Thursday, Jun 16, 2016

Dubai: The growth in retail sales in the UAE during Ramadan is failing to match that of last year.

So far this month, sales have been down compared to Ramadan last year, but some analysts say there is growth, albeit at a slower rate.

It is normally a “poor month for retail sales”, as many of those fasting stay away from malls during the day and fewer tourists visit the country, says Colin Beaton, managing director of Dubai-based retail consultancy, Limelight Creative Services.

The drop in oil prices by around 26 per cent in the past 12 months to $48 a barrel — and lower consumer confidence are contributing to a decline in retail sales during Ramadan compared to the same period in 2015. This downward trend has been felt over the past year.

Other analysts, however, see an uptake in retail sales this month, even though the growth rate is smaller compared to last year.

“Sales during Ramadan are seeing steady year-on-year growth. They are expected to make up for the slower start of the year,” said Nikola Kosutic, research manager at consultancy Euromonitor International.

Consumer spending is up this Ramadan as against the earlier year, thanks to promotions and deals offered by retailers to entice consumers, he said, adding that sales this month are expected to grow by 12 per cent compared to May, with sales of items like yoghurt, dates, milk powder, oil, rice and sugar picking up. “As a response to the Ramadan offers seen in the stores, consumers indulge in impulse purchase behaviour, most of them timing their purchases around Ramadan, especially for gift items and big ticket items as expats travel to home countries closer to Eid.”

Kosutic further pointed out that debit and credit cards usage in the country grew around 14 per cent last year, citing data from Network International.

Shamail Siddiqi, principal at A.T. Kearney, echoed Kosutic’s views. “As per the overall trend, absolute retail sales are still likely to grow albeit at a slower pace. Segments like luxury have been impacted to a much greater extent than mid-tier segments,” he said.

Arslan Ashraf, managing director at global consultancy Nielsen for the Arabian Peninsula and Pakistan, also sees growth in sales during the Ramadan period.

“Given that schools are still open during the Ramadan period this year and that many have not yet taken their leave for summer break, there is that likelihood that consumers will spend more on groceries as their consumption habits tend to change during Ramadan, and retailers can expect to see some growth in sales,” he said.

Retailers are also focusing more on promotions and deals this Ramadan, after posting lower sales in the past five months, according to industry experts.

“The typical response [to lower sales] from retailers will be additional focus on promotions and marketing in order to drive footfall and sales,” said Limelight’s Beaton.

He added that while promotions this month “help support total sales figures”, retailers’ profit is expected to decrease as discounts and additional marketing expenses will reduce gross margins.

By Sarah Algethami Staff Reporter

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