In assessing the potential consumption of licensed merchandise in the Middle East and North Africa (as with all emerging markets), you’re invariably left with a collection of good news/bad news valuations. The good news? According to a report from licensing agent the Arabian Licensing Company (ALC), 50% of the Middle East’s population is under age 16, which is typically the group that is most desirous of licensed products. The bad news? Poverty. The most recent data published by the World Bank estimates that 22% of MENA’s population lives on less than US$2 a day–that’s roughly 62 million people. The bulk of the region’s wealth (and therefore its main retail opportunities) lies in oil-rich countries like Saudi Arabia, the UAE, Kuwait, Bahrain, Oman and Qatar. Resource-poor nations such as Tunisia and Yemen present more of a merchandising challenge.

Based on ALC’s research, MENA boasts eight countries with strong distribution opportunities for licensed and character-branded merchandise such as toys, gifts and stationery. At the top of the heap, the report pegs Saudi Arabia with 250 to 300 stores as the most retail-rich country, followed by the UAE (150 to 200 stores), Kuwait (60 to 75 stores), Lebanon (50 to 100 stores), Egypt (50 to 75 stores), Qatar (30 to 40 stores), Oman (30 stores) and Bahrain (25 to 30 stores).

There are no truly pan-regional chains in MENA, but one company, a mall operator called the Landmark Group, has stores dotted throughout most of the region. Landmark’s 130 stores cover off all of the major retail categories, including hardware (Home Center), home and textiles (Home Style), infant (Baby Shop), footwear (Shoe Mart), sports and apparel (Splash) and general apparel (Life Style). That said, multinational chains such as Toys ‘R’ Us (which has six stores in Kuwait, Bahrain, Doha and the UAE) and Virgin Mega Stores (which has three stores in the UAE) have been popping up with greater regularity in the Gulf’s wealthier nations.

Since the region has a small manufacturing base, many retailers import goods (licensed or otherwise) directly from manufacturers. Companies located in wealthy countries such as Saudi Arabia, the UAE, Bahrain, Kuwait, Oman and Qatar (all of which belong to the free trade zone known as the Gulf Common Market) can ship products in through MENA’s main trading port in Dubai without fear of getting hit with heavy import tariffs. The same cannot be said for countries such as Egypt (see ‘Navigating MENA–a licensor’s guide’ on page 31). In many cases, the retailers also act as wholesalers, which can cause problems for manufacturers when a retailer’s desire to have its own shelves fully stocked conflicts with its duty to sell product lines to other stores in the region.

Among MENA nations, the relatively affluent UAE is the most retail-savvy. Retailers there have quickly glommed onto the benefits of carrying licensed merch, says Shaun Ollier, ALC’s sales and marketing manager, and are taking the time to merchandise major entertainment brands properly with feature walls and themed boutiques. However, unlike in North America or Western Europe, direct-to-retail licenses are not something retailers in MENA covet. Ollier says the logistics of coordinating such agreements (i.e. sourcing product and managing royalty reports), along with the cost of the license itself, have dissuaded retailers from pursuing DTRs.

While the main retail distribution channels for kid-targeted licensed merchandise vary depending on the category, the children’s market is moving away from small boutique stores. At the epicenter of the new retail model are hypermarkets (like Carrefour, Spinneys and Choitram), which sell a wide range of licensed merchandise, including toys and apparel. In the last few years, independently owned mini department stores have also begun cropping up to offer various kid-targeted products.

Toys remain a large category in the region, though licensed character merch represents only 10% of overall sales, estimates Ollier. Among the Gulf Common Market nations, which tallied collective wholesale toy revenues of US$130 million in 2000, specialty toy stores are the main retail channel, accounting for 52% of sales. Department stores (24%), supermarket/grocery chains (13%), other (6%) and duty-free shops (5%) trail a bit farther behind. Though Disney and Warner Bros. had stores in the region, both have shuttered all of their locations, deciding instead to secure dedicated branded areas in established stores.

ALC is planning to fill that retail void with its own Space Toon stores. Named after the company’s satellite channel, which has an audience reach of 24 million, the shops will offer generic and licensed products based on properties from the likes of Warner Bros., HIT and Marvel. The first store is scheduled to open next summer in Saudi Arabia, with other locations to follow in affluent countries such as Bahrain, Oman and Kuwait.

As in most territories, key shopping intervals in MENA coincide with major holidays. For religious purposes, the region follows the Islamic lunar-based calendar, so dates for holidays change from year to year and are celebrated at different times depending on the country. Currently, the major shopping periods in MENA are: Eid al-Fitr (at the end of Ramadan), Eid al-Adha (four days after the Haj Pilgrimage) and the back-to-school period (August and September).