Dubai: Will UAE consumers and investors turn cautious in 2023? Or will discounts and cashback promotions induce them to keep spending on their needs and luxuries - but with some checks and balances in place?
Going by the recent Black Friday and ’90% off’ promotions, the feedback suggests that consumer response had been overwhelming, with categories such as apparel and fashion accessories getting the desired lift. Smartphone sales, especially on flagship models, remains brisk, while TV and home appliances were the other big winners in the final quarter of 2022. (Demand for home appliances has to do with more homes getting occupied by end-users or landlords putting in the latest gizmos before letting it out to short-stay guests.)
UAE consumers - and those in the Gulf - are also signing up to loyalty programs, with the likes of Alshaya and Saudi retail giant Cenomi (formerly known as Fawaz Alhokair Group) among those who have brought in major changes.
With online shopping, UAE consumers are giving more serious attention to shipping charges. The same applies when they are ordering in their food or other services through online portals. Those aggregator platforms who are offering cashback schemes are ‘edging ahead’, while Amazon’s incentives for its Prime members could be something others will look to emulate.
Because saving on shipping/delivery costs are part of the consumer mindset.
And consumers/investors harbour other concerns too. Standard Chartered’s latest survey suggests investors in the UAE rate worries over inflation (30 per cent of respondents), the threat of recession (21 per cent) and an uncertain global economy (20 per cent) as their top concerns as 2023 draws near.
The UK bank’s survey adds that many investors had already made changes over these last 12 months. Among UAE based residents, 29 per cent say they are spending less and ‘making new decisions around their portfolios (27 per cent).
“Investors in the UAE face a complex reality,” said Dr. Owen Young, Head of Affluent and Wealth Management for Africa, Middle East and Europe at Standard Chartered Bank.
While 51 per cent of these investors say they have invested in gold as a result of inflation, the other strategy they have used is putting in more into ‘value stocks’ and bonds.
The Standard Chartered research finds 72 per cent of UAE investors still believe that ‘digital assets are an important part of any investment portfolio, despite multiple setbacks in the market this year’.
Currently, while 66 per cent of global investors hold digital assets, in the UAE that’s at 73 per cent.
“Looking ahead, 71 per cent of local investors surveyed plan to increase their investments in digital assets in the coming year,” the report adds. “This is in part because many said they have seen people make significant returns off digital assets (36 per cent), and 36 per cent consider them to be a good way to diversify their portfolios."
Wait until deals come along
On the consumer side, they want the discounts and promotions offered to be ‘real’ and the benefits available instantly. “Raffles are still important draws, but increasingly, shoppers want to see they have actually saved something when they buy,” said a gold and jewellery retailer.
New research by Oracle, the US tech giant, finds nearly 66 per cent of UAE shoppers cite economic factors prompting them to spend less overall this holiday season. And 84 per cent said they would consider a store financing or payment plan to cover the costs of gifts.
What’s the gameplan for UAE retailers?
In one word, retention. If retailers - and any consumer-focussed business - needs to work on something, it’s making sure their shoppers do come back the next time they plan to buy.
Because shoppers are searching around for deals, and will switch instantly to a new retailer the moment they feel they are getting a better offer. And not just on prices along. They want the ‘right experience’.
In such a situation, “Retention becomes critical instead of (a consumer-) acquisition driven model,” said Sandeep Ganediwalla, Regional Partner at RedSeer, a retail consultancy.
During the early days of ecommerce, price was a big driver for consumers to shop. This coupled with growth metrics meant retailers focussed on prices.
They cannot afford that any longer, because ‘now, consumers have matured and are looking for experience instead of price alone’, he added.
Come 2023, UAE shoppers, retailers and services companies will be fine-tuning the formula. With a little help from discounts, of the 50-90 per cent off sort.