A growing demand for luxury goods and increasing popularity of e-commerce are some of the trends that market analysts at Euromonitor International say will influence consumer spending in the UAE in 2011.
The Emirates, whose economy is expected to grow by 3.2 per cent this year as per the International Monetary Fund’s forecast, has managed to revive investor confidence following the global economic crunch, thanks in part to the resolution of Dubai World’s $25 billion (Dh92bn)
debt restructuring plan. In the recent past months, the UAE also appears to be relatively unscathed by the ongoing upheavals across the Middle East and North Africa (Mena).
According to
Euromonitor’s survey, the post-financial-crisis scenario proves to be promising for the UAE retail sector with particular interest in the luxury goods segment such as fragrances and high-end watches.
UAE’s luxury fragrances sector is seen sniffing the scent of success as it becomes a Dh663.5 million ($181m) industry by 2014, Euromonitor estimates.
“While the local population [remain as huge] consumers of premium perfumes, another big factor driving the luxury perfume market is the thriving tourism industry. Tourists account for a significant segment of the perfume market, with duty-free sales at airports, mall retail outlets and other shopping locations further driving spending in this segment,” the report said.
Indeed despite the financial slump, UAE’s tourism industry still experienced an uptrend in tourist arrivals. Dubai’s tourism bureau reported that around 8.6m tourists visited the emirate in 2010, up by over 10 per cent versus the 7.8m tourists received the previous year.
In Abu Dhabi, total hotel guests reached 1.65m in 2010, rising by 10 per cent from 2009. The Abu Dhabi Tourism Authority further expects visitor arrivals in the UAE capital to hit 1.9m this year – the figure is seen jumping by 20 per cent in 2012.
Quoting Ahmed Pauwels, Chief Executive Officer of EpocMesse Frankfurt, which organises the annual Beautyworld Middle East, Euromonitor said this increase in consumer spending can be attributed to the importance of fragrances on local lifestyle and the UAE population’s higher disposable income.
Likewise, luxury watches are making a comeback and are anticipated to post strong significant double-digit growth in sales this year, says the market research firm.
“Dubai’s Rivoli Group, which sells luxury products such as high-end timepieces, mobile phones in jeweled finish and calf-skin leather bags, expects sales growth of 15 to 20 per cent in 2011. Abraham Koshy, Rivoli Group general manager, said he had sold ‘a few’ platinum Breguet Double Tourbillion Classique Grand Complication watches, priced at over $440,000 a piece, in recent months,” the report mentioned.
Getting comfortable with e-retail
Following the footsteps of their Western counterparts, UAE consumers have began embracing the convenience and ease of purchasing items over the internet, Euromonitor wrote.
“Previously, online shopping in the UAE represented only a small portion of the total retail market,” the agency said. However, in 2009 alone, consumer spending using the internet totaled to nearly $20m, and the trend appears to be gathering momentum.
Quoting a survey by MasterCard, Euromonitor said online shopping in the UAE skyrocketed last year with 42 per cent of respondents confirming that they shopped online for various items ranging from apparel and accessories to electronics, insurance and groceries.
This trend may have been influenced by the dramatic growth in the country’s internet penetration over the past 10 years. According to
InternetWorldStats.com, UAE’s internet usage has ballooned by 414 per cent between 2000 and 2010.
As of June 2010, around 76 per cent of the country’s population or approximately 4.96m people have internet connectivity, one of the highest rates in the Middle East.
Consumer confidence slightly down, but fundamentals remain strong
A report published in February by Nielsen Company revealed that UAE’s consumer confidence dropped by four points in the fourth quarter of 2010 to 97 points, pushing the country to the Top 15 of the
Global Consumer Confidence Index.
Despite that, the survey showed that UAE consumers’ sentiments have remained more or less the same throughout 2010. A Dubai representative of Nielsen Company said the drop in UAE’s ranking from one of the Top 10 countries can be attributed to the fact that Q4 2010 witnessed 14 countries – mostly from emerging markets – ending the year with a consumer confidence index of 100 points or greater.
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