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Thu 19 Jan 2012 08:18 AM

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Dubai’s $4bn retail festival battles wary shoppers

Shoppers think twice over Dubai’s discount festival as economic woes rein in spending

Dubai’s $4bn retail festival battles wary shoppers
The Dubai Shopping Festival is now in its 17th edition [Credit: Bloomberg News]
Dubai’s $4bn retail festival battles wary shoppers
The Dubai Shopping Festival is now in its 17th edition
Dubai’s $4bn retail festival battles wary shoppers
The Dubai Shopping Festival is now in its 17th edition

The rich economies of the Gulf are growing strongly but amid a mammoth array of discounts, raffles and promotions at this year's Dubai Shopping Festival, there are signs that consumers are becoming more value-conscious and thinking twice about spending after months of instability in the global economy.

Daily light shows and fireworks along the Dubai Creek, night souks extending until after midnight , lotteries to win 19 kilos of gold, and hotel promotions are features of the 32-day long festival for shopaholics.

Now in its 17th edition, the festival started off in 1996 as a government initiative to promote retail sales and trade.

"The Dubai Shopping Festival plays a major role in supporting the economy of Dubai and boosting it in various sectors," said Laila Suhail, chief executive officer at organiser Dubai Events and Promotions Establishment (DEPE).

In 2011, the contribution to Dubai's economy from retail, travel and hospitality spending in the emirate during the festival totalled AED15.1bn ($4.1bn), DEPE figures showed, including AED5.9bn spent by regional and international visitors. Total spending was equivalent to about 5 percent of Dubai's 2010 gross domestic product.

Suhail said four million visits were made to the festival in 2011, of which 884,660 were regional and international visitors, mostly from India, the United Kingdom and Saudi Arabia.

Total spending may climb further at this year's festival, which runs until Feb. 5. Tourism has been strong - passenger traffic through Dubai's international airport rose 8.9 percent year-on-year in November - and the government of the UAE has been boosting handouts to its citizens, partly to mark last month's 40th anniversary of the country's founding.

In November, the government said it was setting up a $2.7bn fund to help pay low-income citizens' debts and would raise the wages of some state employees.

"I'm confident that sales at this year's Dubai Shopping Festival will be very positive," said Fuad al-Najjar, asset director at the Deira City Centre, one of the major malls taking part in the festival.

"We have seen a lot of Chinese and Russians coming to shop here. I'm quite optimistic to see double-digit sales growth this year compared to last during the festival."

Hussain Kalmari, shop manager for Breitling at the Mall of the Emirates, is offering up to 20 percent discounts for luxury Swiss aviation and diving watches, starting from a basic price of AED12,000.

"We are expecting this month a 20 percent increase in sales over last year, and we had a good start. The number of tourists has increased this month. We have so many Russians and also Europeans," he said.

But while overall sales may rise this year, there are indications that many individual consumers may be less free-spending and hold out for better bargains.

Pushing a trolley filled with bags from fashion shop Promod and Clarks Shoes, Laleh Khosravian, married with two children, travelled from Tehran to Dubai to snap up bargains at the festival, but said she was disappointed.

"The prices are very high, despite the sales. Last year it was very good, but not this year," she said.

Rose Sebuco, a sales assistant at Vipera, a Polish cosmetics and skin care brand, said: "Sales are not going well at all this year. We had a lot of visitors from Saudi and Kuwait last year. But nowadays it is really quiet."

Simon Williams, chief economist for the Middle East at HSBC, said consumer spending in Dubai, which is more exposed to global economic conditions through trade and tourism than many other Gulf economies, would be vulnerable this year.

"I'm hoping consumer spending will hold on the same kind of levels as last year, but I don't think we will see significant population growth, and I think credit growth will be quite soft," he said.

"Given the distress the global economy is experiencing, I think the inflow of tourists, which tends to have a pretty direct impact on retail spending, will be fairly soft."

Bank lending to the private sector in the UAE is sluggish; it grew just 0.8 percent year-on-year in September, the latest central bank data shows.

"Definitely consumers have become smarter in terms of spending. They check the prices, they make sure they really get value for their spending," DEPE's Suhail said.

"The retailers really have to work very hard because the consumers today are not how they used to be two years ago. They really need to make major efforts to make shoppers come and spend during the festival and give value for their promotions."

Article continues on next page…

While the economies of Dubai and the Gulf in general are growing strongly, buoyed by high oil prices, they may be slowing. Analysts polled in December forecast the overall UAE economy would grow by 3.1 percent this year, after an estimated 3.9 percent in 2011.

HSBC's latest purchasing managers' survey for the UAE, based on a survey of 400 private sector firms, found growth in business activity in the non-oil private sector slipped to a four-month low in December as expansion of output and new orders eased and employment stagnated.

With the euro zone debt crisis still unresolved, companies and consumers in the Gulf, like elsewhere, have been subjected for months to a drumbeat of negative news from Europe. Banks from Europe have been pulling out of business in the Gulf to strengthen their balance sheets back home.

