Insights & Publications

How does Dubai Shopping Festival affect the economy of UAE?

27 June 2019

The advent of the new millennium brought an array of paradigm shifts in culture, lifestyles and trends around the world. One of these wonders is the boom in the shopping economy. With a large segment of the population around the world entering the workforce, there has been a surge in purchasing power globally. The direct impact of this change has been taken by the retail and shopping sectors of all countries.

Subsequently, as the millennial population witnessed growth over the past decade, a rise in tourist shopping (or shopping tourism) has also been seen. As a result, countries around the world have aggressively begun hosting shopping festivals which not only attract tourists globally but also boost local sales for the retailers of these countries.

Also Read: How will sharing economy affect the mid-market hotel segment in the Middle East?

Shopping festivals have a direct impact on the economy of a host country Click To Tweet

Needless to say, shopping festivals have a direct impact on the economy of a host country. The retail industry was valued at USD 23,460 billion in 2017 and is expected to register a CAGR of 5.3% during the forecast period (2018 – 2023), to reach USD 31,880.8 billion by 2023, according to Mordor Intelligence. The retail market is mature and highly competitive in the developed economies of Europe and North America. On the other hand, the developing economies of Asia-Pacific, Middle East, and Latin America have been instrumental in driving the market growth. Consumer spending, which typically accounts for around two-thirds of the GDP, has been a key indicator of the health of the retail market. Especially due to shopping festivals, retail markets witness steep spikes in footfall and traffic resulting in increased volume sales.

 

Initially, shopping festivals were held during key events of the advent calendar. From celebrating Christmas to internationally acclaimed events such as Mother’s Day, Valentines’ Day et cetera. However, with the boom in e-commerce, shopping festival have evolved the world into a globally ‘shopping’ village, where e-tailing giants such as Ali Baba, FlipKart and more are driving massive revenues through online shopping festivals.

Online sales have seen an increase of 19.3 percent globally in the past one year Click To Tweet

Online sales have seen an increase of 19.3 percent globally in the past one year, hitting a record revenue of USD 7.9 billion, according to Adobe Analytics. Black Friday dominates the category of shopping festivals, garnering a record USD 6.22 billion in e-commerce sales. It was followed by Thanksgiving Sales which gathered USD 3.7 billion in revenue from online sales.

However, e-commerce powerhouses have regionalized online shopping festivals such as the Walmart-controlled FlipKart in India. This e-commerce leader holds ‘Big Billion Days’ shopping festival every year since 2014. In 2018, online retail grew by 60% during the five days of Big Billion Days shopping festival with the total revenue amounting to USD 2.3 billion; out of which 70% was claimed by FlipKart.

When a purely regional shopping festival can garner immense success, one cannot help but wonder how would a global shopping festival perform?

The world’s market leader in e-commerce, Amazon, delved into the online festival’s arena in 2015, creating a Prime Day in the month of July. From a single day sale to a 36-hour summer sale festival in 2018, Prime Day has increased fourfold in sales to USD 4.19 billion, and stretched from nine to 17 countries around the world.

The game changer in online shopping festivals has been Alibaba with its 11:11 sale (or known as Single’s Day) held on the 11th of November each year. Every passing year beats the record set by the previous year and hence, this sale garners immense success and popularity globally. As of 2018, the infamous event witnessed a record USD 25.3 billion in sales; hence being termed as the ‘Superbowl of Sales’ by many. Alibaba’s online shopping festival is a story of extraordinary growth and a window into China’s rising consumer power.

The success of shopping festivals is not limited to e-commerce or online sales. The tradition of hosting a shopping festival within a city, where innumerable brands and companies participate to bring together amazing discounts and offers for their customers, is growing unequivocally around the world as well.

To name a few, the Hong Kong Shopping Festival, Thailand Grand Sale and Istanbul Shopping Festival has opened doors to the world to visit and shop from local merchants and retailers. These festivals have become a huge attraction for tourists as the travel industry thrives on shopping tourism, capitalizing on the growing consumer economy globally. Some of these festivals are frequented by regular travelers who are shopping enthusiasts. Whereas, some tourists plan their trips to certain countries in order to gain benefit from an ongoing festival. Hence, giving boom to ‘destination-based shopping tourism’.

