Dissertation Writing Help on Consumer Appliances in the United Arab Emirates Research Proposal Topics
Project Report on Consumer Appliances in the United Arab Emirates, UAE
Case Study on Consumer Appliances in the United Arab Emirates Research Proposal Topics
EXECUTIVE
SUMMARY
Growth
for major appliances slowed by economic downturn
Sales of major appliances saw
striking growth in the early part of the review period, as strong economic
growth in the United Arab Emirates encouraged consumers to buy a wider range of
these products and to make more frequent replacement purchases and upgrades.
The economic downturn however hit consumer economic confidence hard in the last
two years of the review period. Consequently, many consumers sought to cut back
and growth rates for major appliances plummeted as consumers postponed
higher-priced purchases.
Overall
volume growth maintained by bargains in small appliances
Despite the poor performance of
major appliances, overall consumer appliances saw a good volume growth in 2010
over the previous year, with this largely in line with the review period CAGR
and considerably higher than 2009 growth. This was due to the use of price
competition and price promotions for many product areas across small
appliances. Retailers and importers focused on offering economy products and
price promotions in the year, with this trend driving strong growth rates in
product areas as diverse as mini ovens and hair care appliances. Bargains
notably attracted many new consumers, with the household penetration rate of
many products rising as a result in 2010.
Consumers
shop around in search of best value
Durable goods retailers continued to
be the leading distribution channel in consumer appliances at the end of the
review period, benefiting from offering a wide range, expert advice and strong
after-sales service. However, this channel lost share due to growing price
competition as a result of the economic downturn. Consumers became increasingly
willing to shop around for the best value. In addition, many hypermarkets began
to offer high-profile promotional deals on consumer appliances, with this
channel thus gaining share in 2010.
Multinationals
lead with little domestic production
Multinationals lead sales of
consumer appliances, with Groupe SEB, Hitachi, Helen of Troy and Panasonic
being the top four players in 2010. There is little domestic production of
consumer appliances, with even domestic players such as Al-Futtaim and Mostafa
Bin Abdullatif focusing on imports or basing their production in lower-cost
countries such as India and China. In addition, most consumers prefer the
reassurance of a strong global brand. Consumer appliances is however heavily
fragmented, with “others” dominating volume sales in 2010. “Others” further
gained share in 2010 over the previous year, with this due to many consumers
opting for economy imports due to a growing focus on price.
Economic
recovery set to fuel strong growth
Consumer appliances is expected to
see a swift recovery in terms of volume growth during the forecast period as
the United Arab Emirates’ economy recovers. Growth is expected to be
particularly strong from 2012 onwards, with stronger economic growth in this
year likely to fuel growing consumer confidence. Rising income levels will
notably result in low-income consumers buying a wider range of products, with
household penetration rates thus set to grow for most product areas during the
forecast period.
KEY
TRENDS AND DEVELOPMENTS
Construction
downturn hampers sales
The United Arab Emirates saw an
investment boom in construction for much of the review period, including
high-profile buildings such as the world's tallest building and biggest
shopping mall, along with a wide range of housing. During the country’s
economic boom earlier in the review period, many expatriates came to the United
Arab Emirates seeking to make money on property. However, this led to a real
estate bubble, which propelled the expansion of Dubai via credit and
speculative investment.
This bubble burst towards the end of
the review period, with many suffering considerable financial hardship as a
result. A large number of projects were put on hold or cancelled due to
climbing raw material and labour costs and a lack of available investment.
Banks stopped lending and the stock market saw dramatic drops. Hotel occupation
dropped well below capacity and shopkeepers in newly-built malls reported a
massive drop in sales towards the end of the review period.
The downturn in construction also
impacted many expatriate workers. Perhaps the hardest hit workers were
construction workers from the Asian subcontinent, with these workers on low
wages as little as £70 a month. Asian embassies reported mass departures with
many workers going home as companies were forced to close or absconding due to
unpaid debts.
The exact number of unemployed in
United Arab Emirates at the end of the review period is not known. The
government does not release unemployment figures and prevents the press from
running stories that could damage the economy, such as mass redundancies. All
expatriates have to have a residency or work visa in order to remain in the
country and therefore any expatriate that is made redundant is repatriated or asked
to leave.
