The retail sector in the UAE remains the most resilient during the global financial crisis as it continues to grow in 2010 and next year looks better than the last two years because of the rising spending power of people in the country and tourists.
The current year is a big welcome relief after 2009 slowdown and 2011 is going to be a better one than the current year, according to top retailers in the country.
Retail, especially the hypermarket and Fast Moving Consumer Goods (FMCG) sector have shown tremendous resilience in these trying times with many innovative promotions and product development to retain their market share.
In the lifestyle product category, IT & Telecom products have done remarkably well with a slew of new product launches that have spurred increased spending and this trend is expected to continue well into next year.
The visionary and inspiring leadership of this country makes everyone brush aside the negative sentiments and work harder to overcome any signs of depression. This has resulted in quicker turnaround and economic situation is looking much more promising.
Of course all there have been some casualties, but majority of big group with sound financial grounding have emerged stronger and looking better placed to grab the opportunities in the market.
The next year should continue on the same path for most retailers as there are no new major mall openings expected other than those in Abu Dhabi.
New shopping centers and expansions of existing facilities will soon make Abu Dhabi one of the most retail-concentrated cities in the world, according to a recent report by London-based global property broker Cushman & Wakefield. The capital is set to surpass Dubai's per capita retail concentration by the year 2015 when its retail space doubles to nearly 1.8 million square meters, the report said.
Abu Dhabi offers an estimated 936 square metres of shopping space per 1,000 residents, it added. Dubai now offers more than any other city -- 1,400 square metres of shopping space per 1,000 people. The Ushers about 1,000 square metres per 1,000 people, and European countries have just over 200 square mattresses 1,000 people, the property broker said.
While Dubai and most other major cities aren't anticipating significant retail space expansion over thenext five years, Abu Dhabi has plans for new shopping malls on the scenic Reem and Yas Islands, ccording to the reopt. Projects planned for the next five years will push Abu Dhabi's retail concentration to 1,700 square metres per 1,000 people, it added.
Global real estate consultants Colliers International projects for Abu Dhabi a potentially balanced retail platform by 2015 while Dubai shopping mall space is set to increase 30 per cent by 2013 leading to an oversupply in retail rental market. Abu Dhabi and Dubai markets remain upbeat and later for its established position as a global retail platform and entry point for international brand into the region.
Khaleej Times contacted top retailers in the country and sought their opinion for future and the past. Following are excerpts from their communique:
The future
Yusuffali MA, Managing Director of EMKE group, is very optimistic for the next year as he said, "With general upbeat sentiment prevailing in the market I see a great year ahead for expansion & growth especially in the retail sector."
"Taking ahead our current expansion plans we will be opening 17 new hypermarkets and mall in 2011 taking our store tally to 100 and this will further strengthen our leadership position in the organized retail sector of the Gulf. This year we had entered the new market of Egypt and next year will see the launch of our first retail venture in India. In general a very promising 2011 awaits those who have clear focus of the future," Yousuffali said.
Another active player in FMCG market Al Maya Group also sees another good year ahead. The group's director Kamal Vachani said, "We feel that supermarket and food sector would be extremely well in 2011 in the country and specially in Dubai where tourists are growing multifold as the emirate has become the favorite destination for tourists from all over the world.
One of the important segments in retail sector is consumer electronics and new innovations are key to attract technology savvy in the country.
One of the leading consumer electronics distributors Eros Group sees a significant growth next year and focuses Abu Dhabi to meet growth target. "We are quite positive for 2011 and have taken an ambitious target of growing by 20 per cent against 2010. The Abu Dhabi retail market is now maturing and there will be a lot of growth coming from this region in 2011," Niranjan Gidwani, deputy chief executive officer of Eros Group, said.
"We have identified the region as a core business development area in 2010 and will continue to focus on the Capital in 2011 as well," Gidwani added.
Another popular consumer electronics retailer Jacky's Electronics said the current year is the year of consolidation and recovery and next year will be on the same direction.
consolidation and recovery and next year will be on the same direction.
"The next year should continue on the same path for most retailers as there are no new major mall openings expected other than those in Abu Dhabi," said Ashish Panjabi, Chief Operating Officer, Jacky's electronics.
Some of the older, community malls may find it more difficult moving forward as they have to find ways to attract tenants and customers to stay loyal to them, Panjabi added.
The past
The year 2010 was a year of recovery and consolidation overall for the retail sector in the country as many retailers took the year to take stock of what happened in the previous few years of boom and bust. "While sales have shown a definite improvement over 2009, the cost of sales has increased substantially as we've seen the biggest jump in sales only when we invest in promotions," Jacky's Panjabi said.
While doing promotions is nothing new, the fact that we used to plan a marketing calendar that consisted of three to four major promotions in a year, we've seen in 2010, we had more than seven major promotions. While this bodes well on the top line, it does challenge the bottom line," he added. Gidwani of Eros Group said the group recorded a 30 per cent growth in 2010, compared to last year. It indicates that there was strong retail activity within the UAE in 2010, he added. Eros Group distributes leading consumer electronic brands through trade channel as well as through its own retail stores. "Our own retail channel - Eros Digital Home with 28 stores in the UAE - has grown by over 30 per cent vis-a-vis 2009," Gidwani said.
For EMKE Group 2010 brings big relief after the slowdown of 2009 on the back of the global financial crisis. "The all round gloom gave way to some positive thinking in the market and people responded with optimism and enhanced spending," Yusuffali said.
Many new players entered the market while the existing brands went ahead with their expansion plans, he said, adding: "Retail, especially the hypermarket and FMCG sector have shown tremendous resilience in these trying times with many innovative promotions and product development to retain their market share."
"Many of the hypermarkets have aggressively started developing their own private label products to give shoppers more options in the "value for money" segment. In fact this has become so popular that today we have our own "LULU" branded products in almost all categories of grocery sections with a price tag,
which is at least 25 per cent less than other branded products. I expect this segment to grow further and we are investing heavily to develop new product lines," he said.
"As I have been telling for some time now, the residents here, both nationals and expatriates have a very unique characteristics,...they are more of fighters than mere survivors....they can not be bogged down for long," he added. Al Maya Group, which has 30 supermarkets in the UAE and four in Oman, said 2010 has been good year in general and food industry has done quite well. in general and food industry has done quite well.
Challenges and opportunities
While majority of the retailers are very optimistic for good growth numbers in the year ahead, there are opportunities and challenges both.
Gidwani of Eros Group said while Eros Group has continued to grow in the current financial environment through sound fundamentals the environment will still have some after effects. This will be the major challenge of 2011 for the retail industry, he added. "New technologies introduced in 2010 will gain wider acceptance in 2011 and the addition of more retail space will provide new opportunities to retailers to reach a wider customer base, he said. For Al Maya Group there are opportunities as it going to explore new markets next year. "There will be great opportunities next year and Al Maya Group is going to open more supermarkets in the UAE and Oman to grab more market share. We feel the market is going to grow in 2011 on the back of economic growth that would increase buying power and inflow of tourists would further boost retail sector business," said Kamal Vachani, Director at Al Maya Group.