Iran has a very traditional retailing structure
After the Islamic revolution in 1979, the Iranian economy followed a trend of isolation from international markets, which resulted in very low investment in retailing. In this environment, which did not allow any activity from multinational retailers, a very strong chain of independent shops became the only channel to support shoppers with grocery and non-grocery items. Furthermore, the high risks involved in the industrial and agricultural markets encouraged many individuals to open their own stores in various fields of retailing and even accelerated the growth of outlet numbers. As this traditional distribution network is very ineffective and usually culminates in several layers of price mark-ups before products reach the consumer, the price of a single product may vary from region to region as small independent retailers attempt to boost their profits.
The chaotic situation of the Iranian economy in 2013 has a negative impact on retailing
The Iranian economy remained weak in 2013, continuing the trend from 2012. A high inflation rate, negative GDP growth, unemployment and international sanctions led to serious pressure on Iranian consumers. Many Iranians with flat income levels lost their ability to buy a wide range of products. The decline in purchasing power changed the shopping behaviour of consumers in many areas. Customers often eliminated products from their shopping list, or, in the case of real need for a product, they purchased smaller volumes or opted for lower quality but at better prices. These changes negatively affected retailers as they had to stock their shelves to reflect the new purchasing power of consumers and needed to be extra cautious with regard to their margins and consumer unit prices.
Grocery retailers continues to have huge potential
Convenience has slowly become one of the major demands of Iranian consumers. The store formats with the greatest growth in terms of consumer preference were hypermarkets and supermarkets, due to the wide variety of products on offer. Grocery retailers in Iran also entered a new phase of development as the multinational giants began activities in the country. On the other hand, non-grocery retailers remained highly fragmented, characterised by single-outlet operations featured in the largest retailing formats, including apparel and footwear specialist retailers and leisure and personal goods retailers. The concept of chain stores for non-grocery retailers was unknown in Iran at the end of the review period.
Huge outlet numbers lead to considerable fragmentation
The structure of the retail environment is similar in every Iranian city. There is a district known as a bazaar where key wholesalers supply many small independent outlets throughout the city. These wholesalers purchase the required products from the central bazaar in Tehran, which is located in the heart of the city. This cycle means that the impact of chain stores is still very limited and thus each outlet accounts for a tiny proportion of value sales.
Performance over the forecast period is dependent on consumer purchasing power
Future performance of retailing is totally dependent on the general situation of the Iranian economy. If the new government can control inflation, loosen sanctions and remove the country from its stagnation phase then consumers could gradually rebuild their purchasing power and thus generate higher demand for retailers. Under these circumstances, investment by multinationals in both grocery and non-grocery retailers channels could be a possibility, which would help retailing to convert from traditional to modern formats. The future outlook for non-store retailing, especially internet retailing, is also very promising due to the rapid expansion of internet access and modernisation of online payment methods.
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Discover the latest market trends and uncover sources of future market growth for the Retailing industry in Iran with research from Euromonitor's team of in-country analysts.
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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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- Inform your marketing, brand, strategy and market development, sales and supply functions
This industry report originates from Passport, our Retailing market research database.