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Blooming times for retail sector
As Dubai's tourism began to thrive, bringing in visitors from various countries and of different tastes, the variety of retailers grew as well.
- By Nadia Saleem, Staff Reporter
- Published: 00:02 October 1, 2008
Twenty years ago, when the first shopping malls were opening in Dubai, no one could have imagined where the retail industry was heading. Maybe the visionaries had plans for another mall or two, but the 20 million square feet (1.8 million square metre) of retail space that exists today must then have been only an audacious possibility for a small city, albeit one that had potential.
Issues of strategic leasing followed the growth of retail business. Which brands should be showcased at the mall? Of what origin and region should be the brands being brought in? Where did the local demand lie?
In recent years, retailers enjoyed another advantage from setting up base here. As business thrived, retailers saw opportunities to expand into neighbouring countries, according to Eisa Adam Ebrahim, the chairman of the Dubai Shopping Malls Group (DSMG).
"We have a flow of brands coming to Dubai and it has become the gateway for the whole region," he said, adding that many homegrown brands have successfully crossed borders and have established themselves in the whole region.
As the city's tourism began to thrive, bringing in visitors from various countries and of different tastes, the variety of retailers grew as well. Everything from the not-so-well-known brands to the internationally acclaimed names began dotting the malls and elite locations, such as five-star hotels.
"Bloomingdale's is now coming to Dubai as a second big anchor for malls here, following Sax Fifth Avenue and Harvey Nichols and Debenhams, not to mention the hundreds of mono brands and boutiques and flagship stores opening up in the malls of Dubai," Ebrahim said.
The popularity of the city helped in attracting names that had a reputation to protect when entering a new market. Dubai's growing prestige however, easily won them over. Many well-established brands with outlet locations across the region have gained a foothold in Dubai, a city of humble beginnings.
"Dubai is doing very well at branding itself in other markets," which creates a lure for brands," said Neil Tunbridge, the head of retail services for GRMC, a management consulting and business advisory firm.
"With the high tourism, and high spending market that is in UAE, the brands want to be here," he said.
With the country's economic growth, the government made sure that it became popular as a destination for tourism as well as business activities. Recently, the UAE ranked sixth in the first nation-branding index complied by an online American portal.
On the UAE and Dubai as a preferred destination to other countries in the Middle East, Tunbridge said, "There are a lot of brands here that don't exist elsewhere in the UAE or Middle East, just because they know Dubai is growing very quickly and has very aggressive retail."
Another factor that encourages brands to open up stores in UAE, according to Ebrahim, is because of "good retailers who go out and search for brands with potential and convince then to come to Dubai".
A lot of good brand operators in the region are Dubai-based, he said, and they take the franchise to the whole region successfully.
Another reason why Dubai attracts international brands is it's adoption of globally recognised business practices.
"Malls of Dubai are designed and built according to the international standards," he said. "Our strength lies also in the way we manage the malls in our country."
UAE's business environment has also been a key factor. "An advantage is that the environment is tax free and very attractive for investors," Ebrahim said.
Dubai is seen globally as a shopping resort, reflected in the acres of shopping space being constructed in the emirate.
"Over 50 per cent of Dubai's retail revenues are driven by tourism inflows," said Ian Albert, regional director at Colliers International.
A report on real estate by Colliers International, a real estate firm, said that over 70 per cent of forthcoming shopping malls due to enter the Dubai market between now and 2010 have already been let out.
The six new retail projects proposed include the Dubai Mall, due for completion this year with a gross leasable area (GLA) of 344,000 square metres. The Walk at Jumeirah Beach Residences, has a GLA of 71,500 square metres and Oasis Mall 60,000 square metres. Both are due for completion this year.
Sudden burst
Mirdif City Centre of retail area of 183,000 square metres and Dubai Marina Mall with 77,000 square metres are due for opening in 2009.
The Mall of Arabia, touted to be the biggest mall in the world with a leasable area of 400,000 square metres, is due to open in 2010.
The sudden burst in retail space has triggered a surge in retail spending. Dubai's retail spending could cross Dh27.89 billion ($7.6 billion) by the end of 2009, according to Retail International.
By 2009, retail activities in shopping centres would contribute about 50 per cent to Dubai's gross domestic product. By 2009, Abu Dhabi's retail spending will reach Dh7.19 billion, while in Sharjah, it will cross Dh2.36 billion. Retail spending in the UAE is expected to touch almost Dh37.44 billion a year by 2009, according to reports.
"This is a booming place and I can speak from a retail point of view our figures always show a minimum of double digit increase in the sales and income every year. Dubai continues to add more retail space, going from less than five million square feet around ten years back, to close to 20 million square feet of retail space today," Ebrahim said.
He added that there is still increasing demand for shopping malls, despite the credit crisis in Europe and North America, which does not seem to have any affect on Middle East's retail industry.
"Hopefully the winds will go somewhere else," he said.
The demand driving the retail industry was largely dependant on the constant influx of tourists. While Dubai itself had a small population, its location at geographic "crossroads" promised greater exposure. Travellers from Asia to Europe - or further - have the choice of stopping over in the budding city of gold, as it was known a few years ago, to explore the hubbub themselves.
"Tourism is having a big impact on the retail industry. Dubai has an international presence to bring tourists in and when they arrive, malls here do their best to engage visitors and convert them to shoppers," Ebrahim said.
"As long as the government continues to drive the objective of tourism, the retail sector is going to benefit and improve. We are going to attract five million visitors annually very soon, and Dubai's target for 2015 of 25 million visitors will be achieved sooner than expected," he added.
On the outlook of retail growth, Tunbridge said that the market should continue to keep up the momentum of success.
"The retail market will certainly continue to develop for the next five to ten years. While there is economic development and high liquidity, it can all translate itself into a strong retail market," he said.
At the base level of the retail industry is the continuous consumer confidence.
Comparing consumer confidence in the region to other international markets, Tunbridge said, "The dirham certainly goes a long way, when you are looking at the availability of wealth that can be spent in the retail sector, and certainly on high-priced consumables."
He added that the sector is riding a wave of high consumer confidence and will continue to do so for the next couple of years.
"This might not be mirrored in the job market, but the introduction of new shopping festivals or reinvigorated festivals certainly helps as well," he said.
Debut: Bloomingdale's to open soon
The latest addition to Dubai's growing list of prestigious brands is Bloomingdale's, a brand under the larger umbrella of Macy's Inc.
The Al Tayer Group, known for bringing in big names to the market as well as managing and operating them, has successfully convinced the retail chain for its first foray off American soil.
The group also brought brands to Dubai such as Bvlgari and Armani as their first presence in the region. They brought in almost 30 of the world's famous luxury brands. The group's retail arm, Al Tayer Insignia is the largest luxury retailer in the Middle East, which also operates 64 stores. They will add two more stores to their list, with Bloomingdale's outlets in 2010 at Dubai Mall.
Macy's with a total of 810 outlets across the United States is sending its Bloomingdale's segment, which has 40 stores already, out of America after 150 years of operations. The conglomerate has been seeing declining sales over the past few years, like every other retailer due to weakening economy and eroding consumer confidence.
Company officials hope to enter a market that offers them opportunities that currently do not exist in their home markets. "Dubai offers a unique opportunity for Bloomingdale's. It is a fast-growing, affluent marketplace that has emerged as an international destination for tourism, sporting events and business," said Terry J. Lundgren, chairman, president and chief executive of Macy's Inc.
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