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The gift cards market in the UAE will see a bit of a slowdown this year due to the coronavirus pandemic, but it will continue to grow year-on-year and reach more than $2 billion in about four years, a new report said.
Gift cards have gained popularity in the country in recent years, with research analysts recording a steady market growth or a 19.2 percent compounded annual growth rate (CAGR) from 2015 to 2019.
By 2024, the market size will reach $2.04 billion, which will be 60 percent higher compared to $1.3 billion in 2019, according to a report by research firm PayNXT360 published on ResearchAndMarkets.com. Overall, the market will post a CAGR of 13.3 percent during 2020-2024.
The growth will be partly fuelled by the UAE e-commerce market, which accounted for more than 30 percent of the retail trade in the Gulf Cooperation Council (GCC) countries in 2019.
Gift cards are popular among shoppers who want to avoid the hassle of buying presents during special occasions. They are loaded with cash like the regular prepaid debit cards and allow the recipients to purchase whatever they want.
Some shoppers also resort to buying gift cards for personal use, due to ease of use and availability – they can be found everywhere, from the grocery store to the shopping mall concierge and even online.
Product launches
Due to the growing popularity of gift cards, the UAE has seen several product launches in the market in recent years. In July 2019, Google Play rolled out its own gift card in the UAE, allowing users to purchase apps, movies, book and other items at leading retailers across the UAE.
In November 2019, Netflix launched a new gift card for UAE subscribers. The product works as a prepaid voucher which allows consumers to become a Netflix member and pay for their subscriptions. The product can be purchased in both digital and physical versions across retailers, such as Lulu Hypermarkets, Etisalat, Virgin Megastore, Sharaf DG and Carrefour, among others.
According to the report, an increase in adoption by corporates is also giving an impetus to the already growing gift card market in the UAE.
Companies find it affordable to buy e-gift cards for their staff, especially during difficult economic conditions when giving away a salary increase or bonus is not viable.
Slowdown
Over the near term, however, the market will see a slowdown, as business and consumer sentiments decline due to the disruption caused by the COVID-19 outbreak. The impact will be felt across retail and corporate segments.
However, there are certain segments that are expected to see some growth even during the pandemic.
“Though growth of [the] gift card industry will be impacted due to the pandemic, there are certain segments, such as self-use, which will gain significant market share,” the report stated.
The adoption of e-gift cards is also expected to increase significantly over the next four to six quarters. “There are interesting trends emerging across various segments, which are expected to fundamentally reshape gift card industry dynamics,” the report added.
The UAE’s growing e-commerce market, which is forecast to reach $30.6 billion by 2020, will be another major driver.
“Despite near-term challenges, the medium-to-long-term growth story of gift cards in [the UAE] remains strong,” said the report.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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© ZAWYA 2020
