Dubai: The UAE’s retail sector is expected to reach Dh200 billion by 2017, growing by five per cent on average each year, according to an analysis by the Dubai Chamber of Commerce and Industry.
Consumer spending is also expected to continue rising in the medium term, with growth rates projected to stabilise at about four per cent on average per year, leading to a total spending of more than Dh750 billion by 2017 across many categories.
According to the Dubai Chamber, the data they have gathered from several sources, including Euromonitor and ATKearney, indicate that consumer confidence in the UAE has not been negatively impacted by expectations of decelerating economic growth in the region. Retail sales and consumer spending data alone show that the retail sector is growing faster than the UAE economy as a whole.
“The UAE stands out as one of the leading retail centres in the region. Retail is an important pillar of Dubai’s economic diversification strategy,” said Hamad Bu Amim, president and CEO of Dubai Chamber. “The analysis will not only boost the sentiments of the retail sector in the region, but also help raise investor confidence in the market,” he added.
The retail and wholesale trade in the UAE accounts for more than 11 per cent of the UAE’s gross domestic product (GDP) and close to 30 per cent of Dubai’s GDP.
A number of indicators point to a growing retail industry in the UAE. Retail space alone increased by 7 per cent during 2014 to reach 1.6 million square metres. At the same time, retail sales in the UAE reached Dh173 billion, growing by more than 6 per cent compared to 2013.
The Dubai Chamber said this translates to more than Dh20,000 retail sales per capita in a year. In terms of consumption, households spent Dh673 billion in 2014, growing by 6.7 per cent per year in real terms. In nominal terms, household spending growth was higher, at 9.2 per cent year-on-year.
“Those figures indicate a normalisation in consumption patterns, compared to large shifts occurring in previous years,” the Dubai Chamber said.
“In 2009 and 2012, consumer spending had even registered negative growth. Spending per capita increased by 5.7 per cent to reach more than Dh79,000 in 2014. This means that each person spends on average more than Dh6,500 a month.”
Consumers in the UAE spend most of their income on accommodation, with expenditure on housing reaching Dh278 billion in 2014, more than 41 per cent of total consumer spending. This is comparable to almost 25 per cent of the country’s GDP.
Food and beverage is the second most significant consumer spending category, with a 14 per cent share, followed by transport spending at 9 per cent. Communications has a share of 7.8 per cent, and apparel and footwear has a share of 7.4 per cent, while all other items account for less than 5 per cent of private expenditure.
Another area that offers many opportunities for consumption growth is luxury retail in the UAE. “There is growth of wealthy and ultra-rich consumers, the main potential customers of the luxury segment. All in all, consumption is going up and retailing in the UAE is a major sector, which is supportive of economic growth and offers a lot of business opportunities,” the analysis stated.
The UAE emerged in the seventh place in the 2015 Global Retail Development Index, which reviewed 30 developing countries for retail investment. The country’s retail sales value was also expected to grow by 6.4 per cent to reach $18.4 trillion (Dh67.5 trillion) last year.