Local demand shields retail players as tourist-heavy locations feel the pressure

It’s been a tale of two markets for the UAE’s retail sector in recent months. As falling tourist numbers hit headlines, the effect has been different on Emirates-based businesses with a more local client base, and those in tourist-heavy locations. Of the former, some tell us the period actually turned out to be one of stability, and even growth for some.

BACKGROUND- Major destination malls did see a dip in traffic: “The loss of tourism following the conflict has affected footfall in the major malls,” Fitch’s Head of Corporate Ratings for Middle East and Africa Paul Lund tells EnterpriseAM. Sales were down by almost 50% in March at Mall of the Emirates, Director of Research & Advisory at GRMC Advisory Services Subodh Panangatt tells us. The number of tourists fell dramatically since the conflict hit, with DXB handling fewer passengers, down 31.3% y-o-y, and hotel occupancy falling a similar 30.3% y-o-y to 56.4% in the first half of the year.

“Super-regional malls felt the sharpest impact initially,” Panangatt says. Destination assets relying heavily on international visitors felt the brunt in particular, he adds, because tourists often show up in an outsized portion of spending, accounting for 20-25% of sales despite making up 15-20% of footfall.

Teeb Perfumes, a UAE-based fragrance brand, saw a downturn in traffic at its Global Village Dubai location on the back of the fall in tourist numbers, founder Noushad Ponnambath tells us. The store had to close for several days, and some areas of customer flow and sales were down by 10-30% during that period. Despite this, its local customer base supported sales during the period, and overall activity is now picking back up, he says.

On the flip side, at Maison Arabelle’s locations in malls catering more to a local demographic, footfall and sales were a different story. The luxury abaya and kaftan atelier actually recorded an uptick in customer traffic and sales, with 2Q 2026 footfall at its Dubai store rising 85% y-o-y before dipping slightly in 3Q over the summer, though remaining up 49% y-o-y, founder and CEO Amina Bouchiba tells EnterpriseAM. Their stores are in Wafi Mall in Dubai and Reem Mall in Abu Dhabi — both noted for an affluent customer base largely made up of Emiratis and long-term residents from the GCC and further afield.

Similarly, sales were largely steady for the period for wearable art brand Nasab Art, a UAE-based small business, founder Safiya Al Mahri told us. UAE residents and locals make up the lion’s share of Nasab’s customer base.

The bottom line here: Super-regional malls with more of a cushion from a higher resident base clientele bounced back more quickly, while “more purely destination-led, tourist-dependent malls are still on the path to recovery,” Panangatt tells us. Sales were also skewed after the usual 20-25% sales contribution from tourists fell to 5-10%, with revenue mixes shifting toward residents, he adds.

Everyone had to adapt, though

Longer shipping times from China prompted Nasab to look inward to UAE-based suppliers instead for materials like buttons. Al Mahri describes the experience as “an eye-opener,” showing her the risks in a business model with reliance on overseas suppliers.

This is a trend we’ve been tracking elsewhere: More firms have been switching to domestic suppliers in the past couple of months, S&P Global Purchasing Managers Index for August showed, with Senior Economist at S&P Global David Owen telling us the disruptions have “encouraged firms to diversify and enjoy the benefits of having local suppliers,” possibly leading to businesses retaining stronger local relationships as part of a broader, more long-term risk-management strategy.

Maison Arabelle credits another part of its growth to a resilient inventory and to securing supplies ahead of time, keeping its operations more insulated from the logistical disruptions, Bouchiba says. Its overall production is also entirely in-house within the UAE. However, for certain high-quality materials — think silk from South Korea or linen from India — rethinking sourcing isn’t much of an option. For those international orders, “delivery times took a little longer, but we didn’t stop and the product always reached the customer,” Bouchiba says.

Hospitality players had spent time during the period to work on upgrades, and that logic seems to be present within the retail space as well, as Bouchiba tells us that Maison Arabelle expanded its workforce and also opened a new workshop.

State-backed help was there too: Dubai’s Economy and Tourism Department ran a 3-day Super Sale in May, Panangatt notes. Similarly, the Mallathon and Walk to Unlock also ran to try to bring footfall and subsequent sales back into the sector, he says. Such moves mirror a wider drive, especially in Dubai, to roll out support, with economic relief programs worth AED 2.5 bn in total targeting affected sectors like tourism, trade, customs, and aviation.

Firms also ran promotions and initiatives consistently through the period, Panangatt tells us. Teeb Perfumes opted for marketing campaigns, reductions, and product offers to support sales, Ponnambath says, while Bouchiba notes that malls, especially those connected to hotels, rolled out programs like games to encourage engagement with the retail experience.

An online presence helps: “With the changing customer flow, we have also put greater focus on social media… and online presence,” Ponnambath tells us, with Teeb Perfumes doubling down on social media channels, as well as WhatsApp Business, Amazon, Noon, and its website to support sales and mitigate a temporary dip in physical customer traffic.

Background: Online retail revenue has increased by over 64% to USD 9.2 bn this year, according to Dubai South, citing Statista data, and Panangatt notes a spike in online orders during the conflict.

The outlook

Fitch is looking toward November for a recovery, when non-regional airlines resume flights, supporting tourism and a potential rebound in retail expenditure toward the end of the year, Lund says. A certain degree of cushioning came from population growth, he adds, as 160k more residents came to Dubai this year as of August.

International names also seem to be doubling down, war or not. Several international players entered the UAE market at the start of this year and are eyeing more expansion. In September, Primark announced plans to open its first-ever store in KSA, after launching its first Dubai shop in March near the start of the conflict, and expanding with two others across Dubai. US-based Ulta Beauty also opened several stores this year, and Majid Al Futtaim is also planning new openings across its wider portfolio.

On the ground, there’s a sense of optimism among businesses, with Maison Arabelle and Nasab both planning regional and international expansion for the coming period, citing continued demand from a reliable customer base, while Teeb Perfumes is looking to markets in India, the US, and the UK.