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CEA Delegation Sees Opportunities In Dubai

Dubai, United Arab Emirates — Everything you think you know about Dubai and the United Arab Emirates, at least as far as the consumer electronics business is concerned, is probably wrong.

Just how much is misunderstood about this corner of the Middle East is evident in the reactions of the group of American consumer electronics executives attending and exhibiting at the HomeTech Middle East held at the Dubai International Convention and Exhibition Centre the last three days.

“What did we find in Dubai?” rhetorically asked Noel Lee, founder of Monster Cable. “We found world-class retailing and monstrous potential for partnerships — beyond my expectations. They are so sophisticated, and I didn’t know that. They know how to market in a place like the Middle East. This is CE retailing at its best. The message is — we’ve got lots of opportunities. They’re looking for innovation and new ways of doing things. Here it’s exciting and they want to try new things.”

The Consumer Electronics Association (CEA), which is co-sponsoring HomeTech Middle East as part of a larger partnership with international trade fair organizer Messe Frankfurt, also held a meeting of its Board of Industry Leaders here, the first outside the United States.

Among the companies exhibiting in the special CEA area of the show floor were Absolute USA, American Consumer Technologies, Audiovox, Channel Vision, Dell, Diesel Audio, Ethereal Home Theater, Luxman, Maxsa Innovations, Mitek, Naneu Pro and Sima Products, as well as Monster Cable. The HomeTech show has twice as many exhibitors as it did last year and is expected to have three times the number of exhibitors from this year’s show next year.

“As business in Dubai booms, we see a region with endless possibilities,” noted Gary Shapiro, president/CEO of the CEA, during his keynote address. “For the consumer electronics industry, expanding into the UAE is simply the next logical step for companies looking to grow their brand internationally.”

Booming is an understatement. Shapiro’s remarks were obviously prepared before arriving in this morphing megalopolis stretched along the Arabian Gulf. Like most of first-time visitors from CEA, Shapiro was stunned by the vastness of the construction taking place in the 1,588-square-mile emirate and the controlled chaos of the gleaming concrete, steel and glass forest rising from the hot, shifting sand. It seems that every square foot is in some sort of development stage for highways, bridges, light rail lines and, of course, buildings — bizarre Architects Gone Wild towers 30, 40, 50 and more stories tall. The Burj Dubai building, when finished in mid-2009, is expected to be the world’s tallest building at nearly 3,100 feet high with 160-plus floors. The Al Burj office tower, being built a few miles away, is expected to include 200 floors and rise nearly 4,000 feet when it is completed in late 2009.

Construction cranes dot Dubai’s elevated skyline. It is time-lapse urban development. This sea of job sites are strewn with an estimated 400,000 workers, imported from India, Pakistan, Bangladesh and other countries from the sub-continent. Eighty percent of the population is non-native and increasingly western as foreign investment flows into the city.

Dubai is one of seven emirates (comparable to a U.S. state) comprising the United Arab Emirates, the 36-year-old constitutional federation located on the south-eastern Arabian Peninsula that also includes the capital and largest emirate, Abu Dhabi, along with Sharjah, Ajman, Umm al-Qaiwain, Ras al-Khaimah and Fujairah. Dubai’s population is expected to reach nearly 1.9 million by the end of this year from 1.3 million in 2005. According to one local retailer, more than half of this population is less than 20 years old, and the other half is mostly less than 40, critical CE demographics.

“The fact that $47 billion of new housing construction is underway and over one third of the world’s construction cranes fill the skylines of the UAE symbolizes the magnitude of this region’s expansion,” explained Shapiro. “Dubai is a mere two-hour plane ride for 1.5 billion people spanning the Middle East, South Asia and the Caspian region. And, with Dubai now the ninth-largest seaport in the world, the area is truly a gateway for the entire Gulf region. This is a region that companies around the world cannot afford to ignore.”

Dubai’s explosive economic expansion is fueled primarily from tourism rather than oil, which accounts for just 3 percent of the emirate’s income. The city has 306 hotels — with dozens more currently under construction — with 85 percent occupancy thanks to an estimated 6 million tourists last year. Burkas, Bebe and every style of dress in between mix comfortably in Dubai’s fashionable Western-style shops and malls. The government has set up industry-specific free zones throughout the emirate. Tenants in Dubai Internet City and neighboring Dubai Media City, includes Canon, Dell, IBM, Microsoft, Oracle, Siemens and Sony Ericsson, for instance.

More importantly, about $1.7 billion worth of consumer electronics were sold in Dubai last year. Among the emirate’s major “big-box” electronics retailers are Plug-Ins Electronix, which attracts more than 2.4 million visitors to its six UAE stores and could easily be mistaken for a Best Buy or a Circuit City but for its bright yellow color scheme; Sharaf DG, which this month opened a 100,000-square-foot store in the new Times Square Centre in Dubai; and Jumbo Electronics, which has a 40,000-square-foot store in the huge Mall of Emirates, which features an indoor ski slope.

While Dubai, the UAE and the Middle East represent a new frontier for CE, the area also has its drawbacks. For content providers, piracy is a pressing problem. There is only scattered cable-delivered HDTV service in Dubai, which gets most of its TV via DTH satellite. But flat-screen HDTVs are immensely popular in spite of this lack of HD programming, with TV penetration above 80 percent. Even though cellphone penetration in Dubai is 123 percent and more than 70 percent in the UAE, the reach of the EDGE network is spotty at best. Dubai’s Internet service is slow, unpredictable and filtered — or censored — through proxy servers. “The Middle East is gadget rich but bandwidth poor,” observed recent émigré Mike Whittaker, technology director of Showtime Arabia, during a panel discussion. “Bandwidth is very expensive, three times the cost to consumers in the Middle East than in developed countries.”

In addition, few products are acclimated for use in the Arab world. “Local needs are not being met,” noted Sofyan Almoayed, managing director for iMachines, Bahrain’s largest Apple reseller. “iPods are immensely popular here, but they do not have menus in Arabic. We don’t have manuals in Arabic from any company.” Almoayed pointed to his traditional Arab headdress and robe and humorously noted the problem selling over-the-head headphones and belt-clipped products in the Middle East.

And then there are, of course, the 800-pound camels in the room, religion and politics.

“In a world where political and cultural differences sometimes build walls between societies, the consumer electronics industry creates phenomenal products that help break down barriers,” Shapiro said. “Reliability creates relationships and these relationships allow business to be the ambassadors of goodwill. We believe free trade promotes peace. I believe with all my heart that our industry makes the world safer, it brings people closer and this tradeshow, in such an important region of the world, will enhance trade and make things better.”