Dubai offers finest products from the best known manufacturers at what are, perhaps, the best prices in the world. A report on Dubai’s booming electronics trade…
Row upon row of glittering shops in Dubai’s fabled souks, stacked ceiling-high with the latest attractions from the world’s leading consumer electronicsmanufacturers, present a sight that not only lures shoppers from around the Middle East and its adjoining areas but from as far afield as the Confederation of Independent States, the Far East, Europe and Africa. Electronics, like gold, has always been one of Dubai’s greatest attractions for the shopper and tourist alike. The finest products from the best known manufacturers are available here at what are, perhaps, the best prices in the world. Whatever it is you are looking for – from a nifty personal CD player and the most sophisticated component system to snazzy camcorders and projection television sets – chances are you will find the right product to satisfy all your needs in Dubai.
The electronics market has had a chequered evolution in the Emirates. In the initial stages after the formation of the UAE Federation in 1971, there was a substantial domestic demand for products such as TVs, Hi-Fi systems, VCRs, radios, etc., to be met. As the trade began gaining in sophistication and the product range diversified, a huge demand emerged from the South Asian countries – particularly India and Pakistan. Iran too emerged as a major destination and the electronics trade boomed in the souks of Dubai, Abu Dhabi and Sharjah. While the India and Pakistan demand was largely serviced by individuals who carried the electronics items with them, Dubai emerged as a major re-export centre for Iran and other Gulf destinations. As the international electronics industry came up with newer products, a corresponding market emerged for them. With the passage of time the composition of the market and the profile of the shoppers changed too. Once the domestic demand was by and large satisfied and the Iranian market cooled off, the break-up of the former Soviet Union saw an influx of people from the CIS states with a huge propensity to buy electronics items to feed the seemingly insatiable demand for these goods in regions that had hitherto been virtually cut off from the rest of the world.
Recently East African buyers have emerged as the new bulk buyers of consumer goods in Dubai. However, unlike their counterparts from the CIS, most buyers from Africa have long been using the services of shipping lines and hire containers to ship their goods back to their countries, where they sell them at a premium. Although the CIS market is much bigger than that of Africa, leading electronic companies in Dubai are welcoming the brisk business as the number of CIS buyers begins to level off.
One of the most significant developments in the local market in recent times has been the organisation of the immensely successful Dubai Shopping Festival. Held every year, the Shopping Festival has definitely benefitted the consumer electronics trade with sales showing a tremendous rise, taking in the traditional spurt experienced during the Eid festive season. The electronics sector reported excellent returns on the investment in the Dubai Shopping Festival. Some of the bigger electronics distributors reported a 50 per cent increase in their retail sales, other say it was between 30 to 45 per cent, while some claimed that their sales doubled. In the electronics marketplace, profit margins are at a bare minimum, yet Dubai s retailers and wholesalers dropped prices especially for the Festival to attract additional retail customers.
There are several reasons that are responsible for making Dubai s electronics and home appliances market such an attractive one for buyers. The city has a well-organised chain of retailers and wholesalers, an excellent sourcing network, a well developed stocking and warehousing facility and, of course, a reputation for reliability that has been built over the years. Low import duties and direct supplies from manufacturers have contributed in keeping prices in Dubai 15-20 per cent lower than other markets in the region.
As Dubai establishes itself in the Middle East and Africa region as the electronics marketplace, an increasing number of Japanese and South Korean companies have begun shifting their operations nearer to their markets, namely to the Jebel Ali Free Zone. Electronic giants such as Sony, Aiwa, Citizen, Goldstar and Brother are some of the big companies that have already established assembly facilities in Dubai to further boost the distribution of their products to African, CIS and Middle East markets. It is a well known fact that most of the electronic and home appliance needs of larger markets in the region – Iran, Africa and the Indian sub-continent are being fed by Dubai-based companies. Therefore, it makes sense for multinational electronic companies to set up base in Dubai in order to target these high consumption markets.
With the rise of the middle class, it is clear that demand for electronics and home appliances will grow worldwide – especially in countries within the geographical proximity of the Gulf. Dubai, therefore, is in a position to further develop its electronics re-export potential and make it an important contributor to the increasing non-oil trade of the country. In international market developments, European consumer electronics firms are beginning to gain ground lost to Japanese brands in Gulf markets by shedding inward-looking strategies in the face of a shrinking European market. Over the past three years, the European consumer electronics market has shrunk by as much as 25 to 30 per cent. The European market is not only saturated but is in fact shrinking because of high rates of unemployment. This is forcing European firms to look for new growth areas in the Middle East and Asia, as even the North American market is shrinking. The electronics trade in India though is witnessing dramatic growth rates. Last year the TV market was estimated at 1.5 million units, and this year between 1.8 to 2 million TVs are projected to be sold. Till 2008, the annual growth rate is projected at 30 per cent.
