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The Impact of the Global Economic Downturn on the UAE Consumer Retail Sector: Implications for 2009

Datamonitor
March 24, 2009
136 Pages - SKU: DFMN2205339

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Countries covered: United Arab Emirates

Introduction

While the economic downturn hit the UAE late in 2008, it will continue to be felt for at least the next four quarters. And, while a lag exists between declining levels of confidence in the macro and micro economy and changed consumption behavior, most retailers and manufactures need to start altering their business model now in preparation for slowing growth

Scope

Insightful analysis documenting the major drivers behind UAE consumers' changing attitudes and behaviors in uncertain economic times
Detailed examination of how, why and across which products consumption patterns in the UAE will change during the first half of 2009
Comprehensive action points offering practical strategies to deal with, and benefit from, changing consumer behaviour and market conditions
Covers the UAE market specifically with comparative analysis of other countries to fully contextualize the local market situation

Highlights

41% of UAE consumer survey respondents told Datamonitor that wealth or income was 'very important' in creating a feeling of wellness or wellbeing compared to an average of 26% of respondents in 15 other countries. This reflects the comparatively higher propensity to save in the UAE

UAE retailers and manufactures must adapt to succeed during 2009. The UAE economy, while fundamentally strong, has not been immune to the substantial slowdown in the global economy. UAE consumer sentiment has shifted, and will continue to shift in the months ahead

Maintaining brand support through difficult times helps take advantage of competitors who often reduce marketing efforts. As consumers spend more time considering options before they spend money, this increases the likelihood of getting their attention with effective communications

Reasons to Purchase

Improve your decision making: cutting marketing spend can be a mistake; use this report to understand the tactics required for success in a downturn
Understand consumers: understand the key issues affecting UAE consumers' FMCG consumption against the backdrop of a global downturn
Understand the local market situation: access detailed trend analysis, interviews with key opinion leaders, and primary research with UAE consumers

