A growing consumer market: Leading the way in Islamic retail and halal offerings

Dubai’s efforts to position itself as a global centre for the Islamic economy, combined with its standing as the world’s second-largest showcase for global brands, allows it to play a pivotal role in retail development and innovation. In October 2015 Dubai played host to the Global Islamic Economy Summit, where experts gathered to consider the scale, hallmarks and potential of markets serving the world’s Muslims. The gathering came two years after Dubai’s ruler, Sheikh Mohammed bin Rashid Al Maktoum, launched a strategic plan to develop the Islamic economy in the emirate. That plan included seven pillars and 46 initiatives to establish Dubai as a centre of Islamic finance, a trusted name and standard-bearer for the halal industry, a destination for family-friendly tourism and a capital of Islamic fashion and design.

Leading Edge

The 2015-16 “State of the Global Islamic Economy Report”, published to coincide with the Global Islamic Economy Summit, showed that the UAE was playing a highly influential role in the rapidly growing global Muslim consumer market. Only Malaysia had a higher overall ranking in the study of 73 countries, and the UAE placed either second or third in the development of halal food, Islamic finance, halal travel and Islamic fashion.

The country had a lower ranking in the development of halal pharmaceuticals and cosmetics, which to some extent reflects its role as a predominantly service-based economy rather than a centre of manufacturing. The report calculated that consumer spending by the world’s Muslims was worth $1.8trn in 2014 and that it would grow to $2.06trn by 2020, partly fuelled by the expansion of the world’s Muslim population, which is growing at twice the rate of the global population as a whole. The report was produced by Thomson Reuters and supported by Dubai Islamic Economy Development Centre (DIEDC).

Digital Market

Thomson Reuters and DIEDC also collaborated with Dubai Silicon Oasis Authority to produce a separate study of the impact of Muslim consumers on the world’s digital economy. The report estimates the overall value contributed by Muslim consumers worldwide to the global digital economy in 2014 was $107bn, representing 5.8% of the total. The 2015 “Digital Islamic Economy Report” predicts that Muslim spenders will have an increasingly powerful impact on the global digital economy, with their contribution growing at an average of 17% per annum through to 2020, compared to 15% average annual growth in the rest of the world.

The report examines different key segments of the digital economy and identifies social commerce and retail e-commerce as among the top-five most-promising areas. Within online retail, the report points to the success and growth potential of different sites serving the Islamic fashion sector, such as Turkish start-ups Modanisa and SefaMerve, the latter of which was identified by Google as a site with the potential to reach a $1bn valuation. According to internet data analytics firm Alexa, Modanisa and SefaMerve are ranked first and third, respectively, in terms of visitors to Muslim websites.

However, the success of these two sites may stem from their domestic Turkish base. The report also reveals that Turkey has the highest level of Muslim digital commerce spending in the world ($8.1bn) and the second-highest digital advertising spend on Muslims ($603m) out of a global total of $6.1bn. The report suggests that online retail of Islamic clothing and halal cosmetics “remains an attractive, high-growth market with lucrative opportunities to meet the fashion and cosmetics needs of Muslims globally”. However, according to the report, lack of trust in online payment and unreliable postal services are key challenges in some economies.

Travel Shopping

The emirate was declared the number one shopping travel destination for Muslims, according to a 2015 survey by the Organisation of Islamic Cooperation Muslim Travel Shopping Index, published by MasterCard and CrescentRating, with a weighted score of 79.5 out of 100. The report measured 40 major international shopping destinations and found that 108m Muslims travellers spend $142bn on tourism annually, representing 10% of the world’s travel economy. Bahrain’s capital Manama came in seventh overall with a score of 59.6; Doha, Qatar came in eighth with 59.5; and Riyadh ninth, scoring 59.3. The report estimated that $36bn was spent in the 40 cities covered and that 26% of spending ($9.3bn) went towards shopping.

Halal Food

“The State of the Global Islamic Economy Report” says the total global spending by Muslims on F&B was $1.13trn in 2014, and it ranked the UAE third on its index for halal food. Factors used to determine this rank included media coverage of halal, low pricing of halal products compared to other food, and robust regulatory and compliance processes.

In October 2014 the Emirates Authority for Standardisation and Metrology (ESMA) introduced a mandatory UAE standard for the halal mark. The regulations stipulate that the halal certificate guarantees the product or service is sharia-compliant. Certificates are issued to slaughterhouses and farms, and for food products and ingredients. Halal certification also guarantees the processes used by manufacturers and retailers to produce, distribute and sell products. “Harmonisation will be key in the global Islamic economy agenda of 2016,” Abdulla Mohammed Al Awar, DIEDC CEO, told OBG.

Dubai has created a 622,450-sq-metre Halal Cluster in Dubai Industrial City, a 52m-sq-metre zone close to Al Maktoum International Airport and Jebel Ali Port. The aim is to offer integrated warehousing, logistics and showrooms to companies catering to consumers of sharia-compliant food, cosmetics and personal products. Working through a strategic partnership with ESMA, the UAE government hopes to attract more businesses to the cluster and increase awareness of the national halal mark. Dubai aims to establish itself as a world leader in halal regulation, but there are challenges when it comes to a unified approach across Islamic economies on several continents. “Sharia harmonisation is a challenge, and it will take time to find their way, but a centralised global certification hub would be a positive development in the halal industry,” Bashar Al Natoor, global head of Islamic finance at Fitch Ratings, told OBG.

Islamic Fashion

“The State of the Global Islamic Economy Report” says that people in the UAE spent $18.24bn on Islamic clothing in 2014, the second-highest total for any Muslim country after Turkey, where the market was valued at $24.84bn.

The report estimates that Muslim consumers spent $230bn on clothing in 2014, equalling 11% of total global spending on clothes, with this segment up 3.8% over the previous year. Dubai is a well-known entry point for global fashion brands seeking a foothold in the Middle East, and international brands are also starting to cater to Muslim customers. Mango, Tommy Hilfiger and DKNY have all attempted to serve this market, with DKNY launching a Ramadan-themed range, and the UK department store House of Fraser has carried a selection of more modest sportswear. “Islamic fashion seems to be steadily going mainstream. You can now find modest fashion collections from big retailers such as Zara or H&M. Standardisation, nonetheless, is a global problem. Unlike halal food, when you buy Islamic fashion, putting a stamp on it doesn’t mean that it meets certain requirements, as nobody knows how you will end up wearing the clothes,” Alia Khan, chairwoman of the Islamic Fashion and Design Council, told OBG.

A young inventor in the UAE may have found a solution that will appeal to millions of Muslims exercising in hot and humid climates. In 2015 a 17-year-old Syrian from Sharjah displayed an innovative garment at the Abu Dhabi Wearable Tech Show. Sahib Mas’ab Al Turk’s cooling jacket features two fans that are run by a dynamo connected to running shoes, so that the wearer will become cooler the more they walk or jog.