The UAE Luxury goods market is growing significantly on the back drop of heavy reliance on oil and hydrocarbon revenues. Many countries see this as a key long term entry market. UAE remains the most important destination for luxury tourism making it unique in the region as a key market for luxury retail.
- Increasing in the number of wealthy and super rich UAE population who are willing to spend millions on the lavish items.
- Booming travel and tourism sector driving the market extensively.
- Increase in the brand omni channel strategies
- Emergence of the e-commerce has provided an easy access to product-related information and prices online at any given point of time. This has further contributed towards the overall growth of the UAE luxury market.
- Global economic uncertainty puts pressure on the region effecting its demand and supply balance.
- Unstable oil prices pose a challenge to the country as it is an oil rich nation with the economy majorly driven by the oil industry and its pricing trends.
- Political unrest in the region also does impact the market in the country in a negative manner as there is regular tension among the public towards the governmental moves.
Key Market Trends
Cosmetics and fragrances is the top-performing sector in UAE luxury goods market
UAE consumers are highly conscious about their choice of luxury cosmetics and fragrances and the companies operating in the market are thus working to enhance their packaging with a wide variety of materials that are sustainable. Few of the examples include Hammamii - a UAE-made luxury spa brand, that contains camel milk and dried lemon in its lines, uses eco-friendly and recyclable packaging for its bags, bottles and jars. Likewise, the UAE-based Camel Soap Factory makes use of environmental - friendly packaging for its products, which are handmade from camel milk, olive oil and beeswax. As per various industry experts, Consumers in the UAE on an average, spent USD 247 per capita on cosmetics and personal care, more than any other country in the Middle East, and ninth in the world which is forecasted to grow to USD 294 in 2020. Green beauty and skincare products has made huge impact in the industry, especially as consumers become more aware of what goes into products.
Ecommerce sales picking up pace in the sector compared to offline sales
UAE online retail market is emerging fast and is drawing huge attention of investors across the globe. UAE poses the highest internet penetration rates in the world at present along with two other countries Bahrain and Qatar. In the recent times, consumers are mostly researching online before making a purchase, and with a larger number of young smartphone users joining the customer base, it is just a matter of time before pre-purchase online research gets converted into actual online transaction. Within the entire GCC region, UAE has the highest percentage of internet users who actually transact online (46%), followed by Kuwait (35%) and the KSA (25%). The GCC online retail channel for luxury goods has gained momentum with the emergence of quite a few online players that have registered stronger growth. Souq.com is one of the most prominent online retailers in the MENA region. Awok.com is another UAE-based online retailer which had witnessed a 500% Y-o-Y increase in its revenues in April 2015. While there was some low base effect (as this was only the second year of its operations), a revenue growth rate of 500% clearly shows that online retailing is catching up in the GCC region.
The UAE luxury market is quite competitive with Dubai being highly developed in the sector giving a healthy competition to its neighbors such as Abu Dhabi where the leasable retail space is growing effectively.
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