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TRADITIONAL STRUCTURE OF RETAILING IS CHANGING WITH A RAPID PACE
Retailing was one of the most dynamic industries during the last five years in Iran. Modern grocery channels such as hypermarkets expanded rapidly at the expense of traditional independent outlets, internet retailing and direct selling registered strong growth, and there were rapid changes in shopper purchasing habits. There was also considerable investment in response to high demand from the young population for modernisation. Rapid urbanisation and population density in key cities such as Tehran make Iran an ideal country for modern chain outlets.
MORE STABLE POLITICAL SITUATION RESULTED IN BETTER GROWTH IN 2016
The Iranian economy benefited from stabilisation in 2016. After mutual agreement between Iran and the West over the nuclear ambitions of the Islamic government, both suppliers and consumers felt hope for improvement in the business environment. As a result, prices were less volatile and the supply chain encountered less disruption. However, consumer purchasing power remained low due to general stagnation in the economy which made shoppers very price sensitive. This sensitivity was used widely by modern chain retailers such as supermarkets and hypermarkets to convince shoppers to switch from more expensive traditional channels such as independent groceries to modern channels with wider promotional offers.
MODERNISATION FASTER IN GROCERY RETAILERS CHANNEL THAN IN NON-GROCERY
In grocery retailers, investment was higher from both domestic and multinational retailers and thus modernisation occurred at a faster pace than in non-grocery channels. Bigger outlets, better product arrangement and better service to consumers were evident in grocery retailers in 2016. However, non-grocery specialists could not change due to lack of strong multinational investment in 2016. One reason for lower investment in non-grocery was the strong threat from the internet retailing and direct selling channels, which are used widely for non-grocery items rather than grocery products.
CONSIDERABLE FRAGMENTATION DUE TO HUGE NUMBER OF INDEPENDENT OUTLETS
The number of outlets remained high in Iran in 2016 due to the relatively low level of investment required in retailing. It is easy to register an independent shop in any retailing channel and as competition from chained outlets is still limited, such shops can achieve a reasonable turnover. Each channel contains several key wholesalers in the Tehran Bazaar that supply regional wholesalers in each city and independent outlets across the country are supplied by wholesalers in their region.
HEALTHY GROWTH EXPECTED FOR MODERN GROCERY RETAILERS
While retail prices are predicted to continue to increase over the forecast period, total sales are expected to register a healthy CAGR at constant 2016 prices. Sales growth will be fuelled by factors such as the young population and expected growth in disposable incomes. The emergence of multinational retailers will further drive growth. Internet retailing specifically is set to grow rapidly thanks to expected improvement in product availability, activities by existing brands and launches of new websites and applications.