UAE retailers should go hard for domestic shoppers

Dubai: For local retailers worried about the falling number of high-spending tourists at the malls, it’s time to give serious attention to domestic shoppers. And the numbers are there to suggest they would be wise to do so.

The UAE population is forecast to increase by almost 20 per cent by 2020, says a new retail sector update from Knight Frank, the consultancy. (And by 2050, the current resident base of 9.5 million could swell to 15 million, according to United Nations estimates.)

While 60 per cent of the visitor numbers at The Dubai Mall last year were from within the UAE, those percentages would be much higher at the other malls.

The mall traffic numbers for this year could see a further firming up in favour of the domestic shopper. That is why it’s high time retailers did more with their game plans to get them buying. (UAE retail sales are expected to be around $41.1 billion (Dh150 million) this year. It was $31 billion in 2011. But ‘lower oil prices and implementation of potential taxation policies could impact the retail spend in H2-2015 and 2016’, the report adds.)

Iranian factor

But the “potential growth of resident spending is expected to prevail against the overall falling number of tourists this year,” the report states.

Retailers and mall owners could soon have another factor come swinging in their favour.

“The lifting of the Iranian sanctions is envisaged to directly impact trade and tourism in Dubai leading to greater expenditure ... the flow of Iranian tourists, businesses and goods will help increase retail returns,” Knight Frank says.

Dubai recorded a 41 per cent rise in Iranian visitors last year.

Local mall developers are already well ahead of the game in their planning for the future.

By 2020, the gross leasable area in Dubai’s retail sector would have touched five million square metres.

“While the ‘Dubai retail market continues to be dominated by super-regional malls, representing 52 per cent of the existing supply, new developments (that) focus on regional and community retail projects (are) accounting for 12 per cent,” the Knight Frank report adds. “The latest trend is towards a mid-market retail offering which caters to the resident population.”

Even then, it won’t be long before Dubai’s super-regional malls call the shots — by 2025, 88 per cent of Dubai’s retail capacity will come from them, while 8 per cent will be provided by regional malls. Community and neighbourhood malls make up the rest.

This compares with the 24 per cent shared by community, neighbourhood and convenience retail as of end 2014, while Dubai’s super-regional malls had 52 per cent of the leasable area and regional malls another 24 per cent.

The main reason why by 2025 Dubai retail landscape will have a dominant super-regional mall presence is because the Mall of the World and much of its 743,000 square metres of development would have skewed the balance.

Also, well before the end of this decade, The Dubai Mall would have added another 92,903 square metres.

Over the longer term, “Growth in the non-oil economy, particularly the tourism sector, the increase of population and income and upcoming international events (i.e., Expo 2020) are all pointing to a positive outlook for the retail sector in the UAE,” said Matthew Dadd, Head of Retail at Knight Frank UAE.

“Dubai and Abu Dhabi have responded to the evolving regional demand by expanding their retail offering and enhancing entertainment attractions.”