Retail sector expected to bounce back post-Ramadan

After the summer slump, the retail sector will bounce back in the fourth quarter this year. And with consumer confidence expected to pick up beginning the last week of Ramadan season, sales are slated to continue to grow by 16.5 per cent in 2010, insiders of the retail sector told Emirates Business.

"July is slow, which is expected because it is summer. But we expect things to bounce back post-Ramadan because usually the last week of Ramadan is the peak season," said Arif Khan, Area Business Manager, Middle East, North Africa & French Territories, Kodak Inc.

"The retail sector would continue to grow… It is a normal cycle here in this region and the fourth quarter is a very important quarter for us. The outlook is still positive but I would not go overboard in saying it is very positive. We are in a normal cycle," he added.

According to the Dubai Chamber, the outlook for the retail sector remains positive although a tightening in credit conditions, lack of job security, an increase in consumer savings rates and a fall in tourist visitors will result in a challenging retail market in the UAE this year.

However, citing data from the Business Monitor International, it said the increasing consumer confidence in the months ahead, which will lead to a pick-up in consumption levels and see the value of retail sales grow by 16.5 per cent in 2010.

It said the wholesale retail trade sector, which has been growing at an impressive average annual rate of 18.5 per cent since 1995-2008 is expected to continue to grow in the short-term following a slight dip this year.

"There is no question that the retail sector is the fundamental and main engine of this economy. It was, it is and it will be. This sector will rebound, it's just a matter of time," said Dr Raed Safadi, Chief Economist and Director Economic Strategy and Development Department.

Walid Hajj, CEO of Cravia, the parent company of UAE franchises Cinnabon, Seattle's Best Coffee, Zaatar W Zeit and Roadster Diner, said: "The dust is going to settle and you ask what is going to happen then? The UAE, and Dubai in particular, is 20-30 years ahead of any of its neighbours in terms of infrastructure and regulations. The region needs a centre and Dubai will remain to be the centre."

One main reason for the sector's survival and growth is the expansion of retailers in the country. Dubai-based Middle East Council of Shopping Centres said the UAE's shopping mall growth is expected to grow significantly by 2010.

In the first half of 2009, three main shopping malls have opened in Dubai, namely, the Dubai Mall, the Arabian Centre and Marina Mall. Dubbed the world's largest mall – Mall of Arabia, with 929,000 sqm of leasable space is expected to open next year.

In addition, at least six shopping malls are scheduled to open in Abu Dhabi by 2012, which adds to the buoyancy and robust growth of the retail sector.

In Sharjah, Sahara Centre – the largest mall in the emirate – is on track to completing its eastern retail expansion in September 2010. According to the Dubai Chamber, while Emiratis actively contributed to retail sales, the purchasing power of UAE's expatriate residents was the fundamental source of the retail sector's success.

It said average household consumption in the UAE stood at $14,400 (52,891) per annum, with this figure expected to rise in the coming years ahead.

"The successful marketing drive in Dubai, as a global leisure and shopping destination, has had a major impact on the country's retail outlook," it said. Tourism is a central factor stimulating retail growth, with the UAE expecting more than 11 million tourists in 2010, according to the Department of Tourism and Commerce Marketing.

Growing urbanisation is also a factor that is making the retail sector more buoyant. In 2008, the UN suggested that 85.5 per cent of the UAE's population was classified as living in urban areas with this figure forecasted to rise this year and in 2010.

"Overall, the presence of a significant number of retail complexes in the UAE is indicative of the thriving economy," said an economist with the Dubai Chamber.

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.