Are UAE businesses finally back on track after COVID-19?
Businesses are focussed on going hyper-local in generating sales until tourists return
Dubai: UAE’s businesses are taking fresh lessons in the value of community – be close to the consumer and they have a better chance of staging a recovery from the pandemic. And in less time as well.
Whether it is an F&B or grocery outlet or stores focused on providing services to that particular community, they are the ones recording improved sales over the last three months. At a time when residents are more likely to stay put or move around within a certain radius, the neighbourhood store is trending. Big.
It’s the same theme when it comes to malls as well – “In Dubai, any mall that is less dependent on the tourist shopper is starting to do well, even touching 80-90 per cent on weekends,” said Mohammed Al Madani, Chairman and CEO of Al Madani Group, which has extensive F&B related interests. “And last Friday, they were even turning back visitors keeping in mind the safety guidelines.
“But it’s not the same story with mega-malls heavily reliant on tourists. A comeback for them will take more time – until flights get back to normal.
“Now, if VAT payments were waived for at least two quarters, it could helped the small and medium businesses face the crisis in much better shape.”
Some major landlords in Dubai and Abu Dhabi are yet to announce COVID-19 related rent relief, which adds to the uncertainty for tenants
Matter of percentages, perceptions
Since September, in particular, local businesses are given to talking in percentages – in terms of where their revenues stand in comparison to “pre-COVID-19 times”. The “50 per cent mark” is a number being repeatedly mentioned, along with the hope that business volumes would inch to about 70 per cent before year-end.
Accelerate the change
Change is coming not just to retailers and in consumer behaviour. The pandemic could speed up change inside and outside of malls as well. “I suspect, in time, we will see older secondary malls be repurposed for other uses,” said Andrew Love, Partner and Head of M.E. Capital Markets at Knight Frank Middle East. “If you look at what’s happened in other parts of the world, especially the US, it’s inevitable that it will start to happen here in the UAE.
“You will see it happen first in built up suburban areas such as Jumeirah, where there are lots of older malls, and where there is demand for alternative uses (i.e., residential villas). And higher returns to be made.”
Again, it’s about remaining relevant – or reinventing – by catering to community or neighbourhood needs. Mall owners, at least a good number of them, will have to learn to operate on lower rental income too.
“Mall management teams are more than ever having to strategically think about their tenant mix and market offering,” said Love. “The days of simply signing leases with tenants who are prepared to pay the highest rental premiums are probably over. Having an experienced mall leasing/asset management team in place is more vital than ever before.”
Some retailers - generally smaller groups or privately owned retailers - have used this period to roll out in order to take advantage of the generous commercial terms being offered
Avoiding closures
At the height of the pandemic and when commercial activity was brought to a halt, business owners feared a rash of closures would happen once lockdowns eased. Thankfully, and this is seconded by many in different sectors, that has not happened. Yes, there have been closures, but nowhere close to the alarming levels that many feared.
The restaurant business is still hurting, and it would be a while before anything resembling a normal state of affairs will return to this key sector of the local economy. In Dubai alone, the F&B business represents more than 10 per cent of GDP, generated by 11,000 licensed entities and employing more than 200,000.
Shine’s off
There is one category that believes even a 50 per cent recovery in sales would be a silver lining – it’s the gold and jewellery business. In any other year or time, a drop by more than $100 an ounce over two or three weeks would have brought shoppers rushing back into stores. But not on this one – and definitely not when the drop has been from $1,970-$1,980 levels. For shoppers, gold is still way too overpriced for even a look in.
Industry sources say that the jewellery retail sector is yet to see the kind of job cuts others have been witness to. If gold demand doesn’t revive any time soon, some hard decisions will need to be made.
“With customer footfalls dropping to 10-30 per cent of what they were, no business can afford to retain the same staff strength,” said Cyriac Varghese, General Manager at Sky Jewellery. “Going forward, all visa renewals will be based on performance track record – it cannot be any other way.”
With customer footfalls dropping to 10-30 per cent of what they were, no business can afford to retain the same staff strength
By January next, jewellery retailers will also decide on the number of stores they should retain… and that will be the time when they make the move to cut staff numbers.
The fashion and apparel business is another that is hurting, and some leading operators have reportedly taken the decision to reduce their store footprints drastically.
Constant promotions
In recent months, Dubai and Abu Dhabi have had massive sales promotions, with discounts touching 80-90 per cent. By all accounts, these proved successful, as retailers were able to make full use of pent up – or “revenge” – spending from resident shoppers. But either side of those promotions, activity has remained muted.
One solution will be to raise the frequency of promotions, until such time retailers are confident that their inventory levels are at manageable levels, and they can look to 2021 with some hope. The promoter of ‘Concept Big Brands Carnival’ is again testing the retail waters to see if consumers will return to pick up fashion and tech accessories at slashed prices. The first of the ‘Carnivals’ will open in Dubai September 30 at Dubai World Trade Centre.
“The return of the Carnival is after an enforced break – and the hope is shoppers will return as well,” said Vijay Samyani, Chairman of Concept Brands Group. “The language of discounts and special offers are known to shoppers – the pandemic has only slowed buying, not uprooted it from consumer habits.
“DWTC was once a quarantine centre for COVID-19 patients, and now, we are more than happy to lift that image and bring shoppers back together at Dubai World Trade Centre.”
Even if the eventual numbers fall short of pre-COVID-19 times, it’s still a win-win as long as shoppers make the re-entry. These days, it’s about counting the small wins – and adding those up to be bigger one.”
The pandemic has only slowed buying, not uprooted it from consumer habits