In dreams begins responsibility, or so said W. B. Yeats. Retailers in the UAE seem to have embraced both the dream and the responsibility of creating innovative concepts as they navigate a host of opportunities and challenges ranging from narrowing margins to new delivery models, the rising power of social influence and exciting platforms in personal commerce.
Retail offerings in the UAE now go well beyond the typical shopping mall. From community malls to flash retail, cafés and stores in recycled shipping containers, new concepts are being tested across the nation, with retailers revamping their products to stay upbeat in an era of low oil prices, cautious consumer spending and modest tourist turn out.
Like many other sectors, malls in the UAE were hit hard this year. “During the first half of 2016, the retail sector saw a tough sales growth,” says Rabia Yasmeen, research analyst at Euromonitor. “Both grocery and non-grocery retailers felt the impact of conservative consumer behaviour.” Despite tough market conditions, however, the sector is likely to grow 5.9 per cent over last year, touching $56.6 billion (Dh207 billion) in 2016.
According to Dubai Chamber, the retail and wholesale trade in the UAE currently accounts for more than 11 per cent of the UAE’s GDP and close to 30 per cent of Dubai’s GDP.
While mall developers are aware of changing consumer patterns in the UAE, their responses have been unique, with new retail formats such as the luxury Outlet Village in Jebel Ali.
Other retailers have jumped in to serve a new consumer niche. Meraas, for instance, has created a stable of unusual shopping destinations such as Boxpark Dubai (left), City Walk and The Beach at Jumeirah Beach Residence — all strip malls that cater to specific catchment areas, yet host concepts with tourist appeal.
“Innovation will be the key driving force as the retail market in the UAE matures,” says Andrew Williamson, Head of Retail, JLL Mena. “The standard enclosed shopping mall isn’t the only format being explored anymore. As the market develops, we are seeing the delivery of trendy and innovative developments.”
As the UAE marks 45 years of nationhood, consumers can look forward to exciting new retail space being added to a variety of malls and outlets across the country, including Agora Mall in Jumeirah, Legends Mall and the expansion of Dubai Mall, new deliveries from Al Maryah Central and Reem Mall in Abu Dhabi. Similarly, an impressive Dh230-million investment at Manar Mall in Ras Al Khaimah will see the space expand to 60,000 sq m. Work is expected to be completed by the second quarter of next year.
“Retail rents are expected to soften across the board as the volume of sales remains subdued. Having said that, certain malls operating at close to 100 per cent occupancy, will continue to perform better than the average and will only see marginal rent declines,” says Dana Salbak, Associate Partner and Head of Middle East Research at Knight Frank.
“The retail sector in the UAE is expected to overcome the challenges witnessed in 2016 by adapting to changing dynamics. On the one hand, retailers will place more emphasis on differentiating products and developing brand loyalty to step up against competition. In turn, landlords will become more flexible on lease rates and lease terms to ensure ongoing strong occupancy rates,” adds Salbak.
A few months ago, Majid Al Futtaim officially opened a new neighbourhood mall — My City Centre Al Barsha — at Dubai Science Park. The Dh57-million project targets the daily needs of more than 40,000 residents anticipated in the area by 2017.
Stakeholders remain bullish about prospects. “It’s keeping up and engaging with consumers and their ever changing shopping patterns using technology digitalisation, CRM, omnichannel and eventually global pricing,” says Rajiv Suri, CEO of Majid Al Futtaim Fashion.
E-commerce is set to provide a fillip, with brands across the country looking at tapping into this space. “We have seen a surge in online shopping of late, especially in the home and fashion segments,” says Vipen Sethi, Group Director and Board Member, Landmark Group. “The convenience of 24hours shopping is something that customers in the region are demanding. A key factor for online success in the region is cash on delivery, since customers are still not comfortable using credit cards and the majority of our sales is driven by cash on delivery.”
But don’t write off big malls just yet. Experts point out that shopping festivals in the UAE — such as Dubai Shopping Festival and similar events in Sharjah and Abu Dhabi — will continue to remain critical drivers of sectoral growth with their culture of innovation.