Dubai CCI issues Dubai Wholesale and Retail Trade report

In 2005, Dubai trade and repairing services sector was the highest contributor to Dubai non-oil GDP with a contribution of 24.1 per cent. According to the standard classification of economic activities, the trade and repairing services sector is made up of three sub sectors; wholesale trade, retail trade and repairing services. Wholesale trade is defined as an intermediate process in the distribution of merchandise, whereas retail trade is defined as the final process in the distribution or sale of merchandise which is normally sold in small quantities to the general public. Repairing services on the other hand is defined as the maintenance and repairs of goods associated with wholesale and retail trade.

In 2006, DCCI carried out a survey among Dubai trading companies to investigate how the Dubai trading sector is structured around wholesale and retail activities. More specifically, how the structures of Dubai trading companies determines their conduct and performance. 259 companies which responded to the survey were categorized according to wholesale and retail activities (repairing services were excluded from the analysis). Since it is globally known that it is difficult to classify trading companies according to the activities of wholesale and retail trade, for the purpose of this analysis, companies with more than 10 per cent of its sales being generated from retail activities were classified as retailers and the remaining companies as wholesalers. Thus resulting in 40.5 per cent of the respondents being wholesalers and 59.5 per cent being retailers, which is reflective of the current market.

Market Coverage
A lack of clarity in trade licensing in Dubai has resulted in both wholesalers and retailers performing some amounts of import and re-export activities. However, survey results show that retailers are more involved in domestic trades as 70 per cent of their annual sales are generated from domestic markets and only 30 per cent from export/re-export markets. On the other hand, survey results show that wholesalers are more involved in foreign trades as 61 per cent of their annual sales are generated from the export/re-export markets and 39 per cent is generated from domestic markets.

Products
With regards to products being traded, survey results show that the majority of the wholesalers are trading mainly in textiles, clothing and footwear (20%); household articles, appliances and furniture (16%); motor vehicles, cycles, parts and accessories (11%); construction material (10%); and other products.

In the case of retailers, survey results show that the majority of the retailers are trading mainly in household articles, appliances and furniture (15%); textiles, clothing and footwear (13%); machinery, equipment and supplies (12%); construction material (11%); and other products.

The survey results indicate that about 30 per cent of wholesalers deal in strictly branded products, 19 per cent in strictly non-branded products and 51 per cent in mixed products. A similar disposition was seen among retailers; 37 per cent of retailers deal in strictly branded products, 14 per cent in non-branded products and 50 per cent in both mixed products.

Size Class and Promotional Expenditure
The size classification used for the purpose of this survey, indicates that the majority of the businesses in this sector are small in size. Survey results show that 63 per cent of the respondents are small in size as they employ 1 to 9 employees, 27 per cent are medium in size employing 10 to 49 employees and 10 per cent are large in size employing 50 and more employees. Since the majority of these trading companies are small in size, only a very few spend more than AED 50,000 on promotional activities.

In general, the majority of traders among both the wholesale and the retail activities spend less than AED 10,000 or do not spend at all on promotion. However, those who do spend are involved in the trade of branded products as it is necessary to gain brand recognition and make sales. Among traders, about 34 per cent of retailers and 28 per cent of wholesalers spend on promotion of branded products.

Sales
Survey results show that the top three products that are mainly being sold by wholesalers are in textiles, clothing and footwear, household appliances and furniture, and motor vehicles, parts and accessories (See Figure 2).

Whereas, among retailers the top three products being sold are textiles, clothing and footwear, household appliances and furniture, and food beverage and tobacco. Survey results show that among wholesalers and retailers, companies that generated AED 5 million and more in annual sales accounted for 47 per cent and 30 per cent, respectively. Whereas, companies that generated annual sales from 1 million to less that AED 5 million accounted for 31 per cent of wholesalers and 32 per cent of retailers, and companies that generated annual sales less than 1 million accounted for 22 per cent of wholesalers and 38 per cent of retailers. Survey results further show that according to the distribution of sales by trade activity, both wholesalers and retailers are actively involved in the sales of branded products.

Finally, survey results indicate that the Dubai trade activities are gradually heading towards creating an elitist market. The retailers are the front runners in the promotion and sale of branded products such as textiles, clothing and footwear, household articles, appliances and furniture motor vehicles, cycles, parts and accessories. On one hand, the sale of branded products such as jewelry, gifts and novelties, machinery, equipment and supplies, food, beverage and tobacco and medical, pharmaceuticals and cosmetics shows great potential. On the other hand, the generic products market is suffering from fierce competition from branded products. Therefore, manufacturers of generic products are strongly urged to improve product quality and create awareness of generic products through advertising and promotion. Additionally, retailers are also urged to take an active role in supporting the sale of non-branded product by forming alliances such as mergers and acquisitions between branded and non-branded products.