Current
Impact
Within consumer appliances, major
appliances greatly benefited from the construction boom earlier in the review
period. These products saw annual volume growth of 11-14% annually over
2005-2008. However, as construction declined at the end of the review period so
did growth for these products, with major appliances seeing just 1% volume
growth in 2010. Built-in major appliances suffered most from the construction
downturn, due to a decline in luxury housing, with volume sales declining by 1%
in 2010 over the previous year.
The decline in luxury housing
construction and a growing focus on cost reduction also impacted unit prices.
Built-in major appliances saw 7% current value decline in unit price in 2009
over the previous year, as producers sought to maintain volume sales, and a
further 1% decline in 2010.
Outlook
The United Arab Emirates is expected
to see good economic recovery during the forecast period, with a strong
resurgence in construction. In addition, despite the downturn the building
projects still in construction at the end of the review period amounted to
almost the equivalent of the US stimulus package.
Abu Dhabi boasts over 95% of the
country’s oil reserves and accounts more than half of its GDP, with regional
experts predicting that it will overtake Dubai as the destination of choice for
westerners in the Middle East during the forecast period. Dubai meanwhile plans
42% increase in public spending on infrastructure projects at the start of the
forecast period, in order to compensate for vanishing private investment. Abu
Dhabi is meanwhile expected to increasingly support its poorer neighbour.
Future
Impact
There is likely to be resurgence in
construction during the forecast period, with this driving growth for major
appliances. Built-in major appliances is thus predicted to see stronger growth
during the forecast period in comparison to that seen during the review period,
with volume CAGR of 10% and 8% respectively. During the review period, built-in
major appliances saw weaker growth than freestanding variants. However, thanks
to stronger construction activity during the forecast period, built-in major
appliances is expected to see the strongest growth, with freestanding major
appliances seeing just 7% volume CAGR.
However, while there is likely to be
an ongoing focus on luxury housing during the forecast period this will not be
reflected in unit prices. Companies and consumers will continue to be focused
on cutting costs during the forecast period, with the constant value unit price
of built-in major appliances thus expected to decline by 21% during the
forecast period as a whole. This represents a considerably sharper decline in
price in comparison to freestanding major appliances, which is expected to see just
6% constant value unit price decline during the forecast period.
Growing
focus on environmentally-friendly products
The United Arab Emirates is well
aware of the environmental benefits of its terrain, with the country’s economy
built on fossil fuels and large oil revenues. Consequently, consumers became
increasingly ecologically-conscious during the review period, with this
reflected in a number of initiatives in the country.
Established in 2006, the Abu Dhabi
Future Energy Company (Masdar) is focused on the development, commercialisation
and deployment of renewable energy solutions and clean technologies. Masdar
builds on Abu Dhabi’s position as a leading global energy player, aiming to
develop renewable energy and low-carbon technologies at a global level, while
also contributing toward the UAE’s economic diversification.
Current
Impact
A number of manufacturers introduced
eco-friendly products towards the end of the review period, which highlights
companies’ commitment to contributing towards a greener environment. Players
also sought to address a growing consumer demand for sustainable options in
consumer appliances, with these enabling consumers to contribute to the
environment through small everyday steps. Manufacturers sought to offer
products with a minimal impact on the environment without compromising on
performance or design. These appliances work at the same capacity as regular
products but use less energy or incorporating features that enable consumers to
actively save energy. Manufacturers also focused on improving waste management
and recycling from the manufacturing process.
Philips notably launched its
EcoVision plan in the second quarter of 2010, launching a range of
energy-efficient products and announcing plans to generate 30% of its revenue
from environmentally friendly products by 2012. In vacuum cleaners, the company
notably launched three vacuum cleaners and a powerful handheld vacuum cleaner
that use up to 35% less energy while offering the same results as
higher-powered vacuum cleaners. These products are made from 95% PVC-free
materials and also packaged with at least 95% recycled materials, which can in
turn be completely recycled.
Eros meanwhile announced a
partnership with Take my Junk UAE, a charitable foundation that provides donated
goods to underprivileged people. Eros Digital Home outlets across the United
Arab Emirates thus began to act as drop points for donations of consumer
appliances, with this initiative promoted by Eros’ Pass it On! campaign. This
initiative thus combines a focus on the environment and recycling, with a focus
on social charity, thus boosting the company’s profile and environmental and
charitable image.
