Dubai: UAE consumers started turning cautious during the final months of 2022 after successive interest rate hikes and amidst more concerns that the global economy would soon enter a full-blown recession.
Shoppers were ‘opting for discounts and deals for essential items, and cutting back on non-essential’s such as electronics’, says the latest state of the market report from Majid Al Futtaim, the hypermarket and malls operator.
“Average spend per transaction in hypermarkets and supermarkets was down 3 per cent. However overall spending in the segment was up 11 per cent on the year prior, showing movement towards smaller basket value and more frequent transaction.”
It was in the final three months of 2022 that the full impact of the US Federal Reserve rate increases – and these being mirrored in the UAE – started to exert itself on the shopper sentiments.
But there was the feel-good factor from the FIFA World Cup in Doha during November-December, as well as from increased visitor arrivals for the final weeks of the year into the UAE.
Spectre of inflation
“Inflation was a reality in 2022 ending the year at 5.2 per cent, however, it was still significantly less than elsewhere in the world,” says the report. “Consumer optimism remained high though, despite inflation.
“In Majid Al Futtaim’s Happiness Lab survey, approximately 90 per cent of respondents viewed the UAE’s current economic situation positively. The Majid Al Futtaim PoS data indicated that this optimism is evidenced by a peak in absolute consumer spending in the fourth quarter of 2022, which accounted for 29 per cent of all retail economic activity during the year.”
Gains all year through
For full-year 2022, UAE shoppers made sure they were highly engaged, whether online or at stores. Increase in consumer spending was there in the retail (13 per cent) and non-retail economy (29 per cent), the report finds. “E-commerce sales are on a strong upward trajectory, more than doubling to $6 billion in 2022 from $2.6 billion in 2019,” it adds. Online supermarket and hypermarket spending grew by 40 per cent in 2022, while offline growth was at 7 per cent.
Fastest growing e-economy?
Talk about UAE consumers using less of online or ecommerce channels post-Covid seems misplaced. According to the report, the UAE has the world’s ‘fastest-growing’ ecommerce market with sales expected to hit $9.6 billion by 2026.
Even with the cautious mindset, shoppers during Q4-22 did a lot of online buys in Q4-22, which saw full-year sales grow 20 per cent compared to 2021. The majority of online spending by residents was at hypermarkets and supermarkets, which witnessed spending growth of 40 per cent during the year.
More of buying now, paying later
The BNPL movement saw a second successive year of high growth, with 45 per cent of consumers using these zero-interest financing in the past year, up from 21 per cent a year earlier.
UAE weekend switch too helped
The UAE's decision to run its weekend on Saturday-Sunday from early 2022 also had a decisive influence on spending habits - "The extended 2.5-day weekend influenced the increase in consumer spend, with weekend retail sales increasing by 11.3 per cent versus the previous year," the report notes. "This translated to additional spending of approximately Dh5.5 billion according to Majid Al Futtaim PoS data."
