Overview

Sunshine, beaches, culture, food… of all the reasons visitors flock to the UAE, one never stops growing in significance: shopping. And with ‘retail therapy’ popular among the booming residential population as well, the potential for this sector seems immense.

Size
Sector value: AED 114bn in 2012 (Dubai only). (Source: Dubai FDI)
Contribution to economy: In 2012, the sector accounted for 12% of GDP. (Source: Euromonitor). It was responsible for 16.5% of the 4.4% rise in GDP that year. (Source: tradingeconomics.com). By Q1 of 2103, this contribution had risen to 28%, with retail now the leading driver of national growth. (Source: Dubai Economic Council)

Growth Projected sector value: AED 151bn by 2015, a 33% rise in three years (Dubai only). (Source: Dubai FDI)

Examples of growth in action:

Mall: Dubai Mall Attracted 75m visitors in 2013, 15% up on 2012 (65m), and 39% on 2011 (54m). Sales climbed 26% in 2013. (Source: Emaar) Large retailer: Dubai Duty Free Sales reached AED 6.65bn in 2013, up 11.4% on 2012. Now handles an average 71,161 transactions a day, up from 64,200 in 2012.(Source: Dubai Duty Free)

SME retailer: Just Falafel
Began in 2007 with one Abu Dhabi outlet. Now the world’s biggest falafel franchise, with 51 stores in nine countries and signed agreements to develop 903 outlets in 18 countries. (Source: Just Falafel) According to Dubai FDI, five factors drive retail growth: –Population growth. The latest figures show that by late 2012, the UAE population was 9.2m, up 280,000 from 2011. (Source: countryeconomy.com)

High disposable incomes. On average, we each have AED 95,500 – 18 times the MENA average. (Source: Euromonitor, 2012)

More retail real estate. By the end of 2014, it’s estimated Dubai will have 3.1m sq metres of retail space, and Abu Dhabi 2.4m sq metres. (Source: Jones LaSalle)

Inflow of international retailers. 53% have a presence here (Source: CBRE). While phenomenally high compared to other nations, this suggests the market’s not yet saturated. Rising fashion consciousness. For example, Dubai Design District – a recently-announced mixed-use development with fashion retail at its heart – has already attracted over 500 expressions of interest from investors, outstripping all expectations. (Source: Tecom Investments)

Opportunities
Four suggestions:
As mentioned above, there’s potential to bring more global retailers here. Franchising and other techniques are a rich vein to explore.

In Dubai, numerous projects burst with retail opportunities. For example, Nakheel’s AED 2.5bn Nakheel Mall has already booked 120 retailers just a few months after being announced. With opening not till 2016, they’re already 40% of the way to full occupancy – so now’s the time to snap up remaining spaces. It’s also just one of several such developments. (Source: Nakheel)

Abu Dhabi possibly represents an even bigger opportunity. Aldar’s Yas Mall will be the UAE’s second largest (after Dubai Mall) when fully open (November 2014). There are 400+ retail spaces here, across 2.5m sq metres. (Source: Aldar) Rents in the capital are also significantly lower, at an average AED 260 per square foot a year compared to AED 420 in Dubai. (Source: CBRE).

Retailers that reward loyalty will thrive. A survey found 66% of UAE customers want customized rewards, yet only 44% get them. Similarly 74% want instant rewards, but only 54% feel they get them. This is clearly an under-exploited technique, and is especially relevant as 31% of consumers here profess brand loyalty is a factor in purchasing decisions – making them among the most brand loyal in the world. (Source: ICLP)

Disclaimer:
“The opinions expressed within this article are generic. Mashreq is not responsible for the accuracy, completeness, suitability or validity of any information on this article. The information, facts or opinions appearing in this article do not reflect the views of Mashreq. Mashreq does not assume any responsibility or liability for the same.”

Toggle