Outlook
There is expected to be a growing
focus on environmental issues during the forecast period. This will partly be
due to global trends, with consumers generally becoming more aware of their
impact on the environment and seeking to reduce this. This trend will be
encouraged by strong media coverage of environmental issues and, increasingly,
by government initiatives.
The United Arab Emirates for example
will focus on solar power during the forecast period. Abu Dhabi meanwhile plans
to become the “world’s first carbon neutral zero-waste city” and to obtain at
least 7% of its energy from renewable sources by 2020, which will create demand
for renewable energy in the city worth approximately US$8 billion over the next
decade.
In response to consumers’ growing
focus on the environment, manufacturers in all areas will push to offer more
environmentally-friendly products. In packaged food, for example, this trend is
expected to result in the launch of a wider range of Fairtrade-accredited
and/or organic products, along with the widening use of recycled packaging.
Players will not only focus on offering environmentally-friendly products,
however, with manufacturers also increasingly focusing on
environmentally-friendly business practices. With consumers becoming more aware
of the need for environmental protection, producers are expected to face
growing scrutiny of issues such as energy usage and waste management.
Future
Impact
The choice and usage of consumer
appliances is expected to be a major focus area for those concerned with the
environment during the forecast period. Consumers will be urged to seek out the
most energy-efficient models and to use these as sparingly as possible.
Manufacturers in consumer appliances
are meanwhile likely to focus new product development in this area. In the
United Arab Emirates, this niche is expected to be mainly developed by
multinational brands, with Panasonic and Philips set to be leading players.
Players will focus on energy efficiency, enabling users to minimise power
wastage when products are not in use, for example. In addition, there is
expected to be a growing focus on the use of recycled and recyclable materials.
In addition to focusing on offering
more environmentally-friendly products, players are also expected to face
growing scrutiny regarding the environmental impact of their business
practices. This will result in players increasingly auditing their own business
practices to minimise their environmental impact, with the results often being
promoted as players strive for an environmentally-friendly positioning.
Consumer
spending begins to recover in 2010
All GCC countries suffered as a
result of the recession and the United Arab Emirates was particularly hard hit
due to the collapse of the country’s real estate bubble. This collapse had a
severe impact within the country due to a large number of construction projects
being put on hold.
The country’s economy however
appeared to be steadying in 2010, thanks to strong government investment and
the assistance of large corporations. Consumer spending thus began to increase
once more at the start of 2010 as the country’s economy began to recover.
Industry sources claim that most residents of the United Arab Emirates believe
that they have already seen the worst and believe that their jobs are now
secure and that economic recovery is real and sustainable. This rising economic
confidence resulted in strong growth forecast for retail sales in the country
in 2010, with this expected to continue throughout the forecast period.
While expatriates account for a
large share of the population in the United Arab Emirates, the majority of
consumers for consumer appliances are United Arab Emirates natives or are Arabs
from the GCC region. This is due to the fact that the majority of Western
and/or high-income expatriates live in gated communities and are provided with
consumer appliances in their accommodation, along with central air
conditioning. Those expatriates not living in gated communities meanwhile tend
to be low-income construction workers, with little free money to spend on
consumer appliances
Current
Impact
As a result of the economic downturn
towards the end of the review period, consumers became less willing to spend
large sums of money on new homes or to upgrade higher-priced items. Therefore
the majority of consumers opted to remain in their current residence. This had
a marked negative impact on sales of consumer appliances in 2009, with volume
growth of just 3% in comparison to a review period CAGR of 8%.
2010 however saw a good level of
recovery in overall unit volume terms, with a growth rate of 8% in line with
the review period CAGR. However, the year saw a marked shift to lower-priced
consumer appliances. While consumers began to spend more freely once more in
2010 many remained reluctant to opt for costly major appliances or struggled to
obtain the necessary credit to do so. Consequently, major appliances saw just
1% volume growth in 2010, while consumers cheered themselves up by buying small
appliances. Small appliances thus saw an impressive 9% volume growth in 2010
over the previous year, with this exceeding the growth rate seen in this area
for much of the review period.
Volume growth for small appliances
was however driven by the use of price promotions, with players reducing prices
in many areas in order to drive volume sales. Irons, small cooking appliances
and small kitchen appliances (non-cooking) all saw 6-7% current value unit
price decline in 2010 over the previous year. This was due to the combined
impact of bargain hunting among price-sensitive consumers and the increasing
use of price promotions by producers, importers and retailers. Consumers
increasingly visited three or four retailers before opting for the best value
product or shopped around for the lowest price online. Price promotions were
meanwhile used to attract consumers during peak sales periods, with Ramadan for
example seeing a surge in the use of price promotions.
