DUBAI

In the UAE, the retail sector is all over the place … and even figures as part of an elaborate April Fool’s Day prank. That was JadoPado, the online marketplace, announcing it had raised $1 billion (Dh3.67 billion) to build a behemoth mall near the Expo 2020 venue and where access would depend on whether future shoppers carry smartphones with Apple or Android apps. Among other things.

But beyond the make-believe, there is a lot happening in the UAE’s retail sector that are pointers to the future. Sure, consumer sentiment is still on the downside, with most shoppers unwilling to splurge on anything beyond the needed. They are scouring over their credit card bills for any hint of potential savings.

But there is something else in the air … and that’s lifting spirits just that bit. Amazon’s direct entry into the region by buying up Souq has energised sentiments. And that has to do with much more than what the deal’s value might be — whether $600 million or $700 million plus. The most important thing is that the deal happened.

“It sets up a marker for the region’s entire retail space, offline and online,” said an industry source. “It opens up possibilities for other global vendors to seek possibilities.

“You already have the early eCommerce pioneers in the UAE, Saudi Arabia and North Africa who have drawn in sizeable funds from investors. Now could be a good time to ask for more or get serious bidders to acquire them, as was the case with Souq.”

Market sources say that the big Chinese internet giants are still unrepresented in the Middle East, and they are not the sort to wait around for the online markets to settle first. “Some of the existing minority shareholders in these online ventures may want to cash out,” said an analyst. “Taking on two pan-regional heavyweights at the same time — Amazon and the soon-to-launch Noon.com — might affect their valuations. And it could hurt them even more if they hold on for too long.

“Any which way, the region’s online space will see some consolidation.”

Not that all of the action is only happening virtually. Dubai developers have signed off on the next generation of mall projects, with the Meydan One Mall recently having its groundbreaking. Nakheel’s massive Deira Islands Mall is awaiting the naming of its main contractor. The retail district at Dubai Creek Harbour will also be revealed.

The thinking is that each of these destinations will build up a sizeable residential base and which the new retail spaces can feed off. Plus, with the visitors Dubai attracts each year, there will be enough for all.

But mall owners who do not offer that something extra by way of leisure and entertainment options need a bit of think. “We foresee the market to moderately segment itself with higher performing and lower performing assets created by a process of natural selection by retailers,” says a recent retail sector update issued by the consultancy Core Savills. “A gap is anticipated to form between these two subcategories, reflected through heterogenous rents and vacancy levels — a case similar to Dubai’s two-tiered office market.

“Retailers are expected to optimise footprint and mark a flight to quality towards perceived high functioning malls while the slower performing malls may see a cascading effect of rising vacancy levels caused by this shift.”