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United Arab Emirates Retail Report Q4 2011
Business Monitor International, Oct 2011, Pages: 77
The Q411 BMI UAE Retail report forecasts that the country’s retail sales will grow from an estimated AED113.37bn (US$30.87bn) in 2011 to AED150.01bn (US$40.85bn) by 2015. Key factors behind the forecast are strong underlying economic growth (especially if the political situation in Dubai remains stable), increasing household consumption, growing acceptance of modern retailing concepts and expatriate wealth.
The UAE’s nominal GDP in 2011 is forecast to be US$337.2bn. BMI predicts average annual GDP growth of 3.7% between 2011 and 2015. With the population increasing from an expected 4.8mn in 2011 to an estimated 5.2mn by 2015, GDP per capita is forecast to rise to US$83,924 by the end of the forecast period.
Average household spending power in the UAE stands at US$14,400 per annum, according to property consultant Colliers International. Emirati households account for the majority of this spending with an average of US$23,000, while Western, other Arab and Asian households have annual spending power of US$19,500, US$13,500 and US$10,000 respectively.
While Emiratis contribute to retail sales, the buying power of the country’s expatriate residents is the major source of success, according to a study by Indian research firm RNCOS. Tourism is also a massive factor in stimulating retail growth, with the UAE expecting the number of tourists to have totalled more than 11mn in 2010.
Growing urbanisation is another factor in the buoyancy of the retail sector. Abu Dhabi in particular is highly urbanised, with the Urban Planning Council (UPC) projecting that Abu Dhabi City’s population will rise to 1.3mn by 2013. In 2005, 85.5% of the UAE’s population was classified by the UN as urban and this is estimated to have increased to 86.3% in 2010.
The UN described 73% of the UAE population in 2005 as economically active, forecast to rise to 78.6% by 2015. In 2005, more than 30% of the population was in the 20-44 age range crucial for retail sales, and this is expected to hit 56% by 2015.
The retail sub-sectors predicted by BMI to show strong growth over the forecast period include over-thecounter (OTC) pharmaceuticals, with sales expected to increase by nearly 31% from an expected US$0.27bn in 2011 to US$0.35bn by 2015.
Automotive sales are forecast to rise by less than 5%, from an expected 448,569 units in 2011 to 468,653 units by 2015, with the luxury car market the only segment expected to show growth. New vehicle sales slumped in the first six months of 2011 to their lowest level since H109, according to Gulf News.
Sales of consumer electronics are expected to increase from a forecast US$3.43bn in 2011 to US$4.30bn in 2015, a rise of almost 26%. The UAE’s consumer electronics market is one of the largest in the Gulf, accounting for close to 40% of regional spending and serving a potential market of almost 2bn people across Asia and the Middle East.
AT Kearney’s 2011 Retail Apparel Index found that the UAE had the highest fashion clothing sales per capita per annum in the developing world, at US$785. The report attributed its success to ‘high disposable income and immense fashion consciousness’. It also pointed out that Dubai had become a ‘hotbed for upscale retailers’, with Prada and Gucci recently establishing a joint venture with al-Tayer Insignia to develop a retail network across the Middle East.
In CB Richard Ellis (CBRE)’s 2011 How Global Is The Business Of Retail? report, Dubai was the top city for mid-range fashion retailers, attracting 60% of all mid-range fashion retailers present. It was also the second most popular city for luxury and business fashion retailers, attracting 82% of those surveyed.
BMI data show that food sales in the UAE, forecast to be worth US$7.73bn in 2011, are expected to increase by 36.1% to US$10.52bn by 2015. The UAE’s mass grocery retail (MGR) sector is one of the Gulf region’s largest by value, with sales forecast at US$5.35bn in 2011 and accounting for 69.2% of the total food and drink market. The value of the UAE’s MGR sector is forecast to rise to US$7.76bn by 2015, when it should account for 73.8% of the overall food and drink market.
Retail sales for BMI set of Middle East and Africa (MEA) countries in 2011 are predicted to amount to US$255.86bn, based on the varying national definitions. Total consumer spending for the region, based on BMI’s macroeconomic database, is forecast at US$722.41bn. In 2011, BMI predicts that South Africa and Saudi Arabia will together account for an estimated 56.2% of regional retail sales, with Israel accounting for a further 15.8%. By 2015, the combined share of South Africa and Saudi Arabia is expected to reach 58.3%. The UAE’s forecast market share of 12.1% in 2011 is expected to reduce to 10.9% by 2015.
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