Outlook
Over the first half of the forecast
period, the United Arab Emirates’ economy is expected to improve, with consumer
incomes and sense of economic security thus also seeing good growth.
Consequently, consumer spending is expected to gradually return to levels seen
prior to the recession. However, there is expected to be a continued focus on
price during the forecast period, as retailers and producers compete heavily to
attract consumers’ attention. In addition, many consumers began to enjoy
bargain-hunting towards the end of the review period and are expected to
continue to actively seek out the best value when shopping during the forecast
period. The value of retail sales in the United Arab Emirates is thus expected
to grow by 4% in constant value terms in 2010 and by 8% in 2011.
Future
Impact
The forecast period is expected to
see strong volume growth for consumer appliances as a result of the United Arab
Emirates’ economic recovery. Overall, consumer appliances is expected to see
12% volume growth during the forecast period in comparison to just 8% growth
during the review period. Volume growth is expected to swiftly rise to 12%
annually by the middle of the forecast period and is expected to increase
further to 15% annual growth by the end of the forecast period.
However, consumers will continue to
think carefully before major outlays during the forecast period. The economic
downturn towards the end of the review period startled consumers, with many
consumers thus seeking to increase their savings levels in order to ensure
stronger personal financial security. As a result, small appliances is expected
to see stronger volume growth than major appliances during the forecast period,
at 12% and 9% respectively. Consumers will be more willing to purchase small
appliances due to these products’ lower cost.
In addition, volume growth in small
appliances will be driven by strong ongoing price competition, with constant
value unit price expected to decline by 7% during the forecast period. Players
in major appliances will be less willing to reduce prices meanwhile, with unit
price decline towards the end of the review period having eroded profit
margins. Instead, major appliances is expected to see 3% growth in constant
value unit price during the forecast period, with this largely due to players
focusing on offering energy-efficient products at a higher price.
Growing
interest in internet retailing hampered by poor payment infrastructure
Consumer interest in internet
retailing continued to grow in the United Arab Emirates during the review
period. However, most internet retailers available in the country are from the
US and UK. Banking systems within the United Arab Emirates meanwhile prohibit
high-ticket purchases via the internet and therefore many websites offer a
payment on delivery option. This inevitably deters many consumers and reduces
the convenience offered by the internet retailing channel.
E-commerce thus remains in its
infancy in the United Arab Emirates and companies were slow to invest in this
area. This was due to the high cost involved in setting up internet retailing
facilities within the United Arab Emirates, due to the high cost of government
licences and secure payment systems. In addition, the high percentage of
low-income workers in the country deterred companies from investing in internet
retailing. These consumers generally lack access to internet facilities and
credit cards, which are essential to online shopping.
Current
Impact
Despite growing interest in internet
retailing, few players in consumer appliances offer e-commerce facilities, with
these generally being rudimentary. Most consumer appliances retailers offer
details of products and special offers on their websites but customers are
directed to bricks-and-mortar stores within the country if they wish to make
purchases.
As a result of these constraints,
internet retailing continued to be a minor channel for consumer appliances at
the end of the review period, accounting for just 3% of overall sales. The
channel saw good growth of 9% in volume in 2010 over the previous year,
however, as the economic downturn encouraged consumers to seek out bargains
online.
With poor payment and delivery
systems and a limited number of players engaging in internet retailing, the
share of this channel remained lowest in major appliances at less than 2% in
2010. In contrast, small appliances saw 3% of volume sales derived from
internet retailing, with a particularly high share of 5% in air treatment
products and 4% in personal care appliances. Personal care appliances also saw
the strongest volume growth for internet retailing in 2010 over the previous
year, with this due to consumers buying economy products from Asian countries.
Consequently, internet retailing saw an impressive 11% growth in volume in
personal care appliances in 2010 over the previous year.
Outlook
Internet retailing is expected to
grow quickly in the United Arab Emirates during the forecast period, with a
widening range of retailers and producers likely to offer internet retailing
sites. Younger consumers grew up with emerging technologies, with new house
owners and young professionals thus likely to turn to internet retailing as a
result of its convenience and quickness.
