Best Place to Invest : Retail Sector in Dubai
Overcoming challenges
There are few world cities more closely identified with retail than Dubai. Indeed, its duty-free and low tax shopping is one of the hallmarks of the emirate. Dubai is home to some of the world’s largest malls, most diverse retail outlets and most value-added shopping experiences, from giant aquariums, ski slopes all under a comfortable air-conditioned retail space. With an added value of special events such as Black Friday, White Thursday and Cyber Monday has extended the shopping calendar.
However, as we all know this sector is facing various challenges, the overall regional and global economic slowdown, combined with the introduction of value-added tax (VAT), have had an impact on consumer confidence and spending. “VAT has had a significant effect on disposable income, impacting demand for all non-essential goods, which was once a pastime for consumers to take a leisurely stroll over a weekend is now questionable.
However, it is likely that in the medium to long term the positive effects of VAT will end up outweighing the negative ones, as transparency in the market will be enhanced.
In many ways Dubai is a much more mature retail market than it was even a few years ago, with more price-conscious consumers experiencing more choice about where – and how – they shop weather it’s online (e-commerce) or a physical store retailer are thus looking for ways to adapt to the new normal, with Dubai’s long tradition of entrepreneurial innovation certain to stand them in good stead.
Retail Expansion
Good News………” Why are retailers choosing Dubai for international expansion”? – Favorable growth
- Reduce barriers to entry.
- Brand-conscious consumers
- According to the national statistics agency, foreign workers represent more than 80% of the workforce. The UAE has seen a huge inflow of immigrants a result of the country’s massive investment programs.
- Growth of real GDP will be about 3.3% in the coming year and will decline to 2.7% per year in 2023-2026
The United Arab Emirates – more specifically Dubai – is a launchpad for regional expansion, and most of the world’s major brands have a presence. In fact, Dubai is ranked number one in overall international retailer presence, with over 62% of the world’s brands with some sort of footprint.
Unlike other major Middle Eastern cities, where the retail landscape is anchored to traditional souqs, Dubai is not hindered by the past. Here there is a real readiness for change which makes Dubai fertile ground for all that is cutting-edge.
International brands continue to dominate in the United Arab Emirates and consumers here are very brand conscious. Domestically made products are limited and the small subset of local producers are likely to have their products be manufactured abroad and then imported back into the country.
Dubai Tourism
Board’s Tourism Vision for the city to become the world’s most-visited destination by 2021, with 20 million annual visitors is well on the way to realization. With Dubai being the seventh most-visited city globally in 2019, with 16.3 million foreign tourists. Over 2013-2018, the number of tourists increased by 5.5% per annum. Dubai prepares to host over 22 million in 2021 as the city hosts World Expo 2021.
Digital consumer in the UAE –trends
Stronger Trade Infrastructure and Local Start-up Growth Key to Development of Digital Commerce in the United Arab Emirate
The United Arab Emirates remains a regional leader in digital connectivity and digital commerce. The country’s strategy for fostering digital development has managed to strike the perfect balance between supply and demand, with consumers becoming increasingly sophisticated in using these technologies to browse, order and pay for online products and services (e-commerce) The level of ease with which consumers can use digital commerce is evolving as trust in online platforms continues to build.
Online shopping in the UAE is nothing new.
UAE retailers such as Jacky’s Electronics started experimenting with internet shopping from the late-90s onwards. These were eventually followed by early attempts at e-commerce websites including uaemall.com and hadaiya.com, the latter a tie-up between bricks and mortar retailer Jashanmal and American Express, launched in 2003.
Conclusion
There is an evident need to diversify the retail offer in Dubai from the more traditional regional and super regional mall offer that currently predominates.
There is no doubt that high volume retail has a place in Dubai but the current and forthcoming supply and the questionable conversion rates from footfall to actual purchase is putting increasing pressure on these retail segments to deliver sustainable turnover ratios.
Therefore, adaptation or collapse seems to be the consensus.