Modern Vs. Traditional: Retail Trends Shifting in Iran

EghtesadOnline: With the ever-growing developments in the World Wide Web, online shopping tools and applications have become more widespread while going to stores to purchase products has considerably decreased.

News ID: ۷۴۴۴۵۷

18 November 2017

In fact, chain stores and hypermarkets, which allow customers to meet all their routine shopping needs in one trip, are diminishing the role of traditional supermarkets and retail outlets. The trend, which started in the world one or two decades ago, now seems to have reached Iran.

But how fast is this trend going? Does it spell an end to small supermarkets? Can hypermarket and online shops dominate the retail market?

Chain Stores Expansion

Chain stores have a 50% share in the world’s retailing market. The share reaches 80% in advanced economies, Financial Tribune reported.

According to the head of Iran’s Chain Stores Union, Iran’s retail market is worth 1,200-1,300 trillion rials (around $30 billion).

Amir Khosro Fakhrian also told the Persian weekly Tejarat-e Farda that chain stores currently have a 10% share or 120-trillion-rial ($2.91 billion) in Iran’s retailing market. This share is projected to reach 25-40% by the fiscal 2021-22.

There are over 2 million licensed and 500,000 unlicensed sales outlets in Iran, whereas the number of grocery stores surpasses 170,000.

The provinces of Tehran, Khorasan Razavi and Isfahan have the highest number of sales outlets in the country.

Saeed Derakhshani, the head the Tehran’s Supermarket Union, says the union is not against the development of chain stores and hypermarkets, but they should not be established everywhere.

Echoing a similar opinion, Ali Fazeli, the head of Iran Chamber of Guilds, said that in developed countries, hypermarkets are constructed in areas with the lowest traffic, which provide facilities like parking lot for their customers. However, in Iran, chain stores have been established in areas with heavy traffic while they lack adequate facilities for customers.

Online Shopping Slowly Catching Up

In 2016, less than 10% of all retail deals worldwide were made online and it is projected to top 15% by 2021. In the US, online shopping has an 11.7% share in the retail market. The share is 17% and 15% in UK and Germany respectively.

PwC predicts online sales of games and toys will grow by over 33% in eight years while sales in electronic products and digital contents would register a 17% rise. The sales of apparel and cosmetics would also increase by over 20% and 3% respectively.

In Iran, online retailing currently has a 0.7% share in the country’s retail market and it is predicted to reach 3% in two years.

Up until a few years ago, online shopping in Iran seemed like a far-fetched idea. More importantly, there was no trust in them.

However, things have changed now and people shopping online are rapidly growing. Online shopping has become the mainstay of Iranian Internet users whose population adds up to 45 million.

The tendency to shop online, especially among the young people, is growing noticeably. Official data suggest there are 9,000 online retail stores in Iran. Online purchases in Iran have an annual growth rate of 60%.

E-commerce companies such as Digikala, Bamilo, Zanbil, Modiseh, Chare, Tehrankala, Shixon, Kimia Online, Final and Albasco are some of the biggest names in the field, offering a variety of products to customers across the country.

Unofficial statistics suggest that Digikala is the leading online store with a 75% share in Iran’s online retailing, followed by Bamilo with close to 15%. The remaining 10% is divided among other online stores.

Moreover, instant messaging service Telegram and photo-sharing application Instagram also have a big role in retail deals.

Online retail stores have also managed to obtain a share in the country’s retail market by gaining the trust of customers.