Dubai has become too expensive for retail tourists, with a 20 percent decline witnessed in the luxury end of the market, according to the CEO of one of the region’s largest retail companies. Jayant Ganwani, CEO of Dubai-based Lals Group, which has 130 stores across the region, said high-end consumers are choosing other markets for their shopping, because of the prices being charged in Dubai.
“There are two things happening in this market. Number one, obviously the expenditure of the Russians was a very substantial part on the luxury end. Conspicuous consumption is something that really is supported by that tourist in that respect.” “We’ve also seen that Dubai has in many ways become unaffordable to a lot of the tourists. Over the years, the impression that Dubai was value for money is under a little bit of a delusion because we have been doing some homework and we found that European merchandise is sold here at a far higher price in equivalent dirhams than it is sold in Europe,” he said.
Ganwani said the tourists, who are still coming to Dubai, are becoming more aware of the prices elsewhere and in order to attract the tourists back to the shops, something has to change. “The tourist that used to come here predominantly with the reason to shop is now smarter. The advent of online information, sales possibilities, everything is making a very difficult scenario for the luxury retail segment because the consumer is able to check what this item sells for on the Champs-Élysées or on Bond Street or on Sloane Street, and say ‘if the difference is going to be substantial, it's worth for me to go a shop in the UK’. And I think that's what's happening.”
“A lot of people have decided that they are not going to come to Dubai to shop and that is not just Russians. It is the Indians, the Chinese, the Pakistanis - wherever they came from to load up on their suitcases, they are finding different shores. Emirates is doing great deals out of all those markets to fly people into Europe via Dubai. You can experience the beach and the sun here and then shop in Europe and save money at the same time.”
“I think that something has got to give and pricings have to become far more reflective of what the international prices are,” he said. The year ahead will see further decline in sales for retail, Ganwani said, with luxury to see a deeper slowdown.
“2015 in my opinion, and 2016 to some extent, we expect there to be a ten percent decline in the expenditure for most retail houses in the mid-market consumer segment. On the luxury end, I think there will be an even deeper erosion in their sales,” he said.