The Middle East has been home to many successful shopping festivals where visitors from around the world experience the taste of shopping in the region. Dubai Summer Surprises, as the name suggests is held during the summer season in Dubai. The unique aspect of this shopping event is that it is held across all malls in Dubai where world-leading brands participate to provide one-of-a-kind experience with respect to discounts, offers and exciting schemes for shoppers. Similarly, Gitex Shopper, is held twice a year with a focus on technology and electronic gadgets. The deals in this festival are impeccable so anyone looking to replace their TV’s, kitchen electronics or mobile phones can wait for Gitex Shopper and get exciting discounts on their favorite goods. The World Trade Center is the host of Gitex Shopper where individual shoppers as well as bulk buyers experience electronic retail at its finest.

Nonetheless, the most popular destination shopping festival off late has been the Dubai Shopping Festival, held each year since the past two decades. This festival attracts tourists from all around the world in an extensive shopping experience that extends beyond a month and caters to all sorts of audiences. Dubai Shopping Festival has been a key factor in driving tourism marketing in the country, thus reflecting positively on the overall economy. DSF is not a simple shopping festival but it is an entertainment-packed wholesome experience of shopping, leisure and rewards.

How does DSF impact Dubai’s economy?

Dubai Shopping Festival has reached its’ historical peak as revenues increased from USD 1.6 million in 1996 to USD 50 million (approximately) in 2018. This festival provides residents a chance to shop their hearts’ out owing to the tremendous attractions created by brand. For people around the world, DSF is nothing short of a fun-filled event with amazing deals and bargains on top quality products.

Every year, DSF witnesses an increase in visitors, local and international. In 2018, a drastic increase of 10% customers was seen, as mentioned by Al Futtaim Group Real Estate and Nakheel Malls Click To Tweet

Impact on Tourism

In this way, Dubai Shopping Festival has become a prime vehicle in building the tourism industry alongside the retail sector for the country. A majority of people from Middle East, African Regions & South Asia visit Dubai specially for the Dubai Shopping Festival; hence turning a festival into a major tourism revenue stream for Dubai.

Every year, DSF witnesses an increase in visitors, local and international. In 2018, a drastic increase of 10% customers was seen, as mentioned by Al Futtaim Group Real Estate and Nakheel Malls.

Impact on Card Payments

Naturally, as footfall and revenue increase during the Dubai Shopping Festival, so do the amount of transactions held through financial cards. There has been a steady growth in card payments over the past five years with a 6.75 percent increase in the year of 2017 till 2018. Spending from debit cards, credit cards and other types of financial instruments has seen a collective growth during the festival season. A 10.76 percent increase in card payments was seen in 2017, followed by 6.75 percent in 2018, indicating the increasing volume of transactions being conducted through cards.

The financial giant, Visa, is a prime sponsor of the Dubai Shopping Festival. As of 2018, they quote that the company witnessed a 12 per cent YOY growth in payment volume during the festival owing to DSF-participating merchants. The rest of the market, however, stands at 16 per cent on an average.

While DSF attracts many tourists from around the world, a study revealed that 73 percent of all DSF sales were accounted from domestic spenders which makes up to nearly three quarters of the entire sales figures.  This segment was followed by American and Saudi consumers with a 5.62 percent and 4.34 percent share among the total payments conducted.

Impact on Hotel Occupancies

According to a report published by EY, Dubai witnessed the highest occupancy rate in the Middle East and N. African market during the first quarter of 2018. This is the same time period when the Dubai Shopping Festival is held, and it will be naïve to believe that this occupancy was not influenced by DSF. Tourists from around the world flock to Dubai in the first quarter of each year owing to the preferable climatic conditions, topped by a family shopping experience which further influences an influx of tourists in the country.

The crux of it all

Similar to many marketing initiatives undertaken by countries to attract tourists, festival marketing has become a key component in driving footfall to a host country. It goes without saying that the rise in shopping festivals, online and offline, has a drastically shaped the new retail structure around the world. This structure is dominated by exclusive, time-bound festivals which play on impulse and induce purchases from customers. Thus, the effects of such festivals on host economies are tenfold. From building the tourism industry to maximizing hoteling, retailing and managing perceptions on a global scale, shopping festivals are a key mobilizer of attraction for a country.

Read Next: How can industries in the Middle East leverage Industry 4.0 to accelerate growth?