How Expansion Feasibility Studies Reduce Risks for Middle East Retail Brand

The Middle East retail space is fast-tracked with potential, led by a younger population, growing incomes and rising consumer expectations. However, for retail companies considering growth, entering or expanding in the region is not without peril. One poor location, or poorly timed launch can cost companies millions of dollars. That is why many progressive companies consider expansion feasibility studies. 

Feasibility studies offer retail brands a systematic, evidence-based assessment of whether they can achieve their growth objectives, and in a volatile, competitive market, a feasibility study can identify and minimize future risk. In the UAE from high-end malls to its retail sector in Saudi Arabia requires that a company understands the terrain before position dollars. Retailers can develop their future geographical expansion map with confidence, on the basis that data and evidence will drive their decisions. Given the stakes, especially in new and unfamiliar geographies, feasibility studies are not simply luxury, it is best practice.

What, Why and How of Expansion Feasibility Studies

An expansion feasibility study acts as a roadmap for determining the likelihood of success and profitability of entering a new market and opening a new location. To conduct a proper feasibility study, aspects to consider include: demographics, competitive landscape, consumer purchasing behaviour, legal and/or regulatory impediments, and commercial viability. 

For Middle Eastern markets, socio-cultural sensitivities, geopolitical considerations, and regulatory compliance are also factors to consider. We help brands assess the risk and determine if their retail growth strategy aligns with real market conditions. For example, the consumer preferences for brands in Dubai could be substantially different to that of consumers shopping in Jeddah. In this regard, a tailored feasibility study assists in bridging the differences.

Usually an exercise conducted by retail chain expansion consultants or in-house strategy teams, we provide clients with a go/no-go recommendation for any proposed new project to help mitigate risk. Instead of simply reacting to what happens to their business after having launched, companies can set success for expansion from the get-go. Good feasibility studies provide a healthy combination of qualitative knowledge as well as quantitative modelling, permitting a stronger market entry strategy.

Creating a Risk-Reduced Expansion Roadmap

A feasibility study is a key building block for a relevant expansion plan, supporting companies as they navigate the different phases of their retail journey. Allowing brands to document and formalise the phased expansion regardless of the retail channel. The expansion plan gives brands a preferred market, offers suggestions on format, and recommends resource allocations, timelines, and roll-out strategies. 

In the Middle East, where retail operates in contexts that swing from ultra-modern mega cities to conservative communities, a phased and insight-based plan is essential for ensuring the brand’s growth is undertaken in a timely and risk-aware manner. For example, the expansion may prescribe entry into Tier 1 cities, such as Riyadh, with a second wave of entry into smaller towns basing each town’s selection on defined metrics of success. 

Feasibility studies will also affect the investment model selected – wholly-owned outlets, franchise, or joint venture. Without a plan based on a feasibility study, retail brands risk over-expansion, misallocation of their capital, and worse still, reputational damage. Fundamentally, a feasibility-based expansion plan allows brands to avoid big blind-spots and inefficient deployment of resources, increasing discussions around successful long-term market penetration and relevance.

Aligning Feasibility Studies with Retail Growth Strategy

Visionary retailers do not use feasibility studies solely to say “yes” or “no” to a market; rather, they use them to develop the appropriate retail growth strategy. For example, a study may show that certain customers prefer an omnichannel approach to shopping. This finding may lead the brand to complement its brick-and-mortar stores with its eCommerce offering. The process of determining the feasibility inputs will also narrow down optimized product mix, store size, pricing model, and staffing. 

When we talk about the Middle East, there will be local preferences that need to be reflected in the growth playbook, such as particular preferences for luxury goods in Dubai, or family-oriented retail in Oman. A feasibility study will either reinforce or adjust those assumptions and provide viability to the growth plan by identifying whether it is realistic and can be replicated as part of a scaling strategy. 

Beyond confirming the potential and roadmap for growth, feasibility studies indicate the costs associated with that growth; transactional factors such as taxation; licensing; staffing; and logistics must be included. Understanding these costs and then aligning these insights with internal budgets will go a long way in managing the Board’s expectations and de-risking the chance of failure halfway through the rollout. 

Integrating the study findings and strategy into purposeful growth ensures the organization is most effectively using its capital for optimal amplification.

Retail Site Planning Backed by Data and Market Research

Retail site planning is one of the more tangible outputs from a feasibility study. Picking a store location is not a guessing game; it is a scientific process that is based on catchment area, projected footfall, accessibility, visibility, and competitor positioning. In Middle Eastern cities, like Abu Dhabi and Doha, where sites are in high demand and expensive, prime locations are limited. Feasibility studies help evaluate and compare a set of locations and site characteristics using hard data. 

In turn, this affects whether the brand of a retailer fits into something that will attract foot traffic or its signage will be competing with underperforming locations to keep rent costs down. In matters of site planning, appropriate research will consider not just where the site is located but also the lease terms and lease commencement, infrastructure readiness, parking availability, and compliance with local permit codes and requirements. Impeccable site planning has the potential to multiply store performance and shorten the time to break-even. The practical application of feasibility studies in retail site planning ultimately assures that a brand does not merely grow, it grows correctly and purposefully for maximum impact. 

Feasibility Studies as a Foundation for a Market Entry Strategy

Forming a successful market entry plan takes time and research. It takes more than just good ideas, it takes proof of concept. That is the value of feasibility studies. Mapping out your economic demographic, spending habits and local retail gaps can bring about a localized entry strategy. For instance, an aspirational luxury fashion retailer may find through their feasibility study research that there is little to no appetite for high end product offerings in certain Gulf countries but rather there is significant demand in Dubai or Kuwait.

The brand will then decide its market sequencing and tailoring when weighing such caveats. The brand will also have the choice of how to enter these markets, directly or through local people. Feasibility studies also provide details regarding legal and regulatory implications so that you can quickly comply upon entering markets. If the brand is entering unstable and/or unfamiliar markets, access to this information could prove instrumental to its very survival. Ultimately, feasibility studies help mitigate the trial and error approach to decision making so entering a new market isn’t just a possibility, it becomes a strategic decision backed by data.

How Retail Chain Expansion Consultants Leverage Feasibility Studies

Consultants with experience in retail chain expansion often utilize feasibility studies to help guide retailers in stability with growth. The benefit of a feasibility study is that it adds an independent perspective; it provides benchmarking; and there is extensive data arena to pull together external analysis and critical sections of data, to assess and then make clear actionable recommendations toward expansion. In the Middle East with different market conditions and cultural, economic, and legal environments in each country, the local insight can be invaluable. Consultants are called on to work up a feasibility study because of the consumer behavior, regulatory environments, competitive analysis, and city & location development plans to ensure that they are not missing any critical variable.

Typically, the consultants’ feasibility reports include clear descriptions of action points around where to go, how to go, when to go, and how much to bring to the market. Unlike a large low-cost retailer who may do a feasibility study afterwards to understand why they were not successful, the feasibility study helps retail brands understand the local conditions to avoid failures that others have had to deal with.

Furthermore, the consultants will often use dynamic forecasting models, to create analysis of potential scenarios for expansion. Dynamic models give a consultant’s clients a full 360-degree status on the possible outcomes of their expansion.

Ultimately, the result is better informed, leaner, and more strategic expansion that reflects a company or brand’s identity.