Structure of the Iranian retailing industry remains very traditional
Unlike many neighbouring countries that saw a rapid trend of modernisation in the retailing industry, Iran remained very traditional, with a large number of independent outlets. This is mainly a result of limitations on foreign investment, which confines the opportunity for multinationals to enter the market. There is a strong network inside Iran of traditional bazaars that manage and control the distribution of the majority of consumer goods. This network includes key importers and wholesalers, which are still a necessity for the majority of manufacturers due to the high number of outlets and the weak culture of modern shopping (undertaking all grocery shopping at once) among Iranian consumers. Awareness about different brands is still relatively low and shoppers usually consult with independent retailers before choosing a brand, which creates a significant influence among retailers on the sales of all brands.
Chaotic situation in Iranian economy in 2014 has negative impact on the industry
The Iranian economy continued to be under the strong influence of international sanctions in 2014, which hampered the growth of the retailing industry. A high inflation rate, poor GDP growth and unemployment continued to impose pressure on Iranian consumers. Many people with fixed incomes lost their ability to buy a wide range of products. The decline of purchasing power changed the shopping behaviour of consumers in many sectors. Sometimes they eliminated products from their basket and, in case of real need for a product, they reduced their purchasing volume or opted for lower quality but a better price. All of these changes affected retailers as they had to fill their shelves according to the purchasing power of consumers and had to be extra cautious regarding their margins and unit prices. Independent retailers were more vulnerable to the purchasing power decline compared to chained operators, which are benefiting from the fact that many consumers are switching from traditional to modern retailing.
Grocery retailing is headed toward modernisation at a faster rate than non-grocery
The entry of multinational retailer Majid Al Futtaim Hypermarkets LLC at the start of the review period had an impact on modern retailing in the country, especially in the grocery channel. Many consumers discovered the convenience of shopping from modern outlets and became less satisfied with the old independent small grocers. As a result many small grocery outlets converted to supermarkets, although they kept their independent status. Bigger outlets, better product arrangement and better service to consumers were all obvious in the grocery channel during 2014. However, the non-grocery channel did not change to the same degree due to the lack of a strong multinational retailer. The number of non-grocery operators remained high, with no evidence of structural change in the forecast period.
Huge outlet numbers mean considerable fragmentation in the Iranian market
The structure of the retail environment in each Iranian city is similar. There is a district known as a bazaar, where the key wholesalers of each city supply many small independent outlets across the city. These wholesalers get their products from the central bazaar of Tehran, which is located at the heart of the city. This cycle reflects the fact that the impact of chained retailers is still very limited and thus each operator accounts for a tiny proportion of value sales.
Healthy growth, especially for modern retailing channels, is forecast
Despite the fact that retail prices are predicted to continue to increase over the forecast period, total sales are forecast to grow at a healthy value CAGR at constant 2014 prices. Sales growth will be fuelled by factors such as the young population and still relatively high disposable incomes. The emergence of any multinational retailers will further drive growth. On the other hand, growth will continue to be inhibited by the Government’s policies regarding foreign investment and privatisation, as well as international sanctions.
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The Retailing in Iran market research report includes:
- Analysis of key supply-side and demand trends
- Detailed segmentation of international and local products
- Historic number of stores, selling space and values, company and brand market shares
- Five year forecasts of market trends and market growth
- Robust and transparent market research methodology, conducted in-country
Our market research reports answer questions such as:
- How big is the grocery/non-grocery/non-store channel in Iran?
- Who are the leading retailers in Iran?
- How is retailing performing in Iran?
- What is the retailing environment like in Iran?
- Which channels are winning or losing in the fight for consumers’ money?
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This industry report originates from Passport, our Retailing market research database.