. The fashion industry failed to react to the crisis as quickly as possible. The major fashion retailers in Kuwait who are also mall developers primarily focused on strategies that will only drive footfall into their physical malls and their stores are byproduct of such strategy. Such limited focus on physical stores led to very minimal online presence such as online stores and social media coverage. Some brands launched their online stores during mid-April, although they do not have the actual online stores only PDF catalogues that consumers need to communicate their orders by screenshotting the selected product to a designated WhatsApp phone number. Fashion retailers who operated their online stores prior to the pandemic were also overwhelmed with the increasing orders and the limited timeframe for delivery. Kuwait is the only country in the GCC that did not allow the delivery services to operate during curfew hours in March and April. Such restrictions caused ordered to be delivered two to three weeks from the purchase date.
Family Entertainment Centers and Cinemas which make up the entertainment industry for this report are expected to stay closed as a result of the continuous government measures that are extending until the end of May.
Unlike the fashion and the entertainment industries, the foodservice industry kept on generating minimum revenues throughout the pandemic. Consumers are still able to purchase meals as take outs from restaurants located outside malls and through delivery service. However, Delivery was allowed only during morning time due to curfew timings throughout the months of March and April. The continuous shortening of the operating hours was putting pressure on deliveries and their abilities to accommodate as many orders as possible. For example, breakfast restaurants were not able to accommodate orders once the government pushed the curfew to end at 6 AM in the morning. Limited transport due to public transportation and taxis ban were forcing restaurant staffs to arrive late in the morning and forcing them to leave their restaurants early at 3 PM to avoid delays and penalties.
Restaurants launched frozen and ready to cook gathering boxes for customers to cover for the missed dinner meals. However, the meals were overpriced covering a minimum average of 6 people.
The ban on delivery was lifted in the start of the Ramadan and will operate during curfew hours which will not generate the desired demand. Ramadan’s breakfast meals evolve around family gathering with homemade meals which caused the performances of dine in and delivery to decline during the holy month. Lifting the ban will not meet the desired positive impact on the foodservice delivery in May. Additionally, take out and drive through sales will decline by 100% in the entire month of May due to the curfew and Ramadan.
Two food retail categories were outperforming other categories due to the nature of their product offerings such as butcher shops and nuts and roastery outlets (i.e. International Mill, Al Rifai, Al Fouz, etc.) and the bakeries (i.e. Mr. Baker, Sable, La Baguette).
Both categories specialize in products that do not require immediate consumption. Restaurants that featured a strong food retail section like Eataly were able to remain open in UAE and Saudi wherein they capitalize on providing branded grocery needs with their own recipes within their stores and through delivery (Kuwait).
Coffeeshops are the worst hit category due to the government specific shutdown of the category. During the first week of March, large queues and social distancing violations were registered by the government that forced the category shutdown at an early stage of the pandemic.
Restaurant brands that diversified their presence beyond retail malls along with the launching of drive through outlets were able to generate better performances than their competitors. Despite the long curfew hours, consumers were slowly getting back to fast food drive through queues around the country.
Governments and Demographics Post Corona
Businesses across the three industries must take drastic measures to survive lockdown losses and accommodate the costly preventive measures to be taken by governments and changed consumer behavior once the bans are eased and lifted. The government is expected to gradually lift the restrictions to avoid outbreaks as a result of social distancing violations. Such measures might include controlling footfall in retail malls and stores at any given time. Screening processes such as temperature checks at the entrances of the stores and malls and maybe within the mall itself. Consumers on the other hand are expected to have high expectations of sterilization and sanitization measures by businesses. The measures that have already started with businesses that are operating during the pandemic are expected to continue in the near future.
The large sudden influx of returning locals with strong purchasing power is a positive contributor for market rebound post Corona lockdown.
Consumer demographics are also expected to change as well once the Corona dust settles in the near future. All six countries in the GCC started repatriating their stranded citizens since early March. Kuwait started repatriation of their 40,000 citizens on the 19th of April. The large sudden influx of returning locals with strong purchasing power is a positive contributor for market rebound post Corona lockdown. That positive change is countered by projected expat population decline. Businesses are expected to shutdown which would reduce the population of high- and average-income expats.
Additionally, the government is tightening its grip on illegal expats who are being offered with paid one-way trip settlements to leave the country. Legal expat residents have also started leaving the country as a result of their businesses being shut down but would return once it is financially feasible for them to return. Such major and sudden demographic changes are expected to affect residential real estate occupancy and consumption in fashion, foodservice, and entertainment patterns as we head towards the reopening of the economy.
Fashion brands are expected to have inventory issues due to unsold March, April, and May inventories along with order cancellations for the next two to three seasons. Global brands that control their supply chain and can balance between the changes in consumer preferences with the severe financial impact of the virus on each global region will be able to thrive beyond the pandemic. Fashion brand retailers must push their localized strategies over their global brand owners in order to survive and accommodate their local needs. Once the crisis is over, global brand owners will push their survival strategies over the country level operators in terms of pushing inventory and promotions that are beneficial to their global brand owner but not necessarily matching the localized consumer reaction and appetite during post pandemic times.