Overview: Catalyst; Summary; EXECUTIVE SUMMARY; Table of Contents; Table of figures; Table of tables
THE FUTURE DECODED: INTRODUCTION: UAE retailers and manufactures must adapt to succeed during 2009; TREND: Macro economic indicators point to a robust, if unspectacular, 2009 for the UAE; Fiscal injections will continue to stimulate the UAE market although weaker oil prices are apparent; Rising unemployment and population decline is anticipated in 2009; Shortage of credit and high debt servicing is a likely scenario impacting UAE shoppers; Commodity prices will ease to reduce stress on household income and buttress retail sales; Stabilization in retail prices will also be important to reduced price inflation and sustained retail spending; The appreciation of the US dollar favors UAE consumers and this should help the economy in 2009; Saving is common practice among UAE residents and this will intensify; Key takeouts and implications: while overall retail sales in the UAE will remain robust throughout 2009, some sub-sectors will have a tough year; TREND: Historically low levels of consumer confidence are a concern for retail spend levels; UAE residents consider wealth to be important to a feeling of wellbeing; Future expectations remain relatively strong in the UAE and this has prevented consumer confidence levels from falling in line with many other nations; A time lag typically exists between movements in consumer confidence and shifting expenditure patterns; Key takeouts and implications: falling consumer confidence in the UAE will impact consumption behavior
INSIGHT: Consumption patterns in the food and beverage space will remain relatively unchanged in the UAE but cost consciousness will intensify: Value and cost are increasingly important to UAE consumers; Down-trading and product substitution in the on-premise heralds increased share of basket for FMCG retailers; Sales of food and beverage products which provide instant and powerful sensory gratification will be stronger; Key takeouts and implications: retail sales of food products in the UAE should remain strong in 2009
INSIGHT: Personal care product sales are expected to record mixed results in 2009: Price and value will become increasingly important in the personal care space; UAE cosmetic sales are still relatively robust; Toiletries, certainly relative to cosmetics, suffer more from sacrificial consumption and down-trading in periods of economic downturn; Key takeouts and implications: personal care items which have more emotional significance will continue to sell well in the UAE
INSIGHT: Household care products sold in the UAE are expected to have a tough 2009 with brand strength likely to emerge as a key success factor: Price is expected to be the key factor determining consumer purchasing behavior going forward; Worsening Q4 2008 results for household care players may set the tone for a more difficult operating environment in 2009; Key takeouts and implications: household care products will potentially suffer in 2009 and well recognized, trustworthy brands may help facilitate habitual buying
INSIGHT: UAE consumer electronics sales are expected to soften but opportunities remain: Opportunities exist as UAE consumers still plan on buying electronic products but margins are being squeezed; Creating buzz and establishing a reason to buy will be important in maintaining store traffic; Phones, computers, and liquid crystal display (LCD) televisions will continue to make up the bulk of UAE electronic retail sales in 2009; Key takeouts and implications: consumers are still buying electronics, but more often at the lowest prices
INSIGHT: Luxury goods brands to have a relatively hard year amidst intense competition: There is reason for optimism about luxury brand performance in the UAE but industry players should anticipate some weaknesses going forward; Many exclusive 'absolute luxury' brands are still doing well in the difficult economic circumstances; To down-trade or sacrifice consumption: the choice UAE consumers are making in the luxury goods space; Increased competition in the luxury goods space will be an ongoing scenario; Key takeouts and implications: luxury goods sales will suffer in 2009 as consumers consume sacrificially
ACTION POINTS: ACTION: Adopt an 'informative' marketing approach, emphasizing the value proposition of individual products; Be wary of over-reliance on price reductions; Marketing should emphasize value not cheapness; ACTION: Price leaders should plan to increase market share; Increasing share of basket in the FMCG market; Increasing market share in the electronics sector; ACTION: Maintain or increase marketing investment to help offset difficulties of operating in an uncertain economic environment; ACTION: Employ techniques which reduce the price elasticity of demand for your products; Improve customer service; Increase product depth and assortment where appropriate; Emphasize the quality and/or freshness of your products; ACTION: Use this period to increase efficiency and drive down costs; ACTION: Consider conducting the due diligence for M&A activity; CONCLUSION: A unique opportunity for strong companies in 2009
APPENDIX: Definitions; Methodology; Further reading and references; Ask the analyst; Datamonitor consulting; Disclaimer
List of Tables: Table 1: Consumer survey: the influence of price, habit/ preferred brand and brand image on household cleaning and laundry product choices in 15 countries across Europe, Asia Pacific, South America and the US, by country, 2008
List of Figures: Figure 1: US dollar appreciation has been a notable feature of the broader economic environment in 2008 and going into 2009; Figure 2: The one major currency which the US dollar has not appreciated against is the Japanese yen; Figure 3: UAE residents have a high marginal propensity to save; Figure 4: UAE consumer confidence has fallen in recent times but remains comparatively high; Figure 5: Consumers in the UAE consider wealth to be highly in creating a feeling of wellbeing or wellness; Figure 6: Over a third of UAE shoppers expect to become more cost/value conscious in the next six months but this behavioral shift is less significant than that reported in other countries in 2008; Figure 7: Product benefits such as quality and freshness and store location determine where UAE shoppers do their shopping; Figure 8: UAE consumers have a similar mentality to consumers from other countries when it comes to value conscious personal care consumption; Figure 9: Less than a third of UAE consumers anticipate buying household products on the basis of value or cost in the next 6 months; Figure 10: Most UAE consumers are planning to purchase at least one 'large ticket' electronic item in the first half of 2009; Figure 11: UAE consumers continue to stand out for their high levels of luxury goods consumption; Figure 12: UAE shoppers least anticipate cutting back on luxury food and beverage products in 2009; Figure 13: A snap poll of luxury store consumers in the UAE reveals relatively poor levels of satisfaction

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The Impact of the Global Economic Downturn on the UAE Consumer Retail Sector: Implications for 2009

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