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

Published by: Datamonitor

Published: Mar. 24, 2009 - 136 Pages

Table of Contents

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

Abstract

• 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

• 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

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