Consumer spending in the UAE was up 19% in 2022 compared to 2021, indicates Majid Al Futtaim’s ‘State of the UAE Retail Economy’ Q4 report. There was 13% growth in spending across the retail economy for the full year including leisure and entertainment (29%), fashion (25%), hypermarkets and supermarkets (11%) and general retail (9%). This increase was driven by the rise in international visitors to the UAE, which more than doubled to 14 million in 2022, bolstered by major events including FIFA World Cup in neighbouring Qatar.
Consumer optimism despite inflation
The final quarter of 2022 saw people becoming more cautious with their spend, opting for discounts and deals for essential items, and cutting back on non-essential’s such as electronics. The average spend per transaction in hypermarkets and supermarkets was down 3% during the year. However, overall spending in the segment was up 11% on the year prior, showing movement towards smaller basket value and more frequent transaction.
The extended 2.5-day weekend also influenced the increase in consumer spend with weekend retail sales increasing by 11.3% versus the previous year. This translated to additional spending of approximately AED5.5 billion according to Majid Al Futtaim Point of Sales (POS) data.
Inflation was a reality in 2022 ending the year at 5.2%, however, it was still significantly less than elsewhere in the world. Resultantly, consumer optimism remained high despite inflation. 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% of all retail economic activity during the year.
A flourishing digital economy
Analysis suggests that the UAE e-commerce market is set to grow with sales forecast to reach $9.2 billion by 2026. Spending in this area peaked in Q4 2022 and grew by 20% for the full year compared to 2021, with three-quarters of consumers saying that digital payment methods are the preferred option.
Fintech solutions such as buy-now-pay-later (BNPL) gained pace with 45% of consumers using BNPL financing in the past year, up from 21% a year earlier. A majority of online spending by residents was in the hypermarket and supermarket sector which witnessed spending growth of 40% during the year.
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