UAE electronics retail braves out the slump

Consumer electronics spending in the UAE has been defying the global credit crunch as industry sources see sustained domestic growth.

Quoting a Business Monitor International (BMI) survey, the Dubai Chamber of Commerce and Industry (DCCI) has reported early in October that the consumer electronics market is projected to be valued at $3.09 billion by 2013 as local demand for tech gadgets such as 3G mobile handsets, smart phones, notebooks, and flat-screen LCDs continue to grow.

The UAE’s strategic location has also made it an ideal re-exporting hub of electronic gadgets to other parts of the Gulf and the Middle East. This is further encouraged by low import duties and direct supplies from manufacturers, which kept prices of consumer electronic devices about 15 to 20 per cent lower compared with other countries in the region, the DCCI noted.

Challenging year for local retailers

Madhav Narayan, Samsung’s General Manager and head of Sales and Marketing -IT Division, admitted that 2009 has generally been a challenging year for the electronics retail sector. However by being proactive, most companies have managed to ride out the storm.

“Yes, definitely there has been a dip in the business from a consumer standpoint. From our perspective the first quarter of 2009 had been difficult, but things were corrected as we moved to Q2,” he said.

Without giving exact figures, Narayan said Samsung has been recording a number that is aligned with the figures they have set for themselves.

Ashish Panjabi, chief operating officer of Jacky’s Electronics, said the effects of the crunch was felt more early this year because there were lots of uncertainties in the local job scene following layoffs in many industries.

“During the early part of 2009, there was a noticeable change in spending habits. People were holding bank on expenditure for non-essential goods. Local consumer confidence made its comeback only after Ramadan. The market is slowly picking up now and we can see this in the shop floor,” he told Alrroya.com.

Practicality influences new shopping trends

Prior to the credit crunch, fashion imposed a huge influence on consumer electronics spending trends, says Panjabi.

“People used to buy electronic items that match their clothes, for instance. Nowadays, consumers look more at the value-for-money and usability of products,” he said.

The affordability of some gadgets such as laptops and netbooks has also made it easy for consumers to part with their cash, says JP Nambiar, head of Retail at Jumbo Electronics.

“We have seen a high demand for laptops. We have noticed that more than one person in the family owns a laptop. Because of their affordability, these gadgets are considered less of a luxury item,” he mentioned.

Patrick Hayati, regional director, Middle East and Africa of electronics accessories manufacturer Belkin, said the crisis has actually been good for their business.

“The categories that Belkin work in are not high-value consumer items. Our shelf price ranges from Dh10 to Dh800. Some people spending on higher value items will actually cut back and switch to the category of items that we sell,” says Hayati.

He added that their Q3 revenue this year has posted a massive growth of 227 per cent compared to the same period in 2008.

Likewise while some consumers may temporarily postpone the upgrading of their gadgets, the production of digital content will less likely cease, thus providing a niche market for the digital storage industry, says Khwaja Saifuddin Ahmad, director of Sales, Middle East and Africa of Western Digital.

“People may stop buying high-end digital cameras and mobile phones. But that does not mean they will stop taking digital photos using their existing cameras and phones. People will still download and share videos and MP3s and the need for storage for these digital files will always be there,” he said.

Ahmad added that digital storage units have become popular as consumers learn the importance of backing up their data and the benefits of portability.

“Initially, consumers used to take data for granted. They will leave CDs lying around until they’re scratched and the data is unrecoverable. That’s when data storage comes into picture. Another significant trend is mobility. People don’t want to just save data, but they also want to travel with and have easy access with their data wherever they are,” he explained.

Outlook for the consumer electronics market

The BMI report forecasts that the UAE consumer electronics market will pick up in the second half, resulting to a minute single-digit annual growth for the industry this 2009. The market then is expected to make a stronger comeback in 2010.

Panjabi said Jacky’s Electronics is anticipating a modest growth in revenue this year owing to the financial crisis, but the retail chain’s expansion will be on track as they open their 14th store in the UAE in the first quarter of next year.

Nambiar’s outlook is likewise optimistic. “At Jumbo, we feel there are two kinds of consumers: one who will always look for value, and the other who always want the newest and best technology products. As long as these types of consumers exist, and with the greater affordability of consumer electronics, we remain positive for 2010.”