Dubai: UAE malls and retailers are in for another round of adjustments to do with retail timings shifted from 9am to 7pm. But even before the latest change in operating hours, the one key requirement – shoppers – was still missing.
“Low footfall does not bode well for successful retailing,” said David Macadam, Chief Executive, Middle East Council of Shopping Centres. “Some F&B operators may find the low traffic numbers will make operations not viable, given food wastage and staff costs incurred.”
The revised timings come into effect from May 20. After Eid, new timings for malls will be announced.
This imbalance in supply and demand – now magnified because of low shopper turnouts - can impact overall occupancy levels at UAE malls. “Many shopping centre management teams may benefit by taking back low [revenue] producing outlets and re-let or repurpose them for a more exciting offering in the future,” said Macadam.
If this holds true, expect some major occupancy changes in the second-half of the year. But that too would require a give-and-take mentality on the part of mall owners – current rental agreements have strict clauses leading to retailers wanting to opt out ahead of their tenure ending. The penalties are quite substantial.
Need for a reset
The COVID-19 imposed crisis thus presents an opportunity to set right the imbalance between retailers and mall operators. The need is for landlords to be flexible and think about taking any measure to avoid their units staying vacant for long.
“We anticipate the financial and marketing relationships between retailers and landlords to evolve,” said Panos Linardos, chairman of the Retail Leaders’ Circle. “They will take joint responsibility for footfall and the success of stores. Flexible language in contracts will evolve for the balance of the year.”
What of rents?
Landlords can offer retailers direct incentives to tide over this difficult phase, in the form of a rent holiday, turnover rent-only leases, capital contribution to fitouts and more. Only such measures will help retailers ease back into full-fledged operations once normal operating hours – 10am-10pm weekdays and 10am to midnight on weekends/holidays – resume.
Sanjay Chimnani, CEO of popuprent.com, said: “Landlords can offer a three-month rent moratorium. Banks can defer all installments and provide some relief on interest rates.
“Senior retail managers could take two weeks of unpaid leave and junