Super Sale Success: For a limited time only?

Dubai: Whilst shopping sales have become a mainstay of Dubai’s retail landscape, analysts are mixed on their outlook for these kinds of bargains.

On Monday, Dubai Festivals and Retail Establishment announced a new “super sale”, set to run towards the end of May, offering shoppers up to 90 per cent discounts for three days.

“Shopping festivals have been fantastically successful for Dubai,” according to Matt Green, head of Research & Consulting, UAE at CBRE.

“They’ve been pivotal to Dubai in helping them to create a tourism market,” Green added.

Dubai Shopping Festival (DSF) started in 1996 as a retail event intended to benefit retail trade in Dubai, and has since been promoted as a tourist attraction.

It is run to coincide with a number of international holidays in China and Russia, both important source markets.

In recent years however, Dubai’s reputation as a shopping haven for tourists has been challenged.

“The problem is, prices are no longer competitive,” Colin Beaton, managing director of Limelight Creative Services, said.

With a strong dollar, high rents, and weak currencies in traditionally important source markets such as the United Kingdom and Russia, “the profit margins of these retailers have declined,” Beaton said.

This has created something of an arms race between shops, with “more and more sales, increasingly earlier in the season. Everyone’s discounting to keep customers engaged and keep the brand awareness up,” he added.

Even Saeed Al Falasi, executive director of Dubai Retail and Festival Establishment, the government body in charge of facilitating these shopping bonanzas, admits that they need to keep upping the ante to keep people interested.

“Usually, within regular calendar days, the maximum a retailer can do is 75 per cent. This allows retailers to go higher, and gets the consumer to get excited too,” Falasi said at a media roundtable on Monday.

Starting from 2017, this three-day super sale will become the first of only two times a year when retailers will be allowed to offer 90 per cent discounts, unless they have submitted their papers to the Department of Economic Development to prove they are closing down.

“You may have noticed in 2015 and 2016 brands running 90 per cent clearance sales for very long periods of time. From this year onwards, the only time you will see 90 per cent sales is during these two periods,” Falasi said.

The senior official said that he wants to excite both retailers and shoppers with well-timed sales, and in turn stimulate the economy.

However, not everyone is convinced this strategy will spell success in the long-term.

“One of the only things that retailers are doing these days is retail promotions, and their impact is fading away a bit. Every year, retailers are reporting lower and lower sales. The market is a bit fed up or saturated with these deals. It’s nothing major, but you can feel the market declining a bit,” said Nikola Kosutic, head of research in the Middle East at EuroMoniter International.

And Kosutic’s prediction for where Dubai is headed is no more optimistic.

“We’re going to reach a tipping point, which we’ve seen happen in so many other markets. There will come a time when consumers will become smarter,” he said.

Kosutic argues that even though this sale is marketed as having discounts of up to 90 per cent, this will be applied to already exorbitant prices, so consumers will still end up forking out more than they should, whilst being mislead by the attractive number.

“Consumers are becoming more sophisticated. The discounted price will become the new norm, and we will reach this point in a year or two. At the same time, retailers will realise what’s going on, and steer away from this kind of stuff, opting for smarter approaches,” he said.

The danger often associated with having regular sales is that people become accustomed to paying discounted prices for items, and refusing to pay full price.

Why would you, when you know the next sale is only a month away?

It’s hard to claw back those margins once you’ve set the prices so low, according to Beaton.

“There’s no doubt, sales and discount shopping is a cultural phenomenon here in Dubai. But there’s a danger with discounts in that they become very hard to ween yourself off. And no retailer wants to be the first to not go on sale,” he said.

For now, sales and shopping festivals are a permanent part of Dubai’s retail and tourism strategy, and that looks set to remain the case for the foreseeable future.