Dubai shopping slump

Sales mean less profit this summer, but great for consumers

Revenue and profit margins have plunged in Dubai's world famous retail sector this summer, as shops slash prices to boost dwindling sales.

Dubai Summer Surprises (DSS, the annual event organised by the Dubai Shopping Festival (DSF), is an important time of year for the city's retailers.

Summer is traditionally a strong season for Dubai's many shopping malls, as schools and universities close for the holidays and soaring temperatures keep people from going outside.

But this year, no amount of discounting seems to help.

"We see no signs of improvement. Sales are down by 25 to 35 percent," said Mohammed Hafiz, chief executive of Al Sawani Group, which holds the Middle East rights for brands such as Adidas, Dolce & Gabbana and Esprit.

The decline in sales comes in spite of the company offering bigger discounts than in the past.

Hafiz's comments are echoed by Jumbo Electronics' head of retail, JP Nambiar.

Jumbo's revenue is up slightly since the beginning of the year, but was down by around 20 percent in the April to June period compared to the same period last year, despite the number of products sold being higher due to manufacturers lowering their prices in response to the global downturn.

"Consumers today are looking for great deals.  Manufacturers are very aware of this and have adjusted prices accordingly, and we have transferred these savings on to our customers," Nambiar said.

"We are posting a reasonable increase month-on-month despite lower tourist traffic across the Emirates, which is where a lot of mall footfall in particular comes from."

The company has 13 showrooms in Dubai.

Amid slowing regional tourism and sliding consumer confidence, small ticket items have been doing better than luxury goods.

Dubai Holding Group, a retailer that operates 34 store in the lower midmarket across the GCC, said sales during this year's DSS have so far only been down by around 10 percent thanks to the affordability of the company's products. (The group has no links to the government owned entity with the same name.)

"Compared with other retailers, this is a comparatively small decrease largely due to the fact we have a focus on mid market products and prices," said group retail manager Jean Michel Bolly.

"Across all brands within the company group we have not offered any greater discounts than in 2008. As a company we have to protect our margins and we do not believe that we need to attract customers through continuously increasing discounts."

Both Al Sawani and Dubai Holding Group said sales of handbags and accessories had risen as more people try to update their wardrobes without purchasing a whole new outfit.

Naeem Ghafoor, chief executive of retail consultancy Skyline Retail Services, said that not only have discounts during this year's DSS been greater than before, retailers have also offered larger discounts earlier in the season.

"Everybody always ends up with great discounts, but it's usually in the last ten to seven days," he said.

MH Alshaya, the region's largest retailer by number of stores, said in May that revenue across all its markets was higher than last year, but refused to comment on the Dubai market.

Ghafoor said the Dubai market would take longer to recover than its neighbours due to its reliance on international tourism.

"Everything is there - infrastructure, hotels and fantastic connections to the rest of the world - but Dubai suffers when the global economy suffers," he said.

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