The UAE is not only a leading market for consumer electronic products in the neighbouring region extending from the Indian sub-continent to East Europe, but is also an important trading sector in the domestic non-oil economy. The total turnover of the consumer electronics market is estimated to be almost US$2.9 billion. Most of the demand for consumer electronics is from outside the domestic market, viz. re-exports, tourists and travellers.
Consumer electronics trade is usually understood to include watches, still cameras and household electrical appliances (white goods). However, the largest amount of business is conducted in audio/visual products (brown goods), which account for about 60-65 per cent of business. White goods being bulky do not enjoy the same ease of transport as the former, and consequently do not have the same re-export and « carry » potential as brown goods. The largest proportion of sales of electronics items are « carry » sales, namely sales in the domestic market which are « carried » by individual travellers out of the country. Industry sources estimate such sales to have an almost 40 per cent share in sales. Such sales are known as semi-wholesale, as « carry » individuals make dedicated trips for the purpose of purchase of electronics, and purchase significant quantities.
Pure domestic sales are around 40 per cent as well. Mostly retail, these are for local consumption by residents and those purchased by expatriate residents as gifts etc. on home leave. Pure domestic demand is in fact very low, considering that the market is already saturated. According to a report in early nineties, 90 per cent and 70 per cent of the households owned a television and Video Cassette Recorder respectively. Only about 20 per cent of sales are officially registered direct re-exports. The re-export markets which developed in the 70s were Iran, India and Eastern Africa. Iran is still the most important official re-export market for the United Arab Emirates. East Europe, and particularly the CIS were an important addition since 1989 onwards. The entry of buyers from these markets have significantly lifted the annual volume turnover of the electronics market by upto as much as 20-25 per cent.
The Dubai market is led by two Japanese makes, National-Panasonic and Sony, who compete for domination, though Sony is confined to only audio-visual electronic items. They are followed by Hitachi which has made some progress in recent years, particularly because of it’s broad range including electrical goods. This is followed by a host of established and new companies with relatively smaller market shares, like Sharp, Akai, Kenwood, Aiwa, Shivaki etc. However, some of these operate in a specific niché product market, wherein their share may be significantly higher.
Japan has been, and still is, the most dominant exporter of electronics into UAE. However, it is slowly giving ground to other Asian producers. The most remarkable among these is China. China is now the leading exporter of radio cassette recorders to UAE. Japan is still the dominating exporter of video cassette recorders, but it has seen it s share dropping. The major beneficiary of Japan’s losing share is South Korea which has seen it’s share surging. The rising strength of the Yen is a major reason for declining Japanese share. The rise has been accompanied by the increased production capacity in the Far East countries. These new companies and the new brands are aggressively pursuing the promotion of their products and brands. However, most new products are still introduced by Japanese firms, and these firms retain their leading positions in the early years after the product is introduced (e.g. in recent times, CD players, video cameras). Thus Japan is by far the leading exporter of video cameras, while microwave ovens are being sourced from South Korea and radio recorders from China. While the problem of counterfeit goods, which had existed in the electronics market in the seventies and eighties, has now been resolved with the introduction of a trademark and copyright law, the sector suffers from « parallel » imports. Though there are no figures for the share of such imports, industry sources claim it to be as much as 30 per cent of total imports.
HOW TO PROMOTE YOUR PRODUCTS IN AFRICA
There are a few easy ways for dealers and manufacturers of electronics and household appliances to make their presence felt in the markets of Africa. For traders of televisions, hi-fi stereos, mobile telephones, referigerators, cooking ranges, freezers and other consumer electronics, Africa is indeed a very lucrative market. Those dealing in products manufactured in the Far East (China, Korea, Thailand, Malaysia etc) will find a ready market for their products as Africa is by and large a very price-sensitive market. It is a well known fact that African customers prefer cheaply priced goods from the Far East rather than the expensive ones from Europe and America. You can promote your products and/or services in Africa through many mediums:
The growing use and influence of the Internet can also be harnessed to promote your business in the African markets. By posting your business proposals on the Africa Business Classifieds. Post your message and wait for the results. Simple!
Last, but not least, add your company to the Advertising Section of the Africa Business Pages. TheAdvertising Section will carry a full page editorial about your company as well as two pictures of your company’s products. In addition to this, your company will also be provided with a direct link in the Business Links section. By promoting your company on the Africa Business Pages you can reap rich dividends. An absolute essential for those targetting the African market. Browse through some samplesbefore taking a decision.