Dubai: There's no such thing as being too late in the retail game. Through a raft of recent franchise agreements, the Dubai-based Al Khayyat Investments (AKI) is building up a portfolio of brands pitched at multiple price points.
As part of the grand strategy, fashion gets a serious look in with the French brands Sandro and Repetto brought on board, and talks are expected to close shortly for another luxury brand.
AKI also has associations with the sports apparel brand Fila and the upscale La Martina label. Most of these brands will be supported by standalone stores at select malls.
But it's not all fashion that AKI is going after. In January, it formalised an agreement with the ¤3.65 billion (Dh19 billion) French company Groupe SEB, which owns consumer appliance brands such as Moulinex, Krups, Tefal and Rowenta.
"We may have come in slightly late, but retail is one local sector that will record high growth numbers in the future," said Ahmad Al Khayyat, managing director of the family-owned business which recorded revenues of $600 million (Dh2.2 billion) in 2010.
Growth prospects
"A lot of this growth will be driven by tourist arrivals and it's not for nothing that the UAE has emerged as one of the leading retail destinations in the world," Al Khayyat said. "If you are getting into the game at a later date, you have to play it differently."
While its interests in fashion, food and beverage, and consumer durables are of recent vintage, AKI has had exposure through running the BinSina chain of pharmacies. This has helped shorten the learning curve as AKI — which also has interests in health care, trading, specialist contracting and real estate — moves to develop its retail arm.
"Retail witnessed its boom years from the early 1990s when some of the leading business groups took early advantage of the [economy] opening up. In comparison we came in late.
Forecast
"But we have been building towards where we are now for a good six years; today we are a mid-sized player in the retail sector," said Al Khayyat.
He forecasts group revenues to touch $2 billion by the middle of this decade.
"We now have 15 or so brands and many more on the way," he said.
"Apart from the fashion interests, brands such as BurgerFuel offer us the right platform to get us going. Fashion and lifestyle, food and beverages, and health care are to be the three core areas we will develop our business around."
Even with all the additions, the retail interests will continue to constitute 20 per cent of group revenues in the future, as Al Khayyat reckons the other divisions will maintain their clout and share of the numbers.
In the next three years, the strategy is to triple the number of stores in the network from the current 70. This is where AKI has its work cut out, according to Al Khayyat.
"As far as I can see, the assumption that retail rents have dropped appreciably is not true," he said. "In fact, we are struggling a bit with the extremely high rents, and we feel it more because we are still expanding our store presence.
Rent factor
"Rents have not come down by that much in retail, particularly in the malls where everyone wants to be in. There are huge waiting lists for all the leading malls and even secondary ones. We are prioritising where we want to be and with what brands," he said.
Even so, the softness prevailing in the other real estate categories is being fully utilised by AKI. "It's a very good time because other costs associated with creating a wider footprint are going down — staff accommodation expenses are down appreciably and this has a positive impact on HR costs," said Al Khayyat.
"The positives out there are so much more."
Future Plans
Focus on contracting
Al Khayyat Investments foresees solid prospects for its specialist contracting business, but has no plans to enter real estate development.
The company is a 50 per cent shareholder in i-Rise Tower, a commercial property located in the Tecom cluster off Shaikh Zayed Road. But Ahmad Al Khayyat sees this as a one off.
"We did not get into too many projects, and divested a lot of the land bank we held well before the downturn," said Al Khayyat.
"The big growth segment we are witnessing today is in contracting, but we are only in niche segments such as landscaping. We will remain a specialist contractor — this way we get to shape the segment we are in. This way we get to be a leader."
