Dubai: For a casual onlooker, the Oasis Centre on Shaikh Zayed Road is caught in the mall industry's version of being between a rock and a hard place. How could it be otherwise with Mall of the Emirates on one side and The Dubai Mall on the other?
The sentiment they may have is the smaller mall would definitely feel the squeeze from its neighbours in attracting shoppers. But try telling that to the people behind the Oasis Centre.
"There has not been any such negativity we had to face since the launch last year, and our footfalls and sales have grown month-on month," said Sanjay Kapoor, general manager of Oasis Centre, which is part of the Landmark Group.
"We believe the visitor needs of bigger malls are very different to that of smaller ones."
By identifying and astutely working towards meeting those needs, a raft of smaller malls have been able to carve their niche in Dubai's retail space. And far from being daunted by the expansiveness the mega malls can command, the smaller malls work their margins by being an integral part of the immediate neighbourhoods they are in.
"The Oasis Centre shoppers are primarily a mix of Emiratis and Asian expatriates, and the mall is extremely popular with family units," said Kapoor. "We do not think these demographics will change as our store mix has not changed."
Best formula
Other neighbourhood malls are working on finding the retail formula that would best serve them. They also have the flexibility to make changes to the mix if one concept is seen as not working and there is a need to come up with another.
An upcoming mall in Mirdif hopes to do so by having a strong anchor tenant and creating a secondary attraction through its food court offerings. The many smaller retail outlets spread across the malls will, in turn, feed off this traffic. "Once we are able to build up a certain level of traffic, the business can be sustained," said an official with the mall in Mirdif. "A neighbourhood mall does not have the complex dynamics that a much bigger mall will have to look into."
For the destination malls, not only do they have a higher installed cost base, the running and service costs also tend to be greater. One way these malls try to recoup this is through placing a significant mark-up on rents.
This is where being smaller has its inbuilt advantages for neighbourhood malls. By having a competitive rental regime in place, they are also better placed to wade through a market downturn.
"Rents may be lower or higher depending upon location inside a mall, so there is a band of rent rates which may overlap between the two types," said Abhay Nadkarni, executive director at Al Aqili Retail.
Destination economics
"What is important to note is that the economics of destination and neighbourhood malls are quite different because of the different scales of operation. Neighbourhood malls would definitely need to maintain their attractiveness to local residents in order to survive, and frequent visits are important as the number of visitors is less.
"There is also the need to be a value-for-money destination for F&B and entertainment as these are the most frequent reasons for visits by consumers."
One way to get that steady stream of shoppers through the doors is by convincing them there will be something in it for them. Oasis Centre thus places great store on promotions as a marketing strategy, and others are not far behind in choosing the same trajectory.
"We are aware shoppers are constantly looking for more value and hence the need to offer this incrementally is reflected in our promotions," said Kapoor. "Our store mix is in the value segment and our traffic spikes by almost 30 per cent when there is a special promotion or a big sale by our anchor stores.
"Unlike bigger malls where entertainment and leisure are the main attractions, mid-sized malls are essentially for the serious shopper who knows exactly what they need, have a budget in mind and quite aware of where he wants to get it from."
But there's a downside to a heavy reliance on promotions to get the shoppers coming. Used beyond a point, there's a real risk that the mall will be conceived as a discount shop.
"It might start attracting a certain demographic that is at odds with the typical shopper profile a mall might have been attracting in the past," said a retail industry analyst. "Then it turns into a high-risk, low return end game." For neighbourhood malls, that's a very thin line indeed.
Positioning important
Over the years, the leading retail groups in the country have refined their strategy to get the best out of their presence in destination malls as well as in neighbourhood shopping centres.
"One will see that multi-store operations typically will want to operate in both types of malls, with different models for operation," said Abhay Nadkarni of Al Aqili Retail. "Single-store operations would prefer destination malls as the consumer footprint is larger and they give a wider geographic coverage.
"Niche stores which have a concentration of their target consumer located in a particular neighbourhood would prefer a mall in that area."
What of the consumers? "The compact space at neighbourhood malls is less daunting, they are less crowded and offer more privacy in shopping, which is particularly important for Arab consumers."
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