Dubai: Seventy per cent of UAE shoppers go online to check out product specs and prices … and then head to a brick-and-mortar store to do the actual buying. That’s the number retailers should focus on rather than obsess over the percentage of sales done purely online.
Because fact is “Online sales in the UAE still represent only 2-3 per cent of the total retail sector,” said Regis Schultz, President of Retail at Al-Futtaim. “Sure, online sales here are growing rapidly, but to me the more important number is how many customers prepare for their shopping trips by going online first.”
Latest estimates reckon that UAE consumer online sales would be about $2 billion. Now, if this is 2-3 per cent of total retail sales, there is still much to be done in the physical world.
But retailers cannot keep on adding stores wherever they can. “The market already has a lot of space — one needs to be careful opening new stores,” Schultz said.
It’s a message mall developers with brand new spaces to fill are hearing quite loudly these days. Any shopping destination that looks just like another one will find filling up difficult to achieve, with retailers and future shoppers alike.
“Today, the best customers are those shopping both online and offline … and they are the ones who spend more money than those who only do one or the other.
“This is a significant number, which is why online retailers in Europe and the US are opening physical stores or want to do so. There is a fusion of online and offline selling happening.”
Mixing it up
Al-Futtaim’s retail operations are in both spaces, by operating the UAE online stores for Ikea, Toys ‘R’ Us, and Marks & Spencer, among other brands. “We are not pushing for more online sales — just following customers wherever they are,” said Schultz. “It’s clearly not about cannibalising sales that happen at our physical stores, but providing more opportunities for shoppers to interact with the brands we have.”
Changing store formats
Some of the more compelling reasons why shoppers head online — ease of use, easy on time, etc — are now being tested out in the stores. Al-Futtaim has just gone online with the scan and go option at its Toys ‘R’ Us stores, whereby shoppers can pick up what they want from the aisles, scan it with their smartphones and get the purchase done right then and there.
What this does is do away with queuing up at the tills. The same will then be rolled out at other mono-brand stores in the Al-Futtaim network.
“If retailers can do away with the main customer concerns about visiting stores — and spending time in queues at the till is one — there is no reason why they won’t come,” said Schultz. “And having no tills in stores does create a lot more space.”
Would that mean doing away with the tills altogether at Al-Futtaim stores? “Not immediately … but that will happen,” he added. “It will allow shoppers to spend more time on the product itself or with the sales staff. That’s the key.”
Standalone “online stores”
One thing Schultz will not tinker with — now or later — is to sell all the brands in the Al-Futtaim Retail under its banner. Instead, Ikea merchandise will continue to retail through its dedicated website, and the same goes for M&S and others.
“Those individual websites each offer a unique experience for the brands,” Schultz said. “Trying to sell toys along with furniture or clothes ends up spoiling it for consumers. And it will not be respecting what’s unique about each brand. Another thing we will not do is keep adding more brands to the portfolio. In some cases, having less is definitely more. That will be our preference.”
In toy business, mortar matters
With kids and toys, stores do matter. The ones of the brick-and-mortar kind.
Sure, a sizeable share of toy sales worldwide have migrated online, but there is still some mystique attached to entering a toy store and picking up the one you want. It is partially why Al-Futtaim is adding two more Toys ‘R’ Us Stores to its local network, apart from all the other compelling business reasons.
Even through the two-year bankruptcy ordeal Toys ‘R’ Us passed through in the US, the local and Gulf operations were doing quite well.
“We re-looked at our portfolio and re-sized some of our non-profitable sources,” said Jonathan Watts, General Manager for the brand at Al-Futtaim. “We made sure we had the stores in the right places. We did a lot better than the principal and all through the [bankruptcy] period we had the products and continued to trade.”
Like all kids’ stories, there was a happy ending. Earlier this year, Toys ‘R’ Us emerged out of bankruptcy.