By Parag Deulgaonkar
Increase in retail space will lead to market saturation, says Dubai Chamber
Business for brick-and-mortar retailers remains strong in the UAE but e-commerce momentum is gaining pace, according to Dubai Chamber.
In a report, issued on Tuesday, the chamber said e-commerce is expected to register double-digit growth in the medium term though non-store retailing just accounts for three percent of total UAE retail sales.
The report comes a week after Amazon.com agreed to buy UAE-based Souq.com, a move experts believe will propel growth of e-commerce sector.
Dr Ali Al Khouri, first deputy chairman of the Cairo-based Arab Federation for e-Commerce told Arabian Business on Tuesday that the MENA region’s e-commerce sector is expected to grow from $20 billion in 2017 to $200 billion beyond 2020.
According to Dubai Chamber, the value of UAE’s retail sector is estimated to reach $71 billion by 2021 from $56.6 billion by end of 2016, growing at a compound annual growth rate (CAGR) of 4.9 percent.
The sector contributes around 11 percent to the country’s GDP, while Dubai’s retail and wholesale sector accounts for 29 percent of GDP.
Demand in the retail sector remained steady last year, supported by a 5.8 percent year-on-year increase in footfall within shopping malls, the chamber said. It added that the footfall increase was driven by rise in number of tourists, absence of sales tax and expansion of sales events, promotions and shopping festivals.
The chamber also said the largest shopping malls in the UAE operated by Emaar Malls and Al Futtaim Properties witnessed steady increase in the number of visitors with credit card transactions increasing 5 percent year-on-year during the Dubai Shopping Festival 2016, signalling rising consumer confidence.
Dubai saw completion of a quarter million square metres (sqm) of new retail space last year - the highest level since 2010 – while supply remained stable in Abu Dhabi at 2.6 million sqm, according to JLL statistics.
Dubai Chamber estimated around 717,000 sqm of new retail space will be completed by 2018, while Abu Dhabi is expected to see a supply of 467,000 sqm of new space over the same period.
Hamad Buamim, president and CEO, Dubai Chamber, said Dubai enjoys several advantages that will drive growth in the retail sector going forward, such as constant influx of tourists to the emirate, rising incomes, and its ability to attract retailers from around the world.
“However, demand for retail space is projected to see a moderate increase in the medium term, which may potentially lead to market saturation,” he said.
In February, Sapna Jagtiani, primary credit analyst with S&P Dubai told Arabian Business an appreciating dollar was making it more expensive for tourists to shop in the UAE and may lead to Dubai losing its coveted “shopper’s paradise” label.
"$20 billion in 2017 to $200 billion beyond 2020." That should have been the headline and pls give some reasoning for such a huge market potential.
Very conflicting report, Hamad Buamim, president and CEO, Dubai Chamber, said Dubai enjoys several advantages that will drive growth in the retail sector going forward, such as constant influx of tourists to the emirate, rising incomes, and its ability to attract retailers from around the world.
Problem is salaries are absolutely not going up and while the level of tourists improved last month, the level of visitation is not drastically increasing. The costs of doing business will severely impact the regions ability to continue to attract retailers from around the world as the value proposition is broken with the shoppers paradise label now definitely lost.
Footfall numbers are always overstated and have been increasingly difficult to convert to sales, while the mention of no sales tax as a key driver for visitation is obviously about to end. The evidence out there today from many in the know who are saying that there is currently a retail recession underway.
Well said @OneGuy. Global retailers waking up to the fact that the market here is so over-priced that you can export from US/Europe, absorb logistics costs & still find a place in the market.
Selfridges in London just started shipping worldwide.
I buy contact lenses from Europe - delivered within 3 days - free of duty if below AED1,000 per parcel.
Mall rents are too high - that drives pricing strategy & it's not sustainable.
Ironic that those that are investing in the online space also run the largest malls here - whilst the Mall operator was also bidding for Souq.com.
Make no mistake, all retailers here are hurting - some of them badly. The prospect of major change is unlikely in the short-term.
Unless there is a major re-alignment in mall rents & product pricing, the game will not change. Tourists see Dubai as very expensive & that's not necessarily a good thing!