DUBAI: UAE shoppers will get more than just discounts this summer. Retail prices have started to decline across categories due to a steady decline in inflation-related pressures.
This is already showing up in food (especially staples like rice and wheat) and grocery shopping. Prices for fast moving consumer goods (FMCG) remain high, but once retail promotions such as the Dubai Summer Surprise kick in, there may be some deep discounts in this category. (This year’s DSS kicked off on June 29 and runs through September 3.)
Consumer prices for fashion, accessories and especially smartphones and other electronics are also falling. “As far as smartphones are concerned, there have been price drops/cuts in recent weeks for all the latest models, even the flagship models released earlier in the year,” said an electronics retailer in Dubai. “These are straight discounts, Rather than value-added transactions such as cash back.”
But the biggest upside for UAE consumers is on the inflation front, a factor that will shape consumer decisions until 2022. That means consumers are more cautious in spending on discretionary items.
Some caution remains, but if inflation retreats further, shoppers will get the boost they need.
“Yes, there are signs that inflation is cooling across product categories in the UAE ahead of Dubai’s summer surprise sales,” said Abhishek Rajput, senior consultant at RedSeer. “According to the Central Bank of the UAE, the annualized inflation rate in May 2023 was 3.4%, down from 6.8% in May 2022.
“This cooling trend is being driven by a number of factors, including:
- The government has taken steps to control food prices, which has helped keep inflation under control;
- Global commodity prices were moderate. Crude oil and other commodities have retreated from their 2022 highs, helping reduce input costs for local businesses. “
If this trend continues over the next few weeks, expect summer sales to hold up well. Steady population growth will also pay dividends — provided that new residents who have made the UAE their home in recent months stay put for the heat instead of going out.
Rabia Yasmeen, Senior Advisor at Euromonitor International, said: “The outlook for consumer spending continues to be positive, with improving job prospects in the UAE and changing consumer demographics, which make the country attractive for inbound residents from many European markets.”
We still think UAE consumers are cautious about spending.However, much of this behavior has translated into the use of loyalty programs and promotions, preferring to use subscriptions for discounts, points and free shipping
– Rabia Yasmeen, Euromonitor International
flashing discount offers
Leading up to DSS ’23, major retailers, including online platforms, have rolled out discounted options, with some sites cutting prices by as much as 80% on popular categories.
That’s why some retailers and analysts believe UAE shoppers find themselves in a win-win situation. The actual prices shoppers see in stores or on e-commerce sites show lower inflation. Add in the discount and they’ve got themselves a great deal.
Dubai Summer Surprise Weekend opening overlaps with Eid al-Adha celebrations, expected to generate higher demand and deep discounts
– Abhishek Rajput of RedSeer
Traveling better than shopping?
But some analysts said the full release of consumer spending may have to wait until early in the third quarter, after UAE residents return from vacation and the new school year begins.
Residents have a lot going on right now, especially preparing for the upcoming holidays. “Household consumption spending is being impacted overall given the school holidays and other summer events,” Rabia said. “Consumers seek leisure and recreational activities as well as domestic and international travel.”
The subtext is not to spend a lot of money on shopping.
Or do you shop and go?
Some retailers say the opposite could be the case – with major categories seeing sharp price drops, and shoppers likely to buy and travel.
“Taking smartphones as an example, we expect strong trade-in demand in the coming days as the prices of the iPhone 14 or the Samsung Galaxy S23 have dropped in recent weeks,” the e-retailer said. Consider buying a foldable phone, with the (Huawei) Mate X3 standing out.
“By 2022, we could see consumers holding onto their phones for longer. This time around, they’re seeing a major price adjustment that will drive many people to upgrade.”
Retail in the UAE could win some points this summer if enough shoppers are convinced that this is the perfect time to buy a round of buying, not just a smartphone upgrade. And then there’s the homecoming bash…