Cash-rich consumers put Gulf emirate among top destinations for US retailers
Limited Brands, operator of the Victoria’s Secret chain, and
American Eagle Outfitters are among retailers seeking a foothold in Dubai as
consumer confidence in the emirate reaches a seven-year high.
Sales in Dubai are up about 10 percent this year, according
to store companies such as Rivoli Group, which sells watches from brands
including Tissot, Burberry, Gucci and Cartier.
US retailers, traditionally reluctant to enter the region,
are coming to Dubai as sales in their domestic markets and other fashion
capitals remain subdued.
“There are more people in the malls here in Dubai than
anywhere else in the world,” said Sheeraz Hasan, founder ‘Millions of
Milkshakes,’ which will open its first branch outside the US this year. “We
wanted to show the West that Dubai is the place to be.”
Consumer confidence in the United Arab Emirates, the
second-biggest Arab economy, is the highest since 2004, according to MasterCard
Worldwide Index of Consumer Confidence released August 18. Confidence was 95.6,
compared with 73.6 six months ago, exceeding markets such as China and India.
The score is calculated with zero as the most pessimistic and 100 as most
Dubai is the second-most attractive emerging market for
retailers after China, in part because high disposable income, according to
management consulting firm AT Kearney.
Retail accounts for 30 percent of gross domestic product in
the emirate, home to about 40 shopping malls, Standard Chartered Bank
estimates. Dubai’s malls feature an indoor ski slope, an aquarium, ice rink,
and a ‘dancing’ fountain, similar to the Fountains of Bellagio in Las Vegas.
Williams-Sonoma, the 55-year-old housewares chain that owns
Pottery Barn and Pottery Barn Kids, opened the first stores outside of North
America and Puerto Rico in the emirate last year. Bloomingdales, owned by
Macy’s, also opened its first store outside the US in Dubai in 2010, while
Victoria’s Secret and American Eagle Outfitters opened stores in the emirate
earlier this year.
“With limited opportunities for growth in their own markets,
more retailers have taken the plunge and made inroads into the region,
typically using Dubai as a springboard into the region’s other markets,”
research company British Monitor International said in a July report.
Visitors from Gulf Arab nations and China are coming to the UAE
as political unrest in other Middle Eastern countries diverts tourism.
Uprisings in the region this year have toppled governments in Egypt and Tunisia
and sparked conflict in Libya, Syria and Yemen. In 2009, the UAE and China
signed an agreement to facilitate travel between the two countries which has
helped boost Chinese tourist number to the Gulf nation.
The possibility of a “second dip” globally could hurt sales,
said Daniel Starta, managing director of AT Kearney in the Middle East.
However, “only catastrophic drops in oil price or truly fundamental stability
issues that challenge both emerging and mature markets would likely have an
impact on the regional retail sector,” he said.
Dubai’s retail industry is recovering after the global
financial crisis caused sales to plunge 45 percent in 2009, according to BMI.
Retail sales in the emirate will likely increase 7.2 percent this year, up from
last year’s 3.6 percent growth, the Dubai Chamber of Commerce and Industry
estimates. Across the UAE, BMI expects retail sales to grow to $41bn by 2015
from $31bn this year.
David Macadam, head of retail for the Middle East and North
Africa at consulting firm Jones Lang LaSalle, said retailers are reporting
annual sales growth of 5 percent to 8 percent, with some as high as 12 percent.
That’s returned revenue to 2006 levels, he said.
Sales at Marks & Spencer Group’s Dubai Mall store
increased 20 percent in the first half of the year, according to Ikram Farah,
assistant store manager.
Dubai-based Chalhoub Group, which sells 280 luxury brands in
the Middle East, increased UAE sales by 19 percent in the first half, helped by
Chinese buyers, joint chief executive officer Patrick Chalhoub said in an email.
The group has joint ventures with brands such as Louis
Vuitton, Fendi, Christian Dior, and operates franchises for others including
Swarovski and L’Occitane.
Sales at Rivoli’s 35 UAE outlets rose more than 15 percent
in the first half and the company plans to open 25 shops in Dubai and Abu Dhabi
“We’ve had a very robust year so far,” said Ramesh
Prabhakar, managing partner at Dubai-based Rivoli Group.
One factor that should be considered is that for Dubai to sustain its position as a shopping metropolis and maintain the level of retail tourism, it has to present a wide supply of cheap goods. Historically Dubai was always seen as the place to shop where you could get the ultimate bargain.
Therefore, the luxury goods sector is not the focal point of the overall retail strategy, you fill the malls if consumers are buying lots of goods at bargain prices. If they think that they've done well at saving money they'll then eat at the mall etc.
The rest of the world is looking for value for money and these luxury goods brands searching for a market outside America with spending power. The Chinese are a welcome consumer injection but they are also in the main a shopping group focused on bargains.
The food retailers will do well as people in the malls in the summer will buy food esp. ice cream and milk shakes since food doesn't cost much as compared to other stuff.
As for the the luxury brands , it remains to be seen.
Retailers are always looking for new markets --today the Middle East, tomorrow, Africa!! Lots of future consumer demand!!