UAE economy inspires optimism
Dubai Are you content with your lot as the year draws to a close? Are you more likely than in recent years to spend on that must-have electronic gadget or take that long-desired holiday?
Even if your answer to both these questions is a qualified “yes”, that’s still good enough to retain the UAE’s position among the top ten nations with the most optimistic consumer outlook.
The key fact to note from a consumer confidence index online survey, conducted by Nielsen in Aug-ust and September, is that UAE residents are no longer viewing the future negatively.
The survey is related to the third quarter and asked three questions concerning job prospects, personal finance and whether it is a good time to buy things that people need — and want - over the next 12 months.
Nearly 40 per cent of respondents said the present was a good time to buy things, while 55 per cent rated their personal finances over the next 12 months as “good”. Coupled with the 11 per cent who rated their personal status as “excellent”, these numbers suggest UAE residents are in a much better frame of mind as 2011 draws to a close.
Equally telling is the 34 per cent who were convinced that the indifferent run of the economy could be overcome over the next 12 months.
This confidence seems to have rubbed off on the retail sector. According to feedback from retail bankers, credit card spending has shown gradual improvement since the start of the third quarter.
“There was a spike in the second week of December, with many transactions sealing travel plans, and these levels were maintained in the days leading up to Christmas,” an official from an Abu Dhabi-based bank said.
But local shoppers won’t be forgetting the harsh lessons of 2009 in a hurry.
“Through our own research we believe that shoppers have increased budget settings and are paying more attention to price comparisons between retailers, searching out deals in the process and comparing prices online,” Richard Nicoll, managing director for Saatchi and Saatchi X, said.
“Not only are these changes taking place before the store, but once inside shoppers are sticking to their list. This means that people are shopping with blinkers, immune to the various temptations that new products, treats and impulse purchases can offer.”
According to data from card major Visa, there was an “upward trend” in terms of the volume of expenditure in the first half of the year. In a year-on-year comparison, growth was a healthy nine per cent in the first six months, and a healthier set of numbers is expected in the second half, based on what retailers are saying.
“We have had a better third quarter than last year and fourth-quarter revenue to date has far exceeded the same period in 2010,” George Kunnappally of BinHendi Enterprises said.
“It’s true across our portfolios in fashion, furniture, watches and jewellery, restaurants and cafes, and this is all the more significant because the revenue boost did not necessarily come from increased volumes but by managing prices.”
UAE retailers will take it any which way they can as long as their year-end numbers are in the black. The improving economic outlook is being reflected in their own actions — over the last six months there has been a wave of new outlet openings in Dubai and Abu Dhabi by retailers of all sizes. This trend is quite at odds with the “safety in consolidation” approach adopted through 2009-10 and evident even in the initial months of this year.
One retailer offers an explanation: “Mall rents are firming up gradually and at the bigger ones, quite significantly so. And with no new malls on the horizon, retailers realise this could well be the last chance to get into a good location without having to pay exorbitant rents.
“Mall managements are offering some incentives but that could disappear if the retail sector starts to show major gains in the coming months,” he added.
Local retailers will have little time to gauge the changes that 2011 brought in its wake.
Next month the Dubai Shopping Festival 2012 opens early and not a moment will be spared getting shoppers — residents and visitor alike — through the doors.
With them will come a fresh wave of optimism about the immediate future and a chance for the UAE to try to move further up in the global consumer confidence rankings. Bring on 2012!
Dubai Even if they are likely to spend more on restaurant outings and gadgets, 35 per cent of the survey’s respondents are still concerned about job security.
Another area of concern was food prices and their impact on household finances. Maintaining an equitable balance between work and life was another issue on local residents’ minds. Wider geo-political concerns, however, no longer matter as much, after being the second most pressing common concern in the first quarter of this year. For many, debt was rated as a potential hot potato issue in the near term, and if more residents start sharing this sentiment, it could hurt local retail and services sector prospects.
“One of the most common barriers in a time of economic uncertainty — and in the last quarter [of 2011] — is âvalue’,” Richard Nicoll said. “Saying your product has a value barrier is like saying that fear is a barrier to skydiving. It’s evidently true, but not very helpful. Instead brands and retailers need to connect with shoppers on an emotional level and activate the insight with experiences that complement the pricing structure. While reason will lead to a conclusion, it’s emotion that leads to action.”
Favourable global oil prices mean Saudi Arabia’s consumers had the second most optimistic outlook on their near and medium-term prospects in the world. In first spot were Indian consumers and such sentiments were also reflected in other Asia-Pacific markets, which took up six of the top ten spots. Unsurprisingly, eight of the ten countries with the most pessimistic outlook during the third quarter were from Europe. Hungarian consumers had the lowest confidence and were just ahead of their counterparts in Portugal.