Dubai: At the rate super-premium retail space is getting snapped up in Dubai, mall developers may well be within their rights to build more. The last three weeks have proved a particularly active one for the sector with a handful of global brands marking out their first stores here.
Scotland's M&Co, an independently owned fashion- and casual-wear label, has opened in The Dubai Mall and so has Turkey's Mudo City, which sells everything from fashion to furniture. For both this represents the first time outside their domestic markets.
"We had zero stores overseas and this venture gives us a great opportunity to expand internationally [by] offering high street fashion," said Lee Braid, who heads the international operations at M&Co, which operates 300 stores in the UK and has plans to add more.
According to market sources, the current round of frenetic activity is taking place because it would be a further two years or so before fresh space becomes available in The Dubai Mall. The situation is similar at the Mall of the Emirates, which will have its own bragging rights with the opening of Prada and Coach outlets in its newly developed luxury retail cluster.
And it is not all about size or having a track record. A brand new community mall, which is to open soon in Dubai, is recording significant leasing interest, according to an official there.
This is good news for the local economy. New stores translate into new job creation, and that translates into major momentum build up for this key sector.
Meanwhile, global brands and their local franchises want to get a look-in now rather than have to wait for fresh new stock to emerge from the pipeline. That too despite signs of an incremental firming up in mall rentals, or at least at those properties which can command such a mark-up.
But are local franchise houses under tremendous pressure to get prime locations from global brand majors?
"It depends on the brand — if the brand is strong, the mall management would always make room," said Aniss Baobaid, general manager at Abu Dhabi headquartered Liwa Trading, which holds the local rights to a slew of fashion and accessories labels and keeps adding to the portfolio.
"There are still many good opportunities, especially for brands that provide great designs and quality to the consumer where the market is definitely growing. I wouldn't say that we have reached saturation, and especially in fashion and kids brands."
But have the terms of franchising agreements changed dramatically from what they were five or ten years ago?
"I don't see any difference — customers were particular about fashion and price and they still are," said Baobaid.
But others say global brand owners are asking for quite a lot… and getting what they want.
A location in a super-regional mall — or The Dubai Mall or Mall of the Emirates, in other words — is, of course, a given. The franchise partner would, among other things, have to open a minimum number of outlets, both within the local market and across a GCC footprint.
Commitment
"Apart from the store openings, franchise partners will have to commit a certain percentage of the sales to marketing and advertising," said a retail consultant.
"That would represent a significant commitment and far higher than what local partners were expected to do in the past."
Then there are the rentals. The decline in lease rates at the leading malls in Dubai was confined to a certain range during the peak of the recent financial crisis and have started to bounce back to near 2008 levels.
"Of course, high rents always impact on margins and profitability," said Baobaid. "Therefore, mall managements should always be flexible and look after the interests of the retailers as well."
But are mall managements listening to this sentiment?
More stores planned
Dubai: Mall operators in the Gulf will have plenty to cheer from Mudo City's near-term plans. The Turkish fashion-to-furniture retailer has just opened its flagship international store at The Dubai Mall and has eyes on more. It is also the first outside of Turkey.
"Our plan is to roll out between 12-16 stores around here," said Mustafa Tavilolu, founder. "There is an energy in the market in the region and we want to tap into that.
"We understand that the customers are always one step ahead and that shoppers constantly look for something. For example, getting into The Dubai Mall was not easy, but they saw the concept and were drawn to it. So we are definitely scouting other locations here. We already have a warehouse in the Dubai Freezone."
Over the last year or so, leading Turkish fashion brands have been making an entry into the Gulf's retail space and angling for a lead positioning currently enjoyed by US and European labels.
