UAE consumer confidence rising with steady economic recovery

Dubai - The research data confirms that the retail recovery detected in the first quarter of 2021 is still evident in Q2 2021 as consumers are exhibiting cautious optimism about the future.

The UAE retail economy experienced an increase of four per cent in consumer spending in the second quarter compared to the first quarter of 2021 while the corresponding quarterly growth in 2019 only saw an increase of three per cent, according to Majid Al Futtaim’ State of the UAE Retail Economy Report.

The research data confirms that the retail recovery detected in the first quarter of 2021 is still evident in Q2 2021 as consumers are exhibiting cautious optimism about the future.

“The prevailing mood of UAE retail in Q2 2021 is cautiously optimistic and confidence is on the rise with steady economic recovery. In time, the success of the UAE’s response measures and vaccination programme will see positive sentiment and resilience return with full force,” said the report.

The data shows that e-commerce is here to stay with overall e-commerce sales in the UAE increasing by 17 per cent in H1 2021 when compared to H1 2020.

While comparing the first half of 2021 with the same period in 2019, there has been a dip of just three per cent in consumer spending. Much of that decline was borne by sectors that had been hit hardest by lockdowns and restrictions (leisure and entertainment, fashion, hyper/supermarkets). Spending on leisure and entertainment declined by 51 per cent in H1 2021, said the report.

Alain Bejjani, chief executive officer at Majid Al Futtaim - Holding, said over the past six months, positive trends could be visible across the UAE retail economy, and in some sectors significant progress in returning to pre-pandemic levels. “We see this cautious optimism strongly driven by the robust vaccination measures taken by the UAE Government and local health authorities, which has served to protect our communities and provided additional confidence both here and abroad.”

“Setting the hardest hit sectors aside, there was a modest, yet noteworthy increase of 0.3 per cent between H1 2019 and H1 2021 in retail general categories, hinting at the prospect of a return to pre-Covid-19 levels of retail activity before the end of this year,” said the report.

“The composition of tourism is evolving: fewer tourists are coming to the UAE but they stay longer and spend more, with the average length of stay increasing from 3.5 nights in 2019 to 5 nights in 2021, coupled with an increased spend. In an era of remote working, home furnishings, books and stationery items experienced a growth of 18 per cent and 46 per cent respectively for H1 2021 compared to H1 2019,” said the report.

Elsewhere, fashion sales were down 4.0 per cent for the same period, possibly because people were buying fewer items when they were living under lockdown conditions.

Looking at the rest of the retail general categories (including food and beverage, electronics, home furnishings, hotels) we can see a modest, yet noteworthy increase of 0.3 per cent between the pre-pandemic H1 2019 and H1 2021. This rise hints at the very real prospect of a return to pre-Covid levels of retail activity before the end of this year. The data, which combines POS data from multiple sources in the UAE along with deeper POS and mall footfall data across our assets, shows that the UAE retail economy has been bordering on its 2019 levels each month and even surpassed 2019 levels of the same month in May 2021, with a growth in consumer spending of 0.2 per cent. This glimmer of growth was driven by the solid performance of retail general categories and leisure and entertainment categories. Naturally, growth within the retail general categories is not homogeneous.

“Looking ahead, we continue to see acceleration in consumer expectations towards omni-channel experiences, as digital and technology solutions become further integrated into everyday life. We also look forward to seeing further recovery in tourism-related sectors, bolstered by the opening of Expo2020 later this year. Speaking to our collective efforts to rebuild post Covid-19 and the impressive resilience of the UAE market, this quarter’s data analysis confirms green shoots of sustainable growth. Majid Al Futtaim remains confident that the UAE retail economy is on track to make a full recovery,” said Bejjani.

In some sectors, strong, pent-up demand has been unleashed by the relaxation of restrictions.

The residential property sector is a prime example, with a 215 per cent increase in the number of residential property transactions in Dubai between May 2020 and May 2021, and a growth in transaction value of 357 per cent.

The research shows that shoppers are demonstrating increased comfort levels in public spaces with 64 per cent of shoppers admitting to feeling comfortable visiting a shopping mall. While across Majid Al Futtaim’s own network of malls, total footfall increased by 11 per cent in Q2 2021, compared with Q1 2021, the report says.

Consumer spends in non-mall retail destinations show a 3.0 per cent increase, when comparing the second quarter of 2021 with the equivalent period pre-pandemic (Q2 2019). Food and beverage sales rose 41 per cent and home furnishings by 28 per cent. — issacjohn@khaleejtimes.com