Sales boom rings up jewel of a year

The American author Bill Bryson famously wrote in his 1991 best-seller, Neither Here nor There: Travels in Europe: "We used to build civilisations. Now we build shopping malls."

Retail Winners from 2011

Damas

The group posted profits after suffering a tumultuous two years in which the Middle East's biggest jewellery retailer had to restructure its debts. Damas still has a long way to go, but this year was certainly better than the last.

Al-Futtaim Ikea

The company relocated its Abu Dhabi store from Marina Mall to a larger space on Yas Island, where it offers a greater range of products.

Virgin Megastore

The British brand has completely reworked its image into a combined music, entertainment and media experience. It is expanding across the region and considering launching the UAE's first digital music download platform.

Technology

The US giant surprised the electronics market this year as it launched an online store in the UAE, undercutting local retailers and causing frenzied price competition.

His laconic jibe at the state of human development never really reached the UAE, where the 1991 opening of BurJuman mall has been followed by a continuing explosion of retail space.

Huge mall developments are set to be finished during the next few years in Abu Dhabi, Fujairah and even Dubai, which experts generally deem to be grossly saturated.

This saturation and the crash in the property market resulted in dire sales for retailers in 2009 as consumer confidence plunged.

But the pendulum has swung back this year, and dramatically for some retailers, who have enjoyed their best sales year.

"The UAE retail market saw positive growth in 2011, for the first time following the recession," says Karima Berkani, an analyst at Euromonitor International, a research and information consultancy. "Growth comes as the UAE economy recovers and consumer confidence returns."

Experts say retailers have benefited hugely this year from tourists visiting the UAE instead of countries in the Middle East and North Africa that were caught up in unrest.

Abu Dhabi expects that 2 million visitors will have stayed in its hotels this year - a record for the capital. In Dubai, the number of hotel guests increased by 11 per cent in the first three quarters of the year compared with the same period last year, according to figures from the Department of Tourism and Commerce Marketing.

"Shopping tourism has been essential to driving growth this year, with many tourists re-routing to the UAE from countries affected by political unrest in the region," says Ms Berkani.

One of the biggest beneficiaries of this boom has been the jewellery and luxury goods market, with some retailers achieving sales growth of more than 30 per cent. Overall economic growth is expected to be 3 per cent.

Euromonitor predicts the value of the luxury goods market in the UAE will increase 16 per cent this year to Dh8.5 billion (US$2.31bn).

"This year has been a record-breaking year for us in terms of sales," says Karim Merchant, the chief executive and managing director of Pure Gold Jewellers, a retailer with more than 100 stores across the Middle East. "Our third-quarter sales compared to the same period last year were up 30 per cent.

"Overall, this year we have done exceptionally well, mainly due to increased sales during Dubai Shopping Festival and Eid."

Jewellers have benefited from rising gold and diamond prices as customers are increasingly confident that the value of their purchases will continue to increase.

"Consumers of all social economic groups are now looking to see tangible value for the money they spend," says Mr Merchant. "If you can convince them on the return on investment and value for money, they are willing to spend happily."

But jewellers say one of the biggest threats to their industry is not the volatility of the price of inputs such as gold and diamonds but greater discretionary spending on electronic gadgets. "Apart from the fluctuation in raw material prices, the main competition to jewellery is from products of other industries like electronics and gadgets that today engage not only the youth but consumers of all demographics," says Anuraag Sinha, the managing director of Liali Jewellery, another major UAE retailer.

New products such as tablet computers are drawing consumers to spend more in electronics stores.

Ashish Panjabi, the chief operating officer for Jacky's Electronics, says the company achieved an average improvement in same-store sales of close to 12 per cent this year over last year.

"This was due to various factors, but the improved flow of tourists, especially from the GCC and the Indian subcontinent, helped contribute to this increase," he says. "We've recorded our best sales in many locations this year as the overall pie seems to have grown, whether this be our locations outside of Dubai or even those in malls like Dubai Mall and Mall of the Emirates."

Euromonitor expects sales of consumer electronics to grow 7 per cent in the UAE this year to $2.7bn.

Gadget sales online have also been impressive this year, helping to expand the e-commerce market, which is still waiting for the boom that many observers have predicted for years.

A few e-commerce websites, including JadoPado, have been launched this year, and established sites such as Souq.com and EmiratesAvenue.com have continued to develop. Then, of course, there has been the bold entry of group buying websites.

"It genuinely feels like the UAE is ready for more e-commerce offerings as it's clear that consumers are definitely open to using e-commerce services and business," says Omar Kassim, the founder and chief executive of JadoPado.

Mr Kassim says the website has done about Dh3 million of business since its launch in March. That number underlines the small proportion of e-commerce in the overall retail market.

Malls still dominate the retail landscape, but, collectively, they too are experiencing a difficult period.

In Dubai, many malls are struggling to compete with titans such as Dubai Mall and Mall of the Emirates. Experts say some malls in Dubai should be completely redeveloped or knocked down.

Meanwhile in Abu Dhabi, more retail space is expected to come on to the market in the next few years.

Analysts foresee other headwinds. Retailers in the Emirates expect strong sales next year, but a euro-zone recession could hurt consumer confidence here and dash retailers' hopes of robust business.

"Because shopping tourism is an important factor in UAE retail, there are many external factors that could impact the market," says Ms Berkani. "Economic tension in Europe will likely cause a drop in European tourists, which will in turn hurt sales and mall footfall."

Maybe Bryson has a point after all.

rjones@thenational.ae

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