A range of international mainstream brands have recently tapped into Malta's retail sector and are transforming the landscape from one of family-run small shops with a limited product range into that of larger outlets satisfying the more sophisticated and cosmopolitan tastes. However, deterred by the small-market environment, high-end stores and most leading brands have not yet arrived. Due to limited choice locally and more competitive prices abroad, many consumers turn to the internet to purchase goods and have become active online shoppers. Growing levels of disposable income do make the retail space a fertile one for new entrants.
The retail sector has been undergoing gradual change. EU accession in 2004 was a major factor, with market liberalisation leading foreign retailers to establish a presence, thereby forcing local businesses to respond through improved offerings, extended space and opening hours as well as embracing the ‘all-under-one-roof’ concept. The advent of online shopping has also accelerated this process.
Today, Malta’s retail sector accounts for more than 20 per cent of gross value added and employs some 30,000 people. Most products are imported and distributed by a limited number of business families. Combined with the small size of the market and the lack of economies of scale, this means that prices are higher than elsewhere in Europe. Despite these challenges, the retail market represents an attractive proposition. The small size of the market is offset by the island’s tourism industry, which attracts 1.6 million visitors per annum. In recent years, several European retailers have started collaborating with Maltese partners, and franchises of fashion and food stores have opened across the island. The country has attracted leading European firms such as UK retailers Marks & Spencer and Debenhams, as well as German discount supermarket chain LIDL.
Footfall and Footprint
While the tradition of morning street markets is still alive in most localities, the retail sector has seen a vast expansion in modern shopping space in recent years. In general, large retail outlets owned by local distributors do not exceed 3,000 square metres, while foreign retailers in some cases reach 5,000 square metres. The main shopping centres are the capital, Valletta, and Sliema, but tourist resorts such as St. Julian’s or inland towns like Birkirkara and Hamrun also host a number of outlets. There are about 20 shopping malls in the country, with one of the longest established being Sliema’s Plaza Centre. ‘The Point’ in Sliema, which opened in 2010, is Malta’s largest shopping complex with a total rentable area of 17,000 square metres, hosting 55 shops. Other areas like Valletta report a fall in business due to factors like parking and congestion. Retailers are increasingly looking at opportunities in secondary locations like the retail zone at the airport as alternatives.
Prospects for Growth
Online shopping continues to drive change in the retail sector, with over 70 per cent of Maltese internet users engaging in this activity. This is forcing local retailers to offer this service, too. As levels of disposable income grow, along with an influx of well-paid foreign nationals, consumers are becoming more demanding. Despite the online option, this represents an opportunity for new entrants to the market. Continuing economic growth and low unemployment present opportunities for investors in the retail sector. Furthermore, Malta’s Freeport and the island’s logistics and warehousing facilities make it an attractive retail gateway and distribution centre for the growing economies of North Africa.