Date 02.08.15 Our ref. EVH

Date
Our ref.
02.08.15
EVH
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Keywords ..................................................................................................................... 2
Abstract ........................................................................................................................ 2
Market Introduction ................................................................................................... 2
Market Development.................................................................................................. 3
Shopping Malls ............................................................................................................ 3
Free Zones ................................................................................................................... 4
Conclusion and Recommendations .......................................................................... 4
Retail, UAE, Dubai, Abu Dhabi, The United Arab Emirates, Food and Beverage,
Luxury Goods, Apparel, Footwear,
The main purpose of this report is to give a short introduction to the retail sector
in the UAE. It can be concluded from the report that the UAE displays great
opportunities for companies operating within this sector since the UAE is
experiencing an increase in GDP, population and spending. Free zones promotes
doing business in the UAE and offers company set ups with lucrative advantages
for foreign firms. Furthermore the UAE has no sales taxes.
The UAE provides great opportunities for Danish companies within retail due to
GDP growth of 4% in 2014, an annual growth of 10% in the population, massive
investments in Expo 2020, growing tourism, a strategic location and increased
spending.
Expo 2020 is expected to create 277.000 new jobs in Dubai, primarily within
construction, tourism and retail. The country has locals and expatriate consumers
with great purchase power who are up-to-date with trends and increasingly
susceptible to Western consumer trends.
In 2012 consumers spent USD 7.6bn in the retail sector in the Middle East and
one third was spent in Dubai. Dubai is rated to be the second most important
destination for international retailers, according to CBRE (Emirates247, 2014).
One third of Dubai’s economy is based on the retail industry.
Retailing is concentrated in shopping malls but internet retailing and hypermarkets
has gained some ground. In 2014 supply and demand for online shopping started
to develop and e-commerce revenue increased 300% compared to 2013 (BMI,
United Arab Emirates Retail Report, 2015).
Decline in oil prices, rising cost of living and retail rent might affect the sector in
the long run but currently the sector is forecasted to grow.
The retail sector is forecasted to grow significantly due to increasing purchase
power among middle and upper-class income households. Furthermore the UAE
is planning to grow its tourism sector which will increase the number of
consumers. This results in great opportunities within retail – especially food and
beverage, non-essentials and luxury products.
In 2014 grocery retailers accounted for 44% of total value sales in the sector while
non-grocery retailers accounted for 57% (Euromonitor, Retailing in the United
Arab Emirates, 2015). The UAE currently imports 85% of its food, and between
2014 and 2019, the amount of food and beverage imported are forecast to increase
by 35.9%. The massive amount of food import is due to the limited farmland in
the harsh desert climate with extreme weather conditions, which makes agricultural
production very limited – not only in the UAE but also in the rest of the GCC.
Furthermore an increased focus on health issues gives lucrative possibilities for
companies offering organic and healthy food and beverage.
Brand awareness sets the agenda in UAE and iconic luxury brands have a leading
position. An increased focus on quality and a younger generation with brandconsciousness generates great demand for luxury goods within apparel, footwear,
jewellery and timepieces. However, a new trend within this field is affordable
luxury goods which are increasing significantly.
Apparel and footwear has seen growth in recent years. In 2014 USD 2.1bn was
spent in this sector – this is a 10% increase from 2013 to 2014 (BMI, United Arab
Emirates Retail Report, 2015). This growth is forecasted to continue due to
increase in tourism and a growing expatriate population with high incomes who are
willing to spend on fashion apparel and footwear.
The UAE is developing a free trade deal with several countries – e.g. Turkey,
China, Japan – reducing costs of import. The competition in the retail market is
high but the sector is expanding due to the demanding consumers, the tourism and
population. The lack of sales tax is further drawing retailers and shoppers (BMI,
The United Arab Emirates Retail Report, 2015).
Shopping options is concentrated in malls which are widely spread in the UAE.
Currently UAE is home to around 40 malls and more are under construction, e.g.
Mall of Arabia. Dubai is leading when it comes to shopping malls – however, Abu
Dhabi is developing in this field since the Emirate is aiming to compete with Dubai
as a shopping destination (Euro Monitor, Apparel and Footwear in the UAE,
2015). In 2014 Yas Mall opened in Abu Dhabi.
The Dubai Mall is the world’s largest shopping center with 80 million visitors in
2014 and the mall is planned to add 304,000 square meters of retail space. The Mall
of the Emirates is growing too and USD 1bn is being invested over the next five
years to add more restaurants and shops.
Shopping in the UAE is tax free and the third-largest reason why tourist comes to
the country. Chinese tourists have lately discovered the UAE as a shopping
destination and they are expected to impact the market in a positive direction
(Euro Monitor, Apparel and Footwear in the UAE, 2015).
In the UAE more than 35 free zones exist offering business licenses to foreignowned businesses. Each free zone is designed around one or more business
industries and offers comprehensive services for doing business in UAE and
company set ups. A company set up in a free zone is attractive, as it offers 100%
ownership, tax exemption and office and warehouse facilities.
The UAE retail sector is forecasted growth and the market is attractive to Danish
retailers due to the demand among local and expatriate consumers with high
income, investments in Expo 2020, increasing population and tourism. Especially
retailers within food and beverage, luxury products and non-essentials have great
possibilities for success in the UAE. Furthermore free zones are giving lucrative
conditions for foreign business.