However, internet retailing will
continue to face stiff competition from traditional shopping outlets and
channels. Shopping in the United Arab Emirates is not always undertaken out of
necessity. Due to the country’s hot weather, many consumers spend leisure time
in shopping malls. Internet retailing thus needs to provide a wide range of
goods at competitive rates in order to encourage more users.
The main issue with internet
retailing for most consumers is a fear of fraud. The United Arab Emirates is
slowly catching up with other developed countries in this area, however, with
secure transaction protocols being enforced by many website owners. The
country’s authorities are also helping to combat fraud and boost confidence
levels in potential consumers by promoting safe internet retailing guidelines.
Future
Impact
As payment methods evolve and price
comparison websites become available in the United Arab Emirates during the
forecast period, internet retailing is expected to gain share in consumer
appliances. The channel will increasingly be used for purchases of small
appliances and, once payment infrastructure is fully in place, will also be
widely used for purchases of major appliances.
Once a solid payment infrastructure
is in place, internet retailing is indeed expected to see the strongest growth
in volume sales in major appliances. This will partly be due to sales rising
from a lower base. However, strong growth will also be underpinned by
consumers’ strong focus on bargains, with consumers seeking to save money on
these higher-priced items. In addition, consumers will appreciate the
convenience of ordering these large and expensive items online via financial
cards and also welcome the convenience of home delivery.
New
product development focuses on multifunctional products
The United Arab Emirates is home to
a large number of wealthy households, with many consumers willing to pay more
for cutting edge design or additional functionality. Consequently, while price
competition remained strong in consumer appliances throughout the review period
players also competed to offer more advanced products. This strategy was also
adopted by the leading players as they sought to better differentiate their
products from lower-priced competitors such as economy Chinese or South Korean
imports.
Current
Impact
There was a growing focus on
multifunctional products in new product development towards the end of the
review period. De'Longhi for example launched the Kenwood Chef in July 2010,
with this high-end product benefiting from 100,000 man hours of development and
60,000 hours of product testing. The Kenwood Chef combines a food processor
with a safe, rapid-heating and energy-efficient induction heater under the
mixing bowl. The product is positioned as aiding in the rapid creation of
complicated dishes and its launch was timed to encourage strong sales prior to
and during Ramadan.
Samsung also aimed for a premium
positioning with its launch of the Aurora CQV513 Microwave Steam Oven in 2010.
This cooks four times faster than conventional ovens, thus saving time. It also
claims to save space, as it can be used in lieu of ovens and steamers and can
produce a crisp and golden crust. The appliance also benefits from a health and
wellness positioning, with superheated steam reducing the amount of fat in food
by 20% and reduces the salt in food by 11% while preserving flavour, texture
and appearance.
Candy’s launch of TRIO however
adopted a differing approach to multifunctional appliances. This launch
combines a hob, oven and dishwasher into one appliance and aims to offer value
and space-saving, with the launch targeting small low- and mid-income
households. The appliance has a standard 60cm x 60cm dimension and also offers
an A energy-efficiency rating.
Outlook
The United Arab Emirates has a large
average household size, at six people at the end of the review period. However,
there was a shift towards smaller household sizes during the review period,
with many young married couples opting to leave their extended families and
move in together. In addition, there was a growing trend towards larger
households opting for additional cooking facilities in order to offer their
inhabitants greater convenience. Consequently, there is expected to be ongoing
demand for compact multifunctional products in consumer appliances during the
forecast period.
Future
Impact
Players are expected to continue to
launch multifunctional products in consumer appliances during the forecast
period. Players will thus seek to clearly differentiate their products from
lower-priced competitors such as economy imports and private label. Growing
demand for space-saving appliances due to a shift towards smaller households
will also encourage this trend.
The pioneers in multifunctional
consumer appliances are expected to be positioned as premium, with the strong
added value offered by these products being reflected in their pricing.
However, these launches are expected to be followed by similar launches at
lower prices, thus making multifunctional appliances attractive to a wider
range of consumers. Dishwasher-hob-oven combinations could well prove
particularly popular, offering busy dual-income households the opportunity of
installing a dishwasher into smaller kitchens. Heated food processors could
also well prove increasingly popular during the forecast period, particularly
around the time of Ramadan when many are kept extremely busy preparing lavish
feasts for family and friends.
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