Electronics retailers hope for return of confidence

Consumer electronics retailers were forced to reduce prices last year to entice cautious customers back to the market.

DUBAI // Shopkeepers hope confidence is returning to the market after retailers and makers of consumer electronics were forced into heavy discounting last year, as buyers spent a third less on their wares. Shoppers in the UAE last year spent Dh2.19 billion (US$596.2 million) on consumer electronics such as TVs and DVD players, 33.8 per cent less than in 2008, data from the consultancy GfK Retail and Technology's Temax report showed.

Kevin Ribeiro, the business group manager based in Dubai for GfK, said the number of consumer electronics goods bought last year rose 1.5 per cent, but the overall sales value dropped because retail prices were cut to entice buyers. "The manufacturers wanted to make the products more available and have sales coming through," Mr Ribeiro said. "During this time people were holding off spending cash, and they gave better offers so people could shell out some money."

Many retailers in the UAE struggled last year, faced with hefty inventories and consumers spending less in a time of economic uncertainty. To move merchandise, many retailers and makers reduced prices and launched promotional offers. But sales of non-essential items, especially those with high price tags, continued to lag. Sales across the seven categories of electronic goods monitored by GfK - consumer electronics, photo equipment, major and small domestic appliances, information technology, telecommunications, and office equipment - were down 25.1 per cent to Dh10.7bn.

Consumer electronics were the hardest hit, followed by sales of photo equipment, which dropped 29.6 per cent to Dh577m. Sales of telecommunications electronics, such as mobile phones, dropped 27.8 per cent last year to Dh2.9bn, the GfK data showed. Small domestic appliances were the least affected, with sales down 5.1 per cent to Dh1.1bn. But sales of major domestic appliances in the UAE last year dropped 18.4 per cent to Dh882m. Ashish Panjabi, the chief operating officer of Jacky's Electronics stores, said the major contributing factor was the drop in price for most electronic items last year. "Average selling prices dropped over the year and we've seen that in various categories," Mr Panjabi said. "Things like LCD TVs and Notebooks saw price drops of anywhere between 25 to 30 per cent."

JP Nambiar, the head of retail for Jumbo Electronics stores, said consumers took advantage of these relative bargains and traded up to better electronics, from box TVs to LCD TVs and from phones to smartphones. "The prices have come down, and become more attractive and more affordable for consumers," Mr Nambiar said. "And people have embraced the new technology." At Jumbo stores last year, the number of flat-panel TVs sold rose 40 per cent, while the dirham value of those TVs fell 10 per cent, he said.

The number of laptops sold increased by 25 per cent, while the overall value of these sales dropped between 5 and 7 per cent, Mr Nambiar added. Sales of major domestic appliances, such as refrigerators, were also hurt by the slowdown in the UAE property market, Mr Panjabi said. "Not as many people were moving into a house and they were not looking at purchasing appliances as they once did," he said, adding that consumers were also trading down to cheaper appliances. Electronics retailers are optimistic that sales will improve this year. "The bottom has been reached," said Mr Nambiar. "From here on, it is about stabilisation and a modest recovery."

Mr Panjabi said Jacky's Electronics was hoping for a modest sales growth of between 8 and 9 per cent this year. The sales boost would come from consumers buying new technology, such as 3-D televisions, or upgrading their electronics ahead of big sporting events such as the FIFA World Cup this year. Mr Panjabi also expected consumers to relax their budgets after a year of restraint. "You've held back for a year and now you might as well buy it," he said. "It's human nature. You will eventually end up spending somewhere."