Majid Al Futtaim report reveals retail sector’s robust growth during the year
Overall UAE consumer spending rose by 13 per cent in 2023 compared to 2022, driven by a 14 per cent increase in the retail economy, a report showed on Thursday.
According to Majid Al Futtaim’s ‘State of the UAE Retail Economy’ Report, the highest growth in spend compared to 2022 came in the first half of 2023, due to the higher base effect from the previous year’s Fifa World Cup, which had given impetus to consumer spending as a result of a surge in tourists in the second half of 2022.
“It’s fair to say that the UAE has become synonymous with an unparalleled retail experiences, offering a diverse range of world-class shopping malls, luxury boutiques, hotels, restaurants, and experiences to an international consumer base. The country’s vibrant retail landscape has long been on a steep growth trajectory and this trend continued in 2023 as factors including tourism and consumer confidence drove increased spending,” the report said.
Consumer spending in the retail economy displayed robust growth throughout the year, with the absolute consumer spend in 2023 split evenly across the first half and the second half of the year.
Overall, spending remained buoyant throughout 2023 but stood out in the final quarter16 (contributing to 27 per cent of all retail economy spend for the year), attributed to COP28, which attracted tens of thousands of visitors to the country, in addition to traditional seasonal spend, the report noted.
“The UAE’s far-ranging social and economic ambitions continue to fuel the Nation’s success in creating long-term prosperity for its people. Over the past 12 months, its proven resilience to external pressures, coupled with progressive policy-making and an investor-friendly business environment has seen the UAE further strengthen its position as a lighthouse for the Mena region,” Ahmed Galal Ismail, chief executive officer at Majid Al Futtaim – Holding, said.
In 2023, spending in the hypermarket/supermarket sector grew by three per cent. Spending in the first half of the year was up by five per cent on the year while in the second half, consumer spend came in line with the same period last year.16
Growth in the sector was primarily driven by a 19 per cent hike in e-commerce and digital sales, while spending in physical stores remained steady, mirroring the previous year’s spend level. “Despite the digital surge, brick-and-mortar stores continued to dominate the market, accounting for 85 per cent of total sector spending,” the report noted.
Consumers have continued to prefer smaller basket sizes while making more shopping trips, following the previous year’s pattern. Consumers were seen splitting their buying between in-store and online, looking for the best deals while limiting the number of products purchased on each trip, whether virtual or actual, data showed. Average spending fell by 2 per cent per basket
in 2023 while the number of transactions grew by 4 per cent.
Majid Al Futtaim’s Happiness Lab data showed a growing appreciation for discount shopping. According to its latest survey,18 47 per cent of respondents preferred purchasing discounted items, while 20 per cent would switch to cheaper brands, in a continuation of the previous year’s trend towards cost conscious purchasing. The survey also found 52 per cent of respondents consistently pay attention to fluctuations in prices, a 3ppt increase from 2022.
The retail general categories saw a considerable uptick in consumer spend through 2023, and a 16 per cent increase compare to the year before. The most significant year-on-year increases were in electronics (33 per cent), food & beverage (F&B) (25 per cent) and hotels (17 per cent). F&B contributed most to the sector’s growth with 41 per cent, followed by hotels (35 per cent) and electronics (nine per cent).
The growth in electronics spending was spurred by a major reset in retail and wholesale prices. “There was also evidence of price stabilising and even falling below or matching 2022 levels as prices for high-demand smartphones launches from Samsung and Apple remained stable,” the report said. E-commerce’s 13 per cent contribution to the sector’s spending reflects a continuation of the broader momentum toward online purchases and spurred by dropping retail prices, enhanced digital literacy, and an increase in mobile orders, it added.
The first two quarters of 2023 made up 82 per cent of the year-on-year surge, including spending at the Dubai Shopping Festival and multiple sales. Tourist spending in the sector increased by 64 per cent compared to 2022. “It continues to grow as a percentage of total fashion spending and represents 23 per cent of the total, up from 19 per cent in 2022.
The growth outlook for 2024 within the sector looks promising as the region continues to be seen as a “haven of growth” for fashion. “t is expected that the luxury market will continue to expand thanks to the rising tourist numbers and a thriving e-commerce marketplace,” the report said.