By Ashford Fernandez
AT Kearney's 2016 retail index puts UAE, Saudi Arabia in top 10 list of global retail developments
The UAE retail sector is facing a tough time as margins are under pressure driven by lower oil prices, decline in Russian and Chinese tourists and fall in consumer disposable incomes, according to retail consultancy, AT Kearney.
Shamail Siddiqi, principal at retail consultancy, AT Kearney, told the Middle East Retail Forum that the pace of growth in the UAE retail market had ‘slowed a bit’, which was a sign of a maturing market.
The slowdown will continue in the short-term, as the drop in tourism from Russia and China this year continues to impact luxury retailers, the forum was told.
"Even if oil comes back to the levels we knew over the past 10 years, the profits in retail that we saw then will not [be the same] because the UAE is now a mature market," said Cyrille Fabre, a partner at Bain & Company, according to the National.
The UAE and Saudi Arabia are placed seventh and eighth, respectively, in AT Kearney's Global Retail Development Index 2016.
The $7,159 (AED26,273) sales per capita in the UAE is the highest in the region, AT Kearney said, but annual retail sales growth slowed from eight percent in 2014 to six percent in 2015.
Another report by Ventures Middle East, a research firm, expects retail sales figure to grow at seven percent per annum until 2018 to reach $285 billion (AED1.04 trillion) across the Gulf Cooperation Council.For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
There's a huge problem looming for the retail sector here in the UAE. The continued lull in oil prices is having a dramatic effect on jobs and disposable income across the GCC - Saudi cuts bonuses and increases for Nationals, oil majors in Saudi, Qatar, UAE all laying off significant numbers of employees, banking sector in never ending retrenchments - it doesn't bode well for the retail & tourism sectors.
UAE has some of the most expensively priced branded goods anywhere in the world & too many people have worked out that if you want something 'special' or that suit or dress/shoes, then the prices internationally are much lower than the same product in Dubai.
Understand how many expats now do their shopping on their travels to avail themselves of broader product ranges & much better pricing.
Some of the big family groups here are struggling. It's the price of the products that they distribute that is fundamentally out of line.
London now offers the best pricing for luxury goods!
UAE retail sector is in big trouble , with bad times ahead. My recent trip to a high end luxury mall in Abu Dhabi - the mall was empty except for maybe 10-15 shoppers during a 2 hour period.
With oil companies laying off workers, cuts in all sectors, no pay raises and rents incredibly still rising- this is the perfect storm for retail agony.
Moreover retail goods and luxury items are 20% cheaper in Europe and when you factor in VAT ,and outlet store bargains perhaps 50% cheaper for many items.
Not sure how UAE retail sector will compete.
Do your shopping online, avoid high prices and premium paid on luxury goods, the best way is to go to the shop in Dubai, try the suit, clothes shoes and if okay, go home and order it online and save your hard earned cash..
Like a lone wolf in the wilderness I have been pushing this message to anyone who cares to listen for 2 years now.
Retail is rapidly becoming wildly over subscribed here in Dubai, yet vastly more GFA is in the pipeline under the pretence that:
1. More Tourists are on the way
2. More Residents are on the way.
3. Because if you build it they will come.
4. Go to steps 1,2,3 and repeat.
Upon closer scrutiny, regrettably for those that are desperately clinging to these steps the reality is far different:
1. Ask any Taxi driver and he will tell you that 2016 has seen a net decline in Tourists in Dubai.
2. More Residents are not on the way due to the now wildly overpriced cost of living, salary stagnation and oppressive rents.
3. Because if you build it they will come. Not anymore. Shopper are now far more discerning, online savvy and price sensitive. Not to mention the layoffs, the cut backs and general perception of high prices and poor service.
Let's be clear it's not just the retail and tourism sector that is in trouble but they are no doubt going to be hit badly.
The mid to high end in both areas are wildly overpriced and that's only going to get worse when VAT is introduced.
In a way we could be facing a perfect storm. Faced with rapidly increased costs of living, residents do not have the spending power they once had - I'm in a high income band and I am scrutinising every potential purchase and more often than not I'm going without - a lot of people in our circle are doing the same.
Tourists from traditional areas such as the UK and Russia will be going elsewhere (or staying at home if they're British).
In the past visitors from the GCC have taken up the slack but the economic reality of low oil prices has finally hit home. You only have to look around - we're in mid October and it's quiet out there.
@Patrick lot of people I know have been doing that for long. It was not just or even mostly prices, it was the poor shopping experience. I am not talking about low income people either.
@One Guy, nope, you have not been alone. Quite a few people have been talking about the structural weaknesses here but we do not buy ad space.
But besides that you are spot on, 2009 should have been a wake up calling regards to the over reliance on real estate/construction, but it is clear it was not.
@JRH, yep I had dinner with the head of one of the big four in Qatar and at one point he was discussing the woes of some of his clients in Dubai, high-end retailers.
But no worries we will soon have someone explaining that this has nothing to do with the low oil prices. Oil price has no impact on the GCC residents appetite for property and goods. No sir
As most have said it's about to get really ugly. The only reason for this - RENT. Unrealistic rental prices for residents and I will even say it, overpriced retail rents. High rental prices mean no spending money. No more trips to the mall and walking out 2000dhs later. No one will waste money on buying clothes, shoes, gadgets and gizmos as everyone needs to save for that overpriced, expensive and unrealistic rent cheque.
Same can be said for hotels. It used to be weekends away to other emirates once a month but now that hotels have 5 different taxes and room service charges and high room rates...... no UAE families can afford to do this anymore.
All of these problems can be solved by rental prices dropping to a reasonable level. Affordable rents are the key to spending.
@Savvy Shopper, yep absolutely bang on there.
The Rentals that are being asked since 2014 are not at all based on any sense of reality for either Retail or Residential. It has now gotten chronically out of control and lopsided and cant possibly be based on accurate 'market dynamics' or fundamentals.
Things would be in a lot more balance if salaries had risen in the same period as the cost of living and rents however, quite perversely, salaries have been actually stagnating and in many cases going backwards among the layoffs. Clearly this does not add up in anyway.
The flow on effect is that disposable income and discretionary spending has dried up just like the oil price.
First casualty of all this: Retail Spending.
Two words to explain further pain for the retail sector in the UAE
1. amazon.com or amazon.co.uk
2. ebay.com or ebay.co.uk
It has spelled the end of K-mart, Sears and perhaps Walmart and soon the UAE retail sector.
I also buy all my clothes from outlet malls in the USA, Europe
...Or do it with one word: E-commerce.
BTW loved your first film John! you've got a second one coming out soon, can't wait!