The threat of an international conflict over Iran's disputed nuclear programme may also start to worry consumers. Dubai residents have lived with the issue for years and many have learned to ignore it, but with Iran just 150km across the Gulf, it could become a factor in spending decisions.

Dubai is vulnerable to any slowdown in wholesale and retail trade because those sectors contributed around 30 percent of the emirate's 2010 GDP, data from the Dubai Statistics Center showed, higher than in many other cities worldwide.

Dubai's GDP accounts for about 28 percent of the UAE's economy.

"In 2012 we will see a lot of cuts globally in the tourism sector, which will affect consumer spending in Dubai," said Mahdi Mattar, chief economist at CAPM Investment in Dubai.

"There will definitely be an impact in 2012 on the real GDP growth of Dubai due to the global slowdown."

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Don'tbuythehype 7 years ago

Rip-off.......... simple fact is that the prices are still way too high even after the 'discounts'. Savvy shoppers are going online or waiting until they travel abroad where they can get proper discounts.

What is with these part sales anyway? Where shops bring out old stock to entice people into their stores - truth is that the stuff you want to buy is in the non-sale section.

Marketing fluff announcing mega-savings (upto 75% off!!) - oh really!!

Business Man 7 years ago

No value here. Most shops doing "Part Sale" on old stock or cheap stock bought specially for the festival. Shopping Festival is dead.

Cyrus 7 years ago

There need to be more restrict watch from municipality on the authenticity of sales. During sale, some retailers increase the price and then offer discount on an inflated price. Others, pull out old and ugly merchandise, which nobody buys, and mark them 75% off, so they can have a huge sign saying 75% off, but in fine print they have "UP TO" and most item will be at regular price or minimally reduced price. Some other are at perpetual 75% "sale".

few shops, which are offering real sales are full of buyers and lots of sale.

Shahriar 7 years ago

@ All the negative people!

The fact is that landlords haven't brought down the rents and retailers have struggled for the last 3 years anyway, with many losing hundreds of thousands of dirhams just trying to survive. So why would you blame them for only putting old collections on Sale? Why should they put new collections on Sale?? Is that what happens in your own countries!!?? NO IT DOESN'T!

Back home, retailers only discount old collections! And e-tailers don't pay the sort of rent that retailers pay in this market!

Get your facts right before you criticize others!!

Telcoguy 7 years ago

Still you give no reason why people should buy here.
As a shopper I could not care less about the losses of a retailer. Quite a few people seem to share my attitude. But we will certainly notary to stop you from overpaying for old or poor quality stuff.
And btw in many of "our own countries" consumers get much more protection and actually many of the practices described here are actually banned. So yes, people have their facts roughly right.

Joe Karcia 7 years ago

So where do they travel to the so called "abroad" to shop? Please name. Would love to know. Its a world known fact that it is cheaper to shop in US, fine, but where else can you shop cheap? Up to my last month travel, found prices in Dubai and most other metropolitans to be the same or about the same with slight variations which is understandable with currency fluctuations, tax, customs duty etc.

Retailer 7 years ago

@Telcoguy, depends which own countries you mean. I know for a fact in UK, Canada and India the retailers do put on sale old items. This is also a normal practise during festives including boxing day sale. I am in this industry and have peers in retail management. Nothing new here and wrong. Its a standard practise for retailers and it is also a standard practise for customers to complain

Move on. Next topic.

Blackdo 7 years ago

@Shahriar,in uk retailers clear goods which have been in his store or displayed for more then 6 months, and sometimes less. During the boxing day, they sell with 85% discount on branded and luxury items.

Businessmen buy those goods in bulk ( in volume not in value) and ship them to Dubai: their profit could go up to 200%. Both have to clear their stock, uk in 6 months and Dubai in one year after the 6 months. Proof : Ladies fashion is always one year out of date, even when it says "new collection"!

Everything is cheaper in UK for example including technology, cameras, computers, clothes, and shoes.
Believe it, it is feasible to buy a return ticket from dubai to uk and get a 20 kgs of new items in your suite case.

online rules 7 years ago

@retailer
and if stores around the world do as you say, people can complain to consumer friendly organisations who are their to fight for consumers. Maybe small stores always do that. The big stores have their sales blasted all over the press, so it is unwise to do so!
That is the difference and why so many on this site have said they have no trust in shops here now.
Some of the "sales" my better half has been to for the shopping festival have been appalling.
Still, once bitten, twice shy. Never again.

Sal 7 years ago

If you go to Europe and just take the VAT out, the goods are minimum 30% cheaper for big brands and new items. The same for electronics. In the US the difference is eeven bigger for jeans and other cloths. My preferred spot for purchase is Asia (except for luxury items). The people who have a chance to travel have plenty of options. Those who cannot, they still have freinds travelling or have internet. The only thing I do buy in Dubai is the food stuff.