When it began, the Dubai Shopping Festival (DSF) was a local retail jamboree, a month of bargains to boost the economic new year. The inaugural event, in 1996, attracted 1.6 million shoppers who spent US$584 million between late January and the end of February. "Shopping tourism" had arrived in the Middle East.

Since then, the government-supported festival has grown into a veritable World’s Fair of tax-free shopping, entertainment and cultural extravaganzas that sprawls across the emirate’s many malls, food courts, restaurants, hotels, amusements and cities within a city.

Organizers say it’s the tip of the spear in a broader effort to "reposition" Dubai as more than just a "seven-star" Mecca for the rich and famous. The emphasis is on more affordable shopping and travel options, which are now in demand. Merchants outdo each other with discounts that can reach 75%, and shoppers joyously cart off jewelry, perfumes, textiles, handicrafts, electronics — and even automobiles.

"The DSF is unlike any event in the world," says Laila Suhail, CEO of Dubai Events and Promotions Establishment. "It has grown to be among the foremost shopping events in the world, and the biggest of its kind in the region."

The DSF has helped shopping and tourism emerge as key pillars of the government’s strategy to make Dubai a leisure destination in the Middle East, particularly since the 2008-2009 shock knocked Dubai off its economic moorings. (The International Monetary Fund is forecasting a 0.5% contraction next year, although overall the United Arab Emirates’ economy is predicted to grow 3.1%.)

Bargain Hunters Abound

Although the global financial crisis has humbled high-flying Dubai, it has not scared off bargain hunters or those with plenty of discretionary income. More than 3.3 million people spent US$2.66 billion at the DSF in 2009, and a slight increase (US$2.67 billion) was predicted for this year’s festival, which attracted more than 6,000 retailers, 60% of them pushing gold and silver.

The DSF’s theme is "One World, One Family, One Festival." Countries erect pavilions in Dubai Village to showcase their culture and heritage through handicrafts, clothing, music and dance. Shoppers can win gold, jewelry, luxury autos and US$10,000 cash for being chosen the "Ideal Arab Mother" or "Ideal Family." There has been a circus, a perfume souk and a Bedouin-style "Family Desert Camp" (with camels and tents). There are festivals of jazz, film, dance and cartoons. The closing ceremonies rival those of the Olympics.

Targeted marketing bolstered DSF 2010, which saw a big increase in the number of amusements. For the first time, festival officials traveled to India to promote the event. "The DSF extends the concept of shopping as an exclusive experience for Indians who love to visit malls and buy branded products at attractive discounts," says Anandakuttan B. Unnithan, a professor of marketing at the Indian Institute of Management Kozhikode.

Looking to increase commerce during the historically slow hot months, the rulers decided to leverage the air-conditioning of their shopping palaces by adding the Dubai Summer Surprises, the summer equivalent of the DSF, 13 years ago. This year’s event opens on June 17 and runs through August 17, just before the beginning of a new school year and Ramadan. Then comes Eid in Dubai, another retail promotion marking the end of Ramadan that emerged in 2008, when the financial crisis rippled through the debt-laden emirate and emptied its malls, airplanes, hotels and luxury condos of tourists and expatriate workers.

Suhail says the public-private partnership is vital, even if some of the retail partners wind up being loss leaders because of steep discounts. The winners are the hotels, apartment flats, and restaurants, which would earn nothing without warm bodies in rooms or at tables. Package tours — in which airlines, hotels and tour operators get together to offer deals at various price points – have also had success. Meanwhile, the government has played a significant role in building the retail and tourism infrastructure, financed partly by the private sector: the hotels, malls, roads, airports and Metro.

These public-private partnerships have been essential to creating the Dubai brand, which has spawned smaller shopping festivals in the Gulf, such as the Qatar Summer Wonders event in Doha, and even in conservative Saudi Arabia, the "Riyadh Festival for Shopping and Leisure," which the local chamber of commerce claims is "not only the residents of Riyadh but tourists from all over the world to enjoy."

A Major Part of the Economy

In late May, Sheikh Ahmed bin Saeed Al Maktoum, who oversees the emirate’s airports, airlines and festivals, said that the retail festival industry had transitioned from being just entertainment into a major contributor to its economy. It’s proving to be a big driver for tourism, which accounted for nearly 40% of Dubai’s first-quarter GDP, according to government figures released last month, and about 22% of the country’s overall GDP, according to a recent report by the Federation of UAE Chambers Of Commerce and Industry.

By comparison, during the launch of the Dubai Strategic Plan in 2007, Al Maktoum acknowledged that the non-oil sector accounted for 97% of the emirates’ total GDP, compared to 67% in 1975. (Abu Dhabi’s economy, by comparison, still relies heavily on oil.)

Currently the eighth most-visited city worldwide, ahead of Shanghai and Rome, Dubai has drawn up plans to more than double the number of tourists it attracts annually by 2015 — 15 million a year compared with the current seven million. According to the Dubai Department of Tourism and Commerce Marketing, in 2007, the latest year for which official numbers are available, the largest numbers of tourists came from the U.K. (752,391), followed by Iran (413,721) and India (410,821).

"Our main focus is on the GCC [Gulf Cooperation Council] countries, Asia and CIS [Commonwealth of Independent States], as these nationalities love to shop," says Suhail.

To that end, the government is pushing ahead with the Al Maktoum Airport, the world’s largest. Occupying part of the 140-square-kilometer, debt-plagued Dubai World Central, the first phase of the airport will open on June 27, Ahmed said, adding that Dubai International Airport is being expanded as well so it can handle an expected 46 million total passengers this year and 100 million by 2020.

Searching for Unique Experiences

But competition is coming. According to Unnithan of the Indian Institute of Management Kozhikode, Hong Kong, Singapore, Thailand and other popular destinations offer similar shopping jamborees, competing for the same set of spenders.

"There are cheap flights not just to Dubai but to virtually every destination in East Asia, which encourages shoppers to [seek out] unique experiences," he says. "Even [the southern Indian state of] Kerala has its own version of a shopping festival." Addressing Indian travelers specifically, Unnithan points out that in this globalized world, almost everything is available in the posh malls that have sprung up across major Indian cities.

Finally, he is skeptical about the continuing charm of the Dubai Shopping Festival. "In the retail lifecycle," he says, "the advantages of any exclusive shopping experience are neutralized by the cost increases [for customers] over a period of time."