Tuesday, May 17th, 2016

The luxury sector in the UAE faces a dip in retail sales

Narada Desk | May 17, 2016 4:25 pm Print
Luxury brand retailers which are located in the United Arab Emirates have experienced the toughest four months span in the recent times, with some claiming that the sales have sunk lower than what they were in the year 2009. According to some estimates, the year-to-date percentage sales decline would be in the “mid-teens” while that for the overall retail sector would be about 5 per cent from 2015 numbers.
dubai images

The UAE’s luxury retail sector market has been affected by the slowdown in China, which in turn has seen a graph of decline in the number of tourists hosted by the UAE. Tourists that even come down to the UAE are not seen spending much like it was pre-slowdown of China.

“Things are difficult because luxury retailers now have more mono-brand outlets open than was the case in 2009-10,” said an industry source. “And not just in Dubai, with some of the recent store openings being in Abu Dhabi. With more stores open and demand weak, average sales per outlet are lower than in 2009.”

“Keep in mind that The Dubai Mall had just opened and the high-end boutique malls in Abu Dhabi were still some years away from their launch. High-end retail has changed dramatically between 2009 and 2016, especially in the sheer number of mono-brand flagship outlets that have opened. No brand would think of nothing less than a stand-alone store at the destination malls in Dubai and Abu Dhabi.”

It is definitely no that the luxury sales have suddenly dropped this year, but the sales was experiencing a rather tough time since the last year itself. This study of sales took a bump of elevation in the last quarter of the year but since January, 2016, it is back into the crust of the graph.

Unlike other categories in retail such as apparel and general brands, luxury brands cannot implement a short marketing strategy of sales and get done with this situation at their doors. Brand giants are strictly aagainst the strategy of heavy discounts for immediate rise in sales as it would pave way for the status and value of the brand.
So far, retailers say, they have gone in for “slight” price changes to pick up the stock that is getting close to being off-season. They have also pursued opportunities to put up the merchandise on high-end fashion e-commerce portals, which also allows them some leeway on the pricing.

The UAE is in the top 20 position in terms of new retail capacity being created worldwide. For mall owners with ongoing projects, the only question that matters is how quick they can get sorted with the leasing,  and on what rental terms. In their own way, retailers, and the luxury labels among them, will be just as keen to know the answers. As this would depend on what sort of bargaining tactics they end up executing in the negotiation process.