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UAE grocery retailing is growing at 5-10 per cent per annum

DUBAI - The UAE retailing industry is on a move and with the changing face of the economy in the next three to five years the industry led by food and grocery retailing would see some phenomenal growth.

The National Bank of Dubai's quarterly report said the industry size for food and grocery retailing in the UAE is estimated at Dh4.1 billion for 2002 and growing at between five and 10 per cent per annum. It said that within food and grocery retailing, organised sector activity is expected to grow stronger and become more dominant. It estimated the sector to grow to over $6.2 billion in the next four to five years as the population profile of the country undergoes a change.

Total retail industry in the UAE is estimated to be $9.4 billion with Dubai accounting for 60 per cent of this. It said that despite their small and relatively limited spread in terms of numbers and locations, hypermarkets, superstores and supermarkets account for half of the total sales, while the remainder is through high street stores, convenience stores and small sized groceries called "baqalas".

According to the report, the retailing industry in the UAE and especially Dubai is at the forefront compared to many of the Asian countries, but still it is relatively underdeveloped compared to the West, and thus provides significant opportunities for expansion.

As per a 2001 survey, the UAE's per capita retail sales was at $2,686 compared to $5,628 of the UK and $8,930 of the US, but it was higher from $1,440 seen in South East Asia and $246 in India. The retail space per square foot was also good at six compared to seven of the South East Asia and two of India. But the US has a retail per capita of 20 and the UK has eight.

Pointing to the food and grocery retailing, which plays a very substantial part in the country's retailing industry, it said that organised sector players account for an estimated 65 to 70 per cent of the business. But it also added that the industry in Dubai is currently passing through challenging times as overall growth has slowed down, coupled with pressure on margins and increasing competitive intensity. It said that although the overall market growth has been on the lower side, supermarket sales have grown, at the cost of traditional grocery outlets and baqalas, mainly from newer outlets being opened up by the supermarket operators.

The expected buoyancy in the economy of the country and specifically Dubai will bode well for the retailing industry, the report said, adding it is likely that in the next three to five years, the retail space per capita in the country will reach the levels comparable to the US.