Fashion brand retailers must push their localized strategies over their global brand owners in order to survive and accommodate their local needs.
Kuwait’s foodservice industry is expected to witness a change in the dine in vs. delivery revenue distribution. It is true that consumers were forced to cook at home especially with very limited food delivery timeframe due to during curfew ban. Two factors will contribute to this change; First, it is expected that the government to lower restaurant occupancy at any given time which would reduce dine in transactions due to restrictions. Additionally, the influx of locals repatriated from overseas and being locked down is expected to continue throughout May which would create demand with high purchase power limited only to take out and delivery orders.
A foodservice rebound is imminent, and operators should consider and adapt to the drastic changes
A foodservice rebound is imminent, and operators should consider and adapt to the drastic changes. The increased local population along with the decrease in expat population is an opportunity that foodservice brands that profiled their consumers throughout the years can capitalize on. New tailored menu items with updated prices and smart meal bundling is of essence. Restaurants should believe in the science of meal building beyond taste. The sooner a restaurant brand can develop a meal that is tasty yet have reasonably priced ingredients and change that meal automatically if the prices change will have the ability to withstand future market changes. Additionally, the pandemic will leave the market with more store vacancies and less competition. The brands that operated a healthy business model should take advantage of the soon to be available real estate and capture new market share that was difficult to capture previously.
Family Entertainment Centers (FECs) business model caters the large number of children in one place to play together which defies all social distancing guidelines imposed by the World Health Organization and the local government. FECs also generate revenues from events and party rooms. FECs were first to adhere to the pandemic restrictions and many have closed prior to the local business shutdowns. FECs should adapt to the changes by reducing the number of children and individuals present at their playground at any given time. The key element to overcome the lower occupancies at playgrounds is a booking system. FECs should take advantage of the summer holiday and children being confined at homes for a long time. A booking system will enable FECs operators to accommodate future bookings and guarantee not returning children due to restrictions.
Cinemas on the other hand, started managing bookings and reservations many years ago but have to consider lower occupancy of customers along with expensive sanitization measures. Cinemas should work together to enable extended viewing times that are not conventional at normal market conditions. For example, having movies ending at 2 AM or 3 AM. The lower occupancies can be countered with extended viewing hours. Unfortunately, standalone cinemas were replaced by retail malls and the standalone theater disappeared more than twenty years ago. Real estate developers should consider the long-lasting impact of the Corona virus and brace for an independent screening policy from the malls which can only be done if the theaters are developed as standalones or have separate points of entry.
Cinemas should work together to enable extended viewing times that are not conventional at normal market conditions.
The financial impact of the Corona virus on Mall developers is drastic. Developers started to waive and reduce rents during business inactivity, and they should expect higher vacancy rates due to closures. The financial impact would leave those developers at a weak financial position even after lockdown measures are lifted. Mall owners should manage the social distancing measures and become proactive to propose plans and strategies to the government to reopen their properties. There are two main challenges being faced by the retail malls after the measures are lifted. The first is how to manage the large influx of customers who are expected to swarm into the malls and most likely violate the social distancing guidelines. The second is how to generate the most footfall for their tenants to stay solvent and can continue to pay the rent.
The longer the working hours, the more footfall will be expected given the imposed social distancing measures
Retail malls should think to operate their malls at extended working hours beyond the traditional 10 am to 10 pm. Malls must consider opening as early as 7 am until 2 am. The longer the working hours, the more footfall will be expected given the imposed social distancing measures. Additionally, the malls can develop a booking mechanism for customers to reserve their visit slot to the mall. The last thing a customer will be stuck in traffic at the fifth ring road to visit the Avenues Mall or the sixth ring road to visit 360 Mall. Introducing a booking system while managing the traffic at the points of entry from the highways would create an enjoyable shopping experience and convince the government to slowly loosen up their social distancing measures. The booking system can also help in controlling retail queues and restaurant waiting times in the mall.
Malls can develop a booking mechanism for customers to reserve their visit slot to the mall. The last thing a customer will be stuck in traffic at the fifth ring road to visit the Avenues Mall or the sixth ring road to visit 360 Mall.
Government Stimulus Packages
The GCC region has its unique financial situation that differs from the global situation. Despite the major oil price fallout, governments in the GCC have been at the forefronts of supporting the cashflow stability of its government workers who account for most of the workforce in the GCC countries. Such continuous cashflow stability along with a spike of that consumer segment will create strong rebound in the market once businesses are back to operation.
Total Stimulus Packages
About Global Markets
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Global Markets’ research methodology depends on covering 100% of businesses that have physical market presence. The detailed and micro study of business and brands is the key differentiator factor for Global Markets’ business model. The company’s strength in linking information from business owners to their operating branches is valuable to reach and better understand market conditions.
The estimated daily revenue change year on year. The revenue estimates are derived from Global Markets’ historic and current primary research estimates and artificial intelligence algorithms developed by the company.
Confirmed COVID-19 Cases
The count of confirmed cases as per the World Health Organization definition.
Daily COVID-19 Cases
Regional and international counts were based on the European Union Open Data Portal (EU ODP). Domestic case count was based on the local Ministry of Health count and press releases.