In 2023, Consumer Spending Saw a 13% Increase in the United Arab Emirates

According to a Majid Al Futtaim study, the retail industry grew strongly all year long.

Based on the ‘State of the UAE Retail Economy’ Report by Majid Al Futtaim, spending by consumers in the UAE surged by 13 percent in 2023 compared to 2022, with the retail industry seeing a 14 percent spike. The FIFA World Cup the year before, which raised spending among consumers owing to increased tourism in the latter half of 2022, is credited for the biggest gain in expenditure in the first half of 2023 when compared to 2022.

The retail sector had a robust increase in customer purchases for the whole year, with expenditures splitting equally between the first and second half of 2023.

Spending was steady throughout 2023, with a noticeable uptick in the last quarter, which accounted for 27% of the total amount spent in the retail industry that year. This increase was ascribed, as the study noted, to both the customary holiday spending and COP28, which brought tens of thousands of tourists to the nation.

Majid Al Futtaim – Holding CEO Ahmed Galal Ismail highlighted the UAEs ongoing progress in realizing a prosperous future through its fiscal and social goals. He emphasized how the nation’s ability to withstand outside pressure, its progressive policies, and its business-friendly atmosphere for investors had cemented its standing as a key player in the Middle East and North Africa (MENA) area.

The hypermarket/supermarket industry had a 3% boost in spending in 2023. The first half of the year saw a 5% increase over the prior year, even though spending in the second half of the year was comparable to the same time the year before.

The industry’s growth was largely propelled by a remarkable 19% surge in e-commerce and digital sales, while spending in traditional brick-and-mortar stores remained stable and comparable to the previous year. According to surveys, despite the significant rise in digital sales, conventional stores continued to dominate, accounting for 85% of the total industry spending.

Following last year’s trends, consumers have shown a preference for smaller basket sizes and an increase in the frequency of shopping trips. They are diversifying their purchases between online and offline channels, seeking the best deals while minimizing the volume of goods bought in each transaction, regardless of the platform. Data suggests that the average spending per basket has declined by 2%.

The industry has witnessed growth primarily propelled by a 19% surge in online shopping and digital sales, while physical retail spending has maintained stability, aligning with previous years’ figures. Despite the digital boom, traditional brick-and-mortar businesses have maintained their position as market leaders, representing 85% of total sector spending, according to research.

In line with the trend observed in the previous year, consumers continued to opt for smaller basket capacities and increased frequency of shopping trips. They strategically divided their spending between online and in-store channels to capitalize on the best deals while minimizing the volume of purchases per trip, whether online or offline. According to data, while the number of transactions climbed by 4% in the year 2023, average expenditure per basket declined by 2%.

According to findings from Majid Al Futtaim’s Happiness Lab, consumer preferences for budget-friendly shopping are becoming more pronounced. Reflecting the cost-conscious trend from the previous year, 47% of respondents expressed a preference for discounted goods, while 20% opted for cheaper brands, as indicated by the latest study. Additionally, 52% of survey participants reported actively tracking price fluctuations, marking a 3% increase compared to 2022.

In all retail sectors, compared to the same time last year, consumer expenditure grew by 16%. The most significant year-over-year rises were seen in hotels (17%), food and beverage (F&B) (25%), and electronics (33%). These three sectors contributed to 41% of the overall growth, with food and beverage leading at 41%, followed by hotels at 35%, and electronics at 9%.

A considerable change in retail and wholesale costs was the primary cause of the growth in electronics expenditure. The industry’s continued trend toward purchasing products online is shown in e-commerce’s 13% share of expenses, which is driven by rising cell phone orders, falling retail costs, and greater digital literacy.

The first and second quarters of 2023 saw a spike in expenditure of 82% of the year-over-year rise, driven by sales campaigns and events such as the Dubai Shopping Festival. Additionally, there was a notable increase in tourist expenditure in the industry, increasing 64% from 2022 to 2023. This represents 23% of all fashion purchasing, up from 19% in 2022.

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