Spending on groceries remains high

Dubai: Budget grocery shops such as Aldi, Netto and Lidl are eating into their more exclusive competitors' market share in Europe.

The response from many established chains has been to launch promotion drives on staples such as fruit and vegetables.

In the US, a widely-reported revival of the thrift store is occurring - a possible indication that 'throwaway' society is changing its outlook as household budgets tighten.

However, grocery shops in Dubai maintain there is no evidence that consumers are being more careful about how they fill their trolleys and that there are no signs of bargain basket marketing towards households hoping to cook more from scratch or opt for cheaper brands.

The group director of the Al Maya chain of stores, Kamal Vachani, even seemed surprised to be asked about changes in consumer spending behaviour.

"Right now there is not any change," he said, pointing on that "the shopping festival is on."

Vachani's predictions for the future were not overly pessimistic either.

"We do expect some kind of change. Maybe they will buy only essentials in the future. We might try deals with suppliers if there is any downward trend, but right now we are not planning anything," he said.

Lulu hypermarkets say they are not nervous. No change there also, claimed the retailer's communications manager, Nando Kumar.

While the company is poised for any possible new patterns in spending, he stressed that they have not yet experienced the need for an action plan.

As Piyush Mathur, regional managing director for consumer research company AC Neilsen pointed out, shoppers initially re-examine their spending on more luxury goods during an economic slowdown.

"Car sales and real estate are effected," said Mathur. But in the UAE, "consumers don't want to negotiate on high priority categories," he added.

Nielsen's 2008 Global Consumer Confidence Survey, asked shoppers in the UAE what measures they would take to stay within their household budgets should inflation increase and the downturn get worse.

Topping the list, 55 per cent of those surveyed said they would cut down on buying new clothes, 47 per cent said they would try to save on gas and electricity, while 43 per cent said they would cut back on out-of-home entertainment.

In ninth place was the group of those who said they would switch to cheaper grocery brands. In the UAE, Mathur pointed out, the market for own-branded, cheaper items in supermarkets is small.

However, he believes that this could all change if times get harder for the economy.

"If the slowdown really deepens, then in the next phase groceries will get hit and there comes the opportunities for own labels," said Mathur.

He pointed out how such an economic downturn was something the region or its consumers were not used to.

Furthermore, as the effects of the global recession edged into the UAE more slowly, its full impact on shoppers' behaviours and choices is yet to be seen.

"We don't really see such trends here," Mathur said, regarding shoppers economising on essentials.

"This situation is new to the region, and there is a lag effect as opposed to the rest of the world."

With Dubai's mainly expatriate population, those feeling particularly hard up may not stick around, and instead head for home.

The evidence of their frugal spending will then emerge in their home countries rather than in the UAE.