Mon, Feb 09, 2009 page12

• FEATURE: Bleak year for UAE shopping fest

  WEAK SPENDING The annual Dubai Shopping Festival is seen as a barometer of the emirate’s economy and is normally popular with overseas tourists and residents

  • AFP
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  Ahmed, clad in an elegant black suit, smiles from behind a fine display of cosmetics at a department store in Dubai, but most shoppers glance quickly and dash away, with only a few reaching the cashier.

  Like many retail workers in the Gulf Arab emirate, Ahmed feels the Dubai Shopping Festival — an annual month-long sales extravaganza starting in mid-January — is not the same this year because of the global financial crisis.

  “During last year’s festival, customers used to buy a whole set of perfume, shower gel, body lotion and other additions. Instead, this year we would be really thankful if they bought just the perfume,” Ahmed said as he adjusted his tie. “You just have to do a lot of convincing for them to actually buy stuff.”

  This year even enticements such as raffles for luxury cars, apartments or even gold are failing to make people open their purses and wallets.

  “We don’t feel there is a shopping festival anymore. We have experienced days [during the festival] that are even slower than normal days last year, let alone last year’s shopping festival,” Ahmed said.

  Dubai, one of the seven members of the United Arab Emirates (UAE), has enjoyed a six-year boom as a financial and tourism hub, but in recent months consumer appetite has been battered by the global economic downturn.

  Over the years, the annual festival, seen as a key barometer of Dubai’s economy, has been popular both with tourists and the country’s resident population, lured by the emirate’s tax-free status and glitzy mega malls.

  The festival “accounts for 25 percent of the annual sales of some retailers, but this year the mood is certainly more quiet in the malls and the traders will not see the peaks of previous years,” said Trevor Lloyd-Jones, managing editor of Business Intelligence Middle East. “Consumers in the UAE are spending less and some major retailers have said their sales are currently down 20 percent.”

  Retailers from various trades said they had witnessed a drop in footfall, per-customer spending and number of tourists. Shopkeepers estimated sales are down 20 percent to 50 percent, a drop that could not be independently verified.

  Laila Suhail, chief executive of the festival’s office, said that although footfall at malls has increased this year, consumers were spending less.

  “Consumers are spending less, but spending wisely,” she said.

  A survey by Mastercard forecast that consumer confidence in the UAE was set to dip in the first half of this year.

  Dubai, where expatriates make up more than 80 percent of an estimated population of 2 million, has suffered jobs cuts and a stock market rout and is facing forecasts of economic slowdown.

  The city-state does not have much oil, but hydrocarbons are the main source of income for the UAE, which is the world’s fifth-largest oil exporter. The slump in global prices has affected business confidence in Dubai.

  At the Mall of the Emirates, most people shopping over the weekend — when throughput is supposed to be at its peak — are barely holding a shopping bag or two, pushing carts that are only half full or even just window-shopping. No pushing or shoving at the fitting room or lining at the tills.

  Even the “70 percent discount” signs plastered on shop facades are failing to generate the hype of the previous years’ festivals.

  A drop in tourist numbers has also contributed to sluggish sales, retailers said. Tourist expenditure is a key source of income for the emirate, which enjoys year-long sunshine and luxury hotels.

  Hotel occupancy rates have dropped and hotels have been forced to slash their rates.

  A hotel executive who declined to be named said the chain he manages had cut prices by 40 percent to 50 percent. Usually, occupancy rates in the winter high season were close to 100 percent, he said, but they were already down to 60 percent in December.

  Lloyd-Jones cited industry sources as saying occupancy rates were down by 25 percent in some hotels as of early last month.

  “Tourists are a very important element of spending in Dubai: They comprise up to 25 percent of [customers in] some of the tourist-oriented malls,” he said.

  Alongside hydrocarbons and real estate, the UAE relies on the services sector, which in 2007 represented 47.9 percent of real GDP.

  But the UAE is forecast to see a deceleration in economic growth this year. Shuaa Capital predicts 2.4 percent growth this year, compared with 7.5 percent last year.
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