UAE retail sector to grow by 33%

The UAE’s retail sales are forecasted to grow from an estimated Dh113.87bn ($31.01bn) in 2011 to Dh151.36bn ($41.22bn) by 2015, according to a new report.

Business Monitor International (BMI), in its Q311 UAE Retail Report, maintains that the key factors behind the impressive 33 per cent jump in the country’s retail sales in four years are strong underlying economic growth, increasing household consumption, growing acceptance of modern retailing concepts and expatriate wealth.

The UAE’s economic growth is back on track after the global economic slowdown led to a decline in the country’s economic activity in 2009 and 2010. Although sectors such as real estate are still reeling under the impact, others such as retail and tourism have continued to surge, driving up per capita incomes of UAE residents.

BMI reckons GDP per capita is expected to rise 18.7 per cent by the end of the forecast period, to $74,484. The UAE’s nominal GDP in 2011 is predicted to be $301.4bn, with growth of 3.3 per cent predicted for the year. BMI predicts average annual GDP growth of 3.6 per cent between 2011 and 2015, and sees the population increasing from an expected 4.8mn in 2011 to an estimated 5.2mn by 2015.

Average household spending power in the UAE stands at $14,400 per annum, according to property consultant Colliers International. Emirati households account for the lion’s share of this spending with an average of $23,000, while Western, other Arab and Asian households have annual spending power of $19,500, $13,500 and $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 per cent of the UAE’s population was classified by the UN as urban and this is estimated to have increased to 86.3 per cent in 2010.

The UN describes 73 per cent of the UAE population in 2005 as economically active, forecast to rise to 78.6 per cent by 2015. In 2005, more than 30 per cent of the population was in the 20-44 age range crucial for retail sales, and this is expected to hit 56 per cent by 2015.

Retail sub-sectors predicted by BMI to show strong growth over the forecast period include over-the-counter (OTC) pharmaceuticals, with sales expected to increase by nearly 40 per cent from a forecast $300mn in 2011 to $420mn by 2015.

Automotive sales are forecast to rise by 49 per cent, from an expected 403,296 units in 2011 to 600,672 units by 2015, largely as a result of growth in the luxury car market. Sales of consumer electronics are expected to increase from a forecast $3.15bn in 2011 to $3.97bn by 2015 – a rise of 26 per cent. The UAE’s consumer electronics market is one of the largest in the Gulf, accounting for close to 40 per cent of regional spending and serving a potential market of almost 2bn people across Asia and the Middle East.

Meanwhile, A.T. 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 $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 signing joint ventures with Al Tayer Insignia to develop a retail network across the Middle East.

BMI data show that food sales in the UAE, forecast to be worth $7.73bn in 2011, are expected to increase by 36.1 per cent to $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 $5.33bn in 2011 and accounting for 69.2 per cent of the total food and drink market. The value of the UAE’s MGR sector is forecast to rise to $7.55bn by 2015, when it should account for 73.8 per cent of the overall food and drink market.

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