The economic downturn has meant slumping sales for retailers worldwide, and shopkeepers in the UAE, whose numbers have multiplied in recent years, are also feeling a sharp pinch. "What we're seeing right now is overcapacity," says Robert Ziegler, the vice-president of the consultancy AT Kearney in Dubai. "There is going to be competition to push and shove to get the shoppers in." Until recently, retailers could rely on shoppers with a healthy appetite for flashy jewellery and luxury brands such as Louis Vuitton and Gucci. Strolling around the shops ranks as a top recreational activity, with 30 per cent of people shopping once a week purely for entertainment, according to the research firm AC Nielsen. But as the global economic crisis hit home last autumn, retailers noticed a change in spending habits. "Before, people would buy about Dh2,500 (US$680) to Dh3,000 worth of ties," says Aymen Touil, a senior salesman at Andrew's Ties in the Mall of the Emirates. "Now, the max a person will buy, at most, is Dh300 or Dh400." Revenue in his store last month was about 65 per cent of the total during December 2007. And it is a pattern that appears to be continuing this year, he says. In the first five days of trading this year, the Dubai store sold about Dh3,700 on average per day, compared with an average of Dh5,700 per day a year earlier. "Before, customers would have to wait inside the store before getting out, because of all the traffic," Mr Touil says. "Now, you see the mall is empty." That change in sentiment is not welcome news for retailers, especially those relying on the Dubai Shopping Festival to boost profits. Last year, about 3.2 million visitors spent almost Dh10 billion in 32 days. This year, retailers are offering special discounts to entice shoppers to buy. Some retailers have already reported that business dropped anywhere from 20 per cent to 70 per cent last year compared with 2007. Others say sales continue to be strong. Susan Zaza, the department manager of perfume and cosmetics at Saks Fifth Avenue in the BurJuman Mall, says sales last year increased by 30 per cent compared with 2007. "Customers who enter, enter to buy," she says. Retailers in Abu Dhabi, which is more insulated from the property sector downturn than Dubai, have reported mixed fortunes. In Marina Mall, the fashion retailer Zara reported a 28 per cent increase in sales last month compared with December 2007. "The population of Abu Dhabi is increasing, and plus, the collection is good," says Baji Abdel, the store's manager. Still, Ahmed Kobeissi, the manager of Hugo Boss in Abu Dhabi, says sales fell 20 per cent last month. However, the selling environment is going to be tougher, according to Michael P Niemira, the chief economist and director of research for the International Council of Shopping Centres. "I think to the extent that the global economy is in recession in Europe, the US, Canada and Japan, it has to have an effect on buyers and travellers to the Middle East," he says. That will mean a change in strategy for Dubai's retail sector, which launched two new shopping centres last autumn, just when consumers began to adopt a thriftier mindset. One of the most anticipated additions, the Dubai Mall, opened in November, adding 12.1 million square feet of retail space. The mall features the world's largest indoor gold souq, a skating rink and one of the world's largest aquariums, and will have more than 1,200 stores when it is fully open. The Dubai Marina Mall welcomed its first customers last month. The 160-store mall is a mix of high street and trendy labels, and features a Waitrose supermarket that is geared to serving nearby residents. More malls are on the way, including the gargantuan Mall of Arabia, set to become the largest mall in the world when it opens in 2010. Extensions are also planned for Mall of the Emirates and Ibn Battuta Mall. "What was going on in the Middle East was generally very much in the exception, in terms of the buys and some of the projects," Mr Niemira says. In contrast, the US and Europe will probably see a continuation of store closures and retail bankruptcies, most notably the UK retailing giant Woolworths. The economic slowdown is forcing overseas retailers to reassess their outlets in the Gulf region, says Mark Morris Jones, the senior director for retail and industrial property in the Middle East and North Africa with CB Richard Ellis. "If those units do not perform, they will shut them down, which is a mindset that probably wasn't very common, say, about four years ago." The car sector has also deteriorated rapidly. The Japanese car giant Toyota has slashed its annual profit forecasts and the "big three" US car makers - General Motors, Chrysler and Ford - are struggling despite a $17.4bn government bailout. In the UAE, car sales began to slow during the final months of 2008 after the region's banks began tightening lending contracts. Banks raised the minimum salary levels needed to get a loan and often rejected credit for employees of finance and property companies - the two sectors hardest hit by layoffs. Consumer confidence has slumped in the UAE. While consumers are still optimistic for the new year, a weak employment market has made them less willing to part with their money. According to MasterCard's biannual index of consumer confidence released on Monday, the UAE's score dropped to 75.4 from 85.4 in June. After a slew of layoffs in Dubai's property and financial sectors, the Emirates' scores on the employment portion of the index dropped to 57, the lowest since 2004. More than 75 per cent of those surveyed said they were putting away cash as a precaution. "At the domestic level, there's a decline in consumer confidence, but it's not a crisis," says Denzil Lawson, the general manager at MasterCard for the Middle East and Levant. "We're still very, very strong and positive." Some analysts remain optimistic about Dubai's shopping sector. Despite dwindling sales, the UAE is still one of the safest countries to be in during the economic turmoil, says Sevil Ermin, the Dubai-based director of retailer services for AC Nielsen. "When you look at what's happening in emerging markets, compared to the rest of the world, we still see that there is a healthy growth pattern here," she says. "But not like the double-digit figures in the years before." According to Ms Ermin, this might be one of the better times to shop. Dubai Shopping Festival organisers say they are giving deeper discounts this year to entice more shoppers. The festival starts tomorrow. aligaya@thenational.ae
