Understanding Iran’s Retail Sector
With a population of nearly 83 million, it should be no surprise that Iran has a large consumer market. But the role of consumers in the Iranian economy has often been overlooked given the perception of Iran’s economy as oil-led.
As in many frontier and emerging markets, the rise of modern retail has been a major trend of Iran’s economic development in the last decade. Iranian shoppers have turned away from the traditional bazaar markets to the modern supermarket format. In 2009, French retailer Carrefour launched a joint-venture in Iran under the Hyperstar brand, marking a highly successful introduction of “hypermarket” stores to the country. These stores were often anchor properties in the spate of new shopping mall developments that were opened in the same period, bringing more modern shopping experiences and foreign brands to Iran’s major cities. Chain retail stores have yet to saturate the market. Dutch international retailer Spar entered the Iranian market through a franchise agreement in 2018.
Growth in the retail sector has been strong despite Iran’s periods of economic contraction. While the retail sector has experienced downturns during Iran’s periods of high inflation, with households cutting back on spending, the sector has shown itself to be far more resilient than the oil sector and a key contributor to the country’s overall economic resilience.
The growth in the retail sector is supported by secular trends. Over the last decade, the development of digital payments and more advanced logistics services, driven in part by the steady growth in the financial services and transportation and communications technology sectors, has spurred the rise of e-commerce platforms. Digikala, Iran’s answer to Amazon, now boasts approximately 30 million active monthly users.
Brick-and-mortar retailers, such as Serkland portfolio company Ofogh Koroush, are increasingly developing their own e-commerce platforms. Ofogh Koroush’s growth is an excellent example of the retail sector’s potential. The chain retailer has grown from 8 stores in 2013, to a national network of 1300 stores just 8 years later, with a growing portion of new stores opening as franchises.