Caution reigns supreme as general macroeconomic factors are expected to contribute to continuing challenging environment for industry

Dubai: January marks a time of change for many people, but don’t expect significant changes in the UAE’s retail market next year.

Over the past year, retail sales have softened due on weaker consumer sentiment caused by the effect of falling oil prices on the regional economy and a stronger US dollar.

Industry analysts say sales could be flat or grow modestly next year.

“The general macroeconomic factors are still largely in place, which is going to contribute to a continuing challenging environment for retailers. I think there is still a lot of cautious consumer sentiment… I do not expect an increase in sales next year… it would be flat,” said Colin Beaton, managing director of Dubai-based retail consultancy Limelight Creative Services.

David Macadam, chief executive of the Middle East Council of Shopping Centres, expects the retail market’s growth to be in the mid- to low single-digit range.

“[UAE retailers] have been used to double-digit growth for 10-15 years or longer. But in the past year, they were only seeing modest single-digit growth,” he said.

But, if higher oil prices return next year and more jobs are created, the market could see slight growth, according to Nikola Kosutic, research manager at consultancy Euromonitor International. The UAE retail market is forecast to grow from Dh207.6 billion in 2016 to Dh219.3 billion next year, Euromonitor International data showed.

“There are some signs of a slight recovery… 2017 is when we will see all the infrastructure projects [related to Expo 2020] coming into full swing… [and] rising employment in some of the related sectors,” he said.

The introduction of value added tax (VAT) in the UAE in 2018 could create 50,000 new jobs, he said. “As companies are adjusting to the new regulations… there will be a wave of hiring and new employment segments will be created.”

Retail strategies

Next year will also see retailers focusing more on promotions and price reductions to entice customers, as well as opening stores in the right locations, according to Beaton.

“In the past, retailers had the tendency to put up as many stores as possible.”

Retailers and mall owners will need to increasingly focus on managing their expenses, rather than on their top-line revenue, Macadam said.

That means “putting more money towards training, more efficiency and try to open other channels of sales, so online sales.”

Brick-and-mortar retailers this past year have used a push rather than pull strategy, but the entry of big online players could reverse this trend, according to Kosutic.

“With noon.com entering the market and internet retailing competitive landscape heating up, we expect product availability in online channels to increase dramatically which means that internet retailers can overnight become a channel of choice for large number of consumers who are looking for specific product variant,” he said.

Noon.com is an e-commerce company that is set to go live in January and offer 20 million products. A group of investors led by Emaar Properties chairman Mohammad Al Abbar and Saudi Arabia’s Public Investment Fund are behind the venture.

The region is likely to see modest growth in online retail sales next year, Macadam said, adding that the growth will be more substantial in 5-10 years’ time.

Sarah Algethami is a freelance reporter with Gulf News

Link to Article: http://gulfnews.com/business/sectors/retail/flat-uae-retail-sales-expected-in-2017-1.1943081