A success model for Dubai retail

Dubai has developed as a major shopping destination over the past decade. The city now has far more retail floor space per person than any other city in the region, and one of the highest retail provision rates in the world. Within this increasingly crowded marketplace, competition for both consumers and retailers has become intense and some centres are inevitably doing better than others.

There are currently more than 2.6 million square metres of retail floor space in more than 70 purpose-built shopping centres across Dubai. This equates to more than 1.6 square metres of retail floor space per resident in the city.

It ranks Dubai far ahead of larger and more established retail centres in Europe in terms of mall-based retail space per capita (London and Paris have 0.13 and 0.34 square metres of mall-based retail space per person respectively).

While cross-border comparisons are complicated by the much higher levels of ‘street front' or ‘high street' retailing in European cities, it is clear that the Dubai retail market would be saturated if not for the high level of tourist spending.

New investment in the retail scene in Dubai is, therefore, likely to be characterised by the development of small community centres and the repositioning of existing centres as there is no room for additional large malls without the displacement of existing ones.

Four-pronged strategy

Based upon work undertaken as part of Jones Lang LaSalle's (JLL) Retail 2020 project, we examine four strategies that are likely to characterise successful retail centres in Dubai. Centres that do not meet the mark are likely to require repositioning or conversion to alternative (non-retail) uses in 2012 and beyond.

When Internet retailing (clicks) first became important, it was seen as a threat to traditional retail centres (bricks). What is now increasingly clear is that both retailers and shopping centre owners require an integrated strategy, combining both bricks-and-clicks.

It is estimated that consumers use digital technologies to research and compare up to 65 per cent of purchases, but only 15 per cent of total retail sales currently occur online. Technology will continue to be one of the major influences on the future pattern of retailing and those shopping centres that can adapt to this and incorporate features of both physical and online retailing will succeed.

While there has been less focus on sustainability and the environmental impact of retail centres in Dubai than in more mature economies, increased attention is likely to be focused on this issue as both retailers and centre owners seek to differentiate their products and service offerings in the future.

JLL has been working with a leading regional developer to design and implement a corporate social responsibility strategy, and we would expect this to be become more commonplace as the local retail market becomes more competitive and the commercial advantages of sustainability are more widely understood.

Quality of experience

The key to success in the retail sector lies not only in the location and quality of the physical assets, but in the quality of the experience they offer. This will ultimately be dependent upon the people employed in the stores and in the centres. We are likely to see retailers and centre managers invest more heavily in the selection and training of staff than in the past.

There are few retail brands or centres in Dubai that are currently offering a point of difference based on the knowledge or attitude of their staff, but this is likely to change over the next few years.

Attracting more customers into the centre (magnetism) and keeping them in the centre for longer (stickiness) are widely recognised as essential components of retail centre management. There are lessons that can be learnt from successful centres in Europe and elsewhere that have not yet been applied in the Dubai market.

One such initiative could be the introduction of loyalty cards similar to those offered by many retailers themselves. These could offer consumers a range of benefits, including special discounts, promotions and other privileges.

Those centres that are able to incorporate the above strategies will continue to succeed as the level of retail spending in Dubai continues to grow in 2012. Those unable to create a clear point of difference between their offer and those of competing malls will be faced with a need to either reposition themselves or convert to other, non-retail uses.

The writer is the CEO of Jones Lang LaSalle Middle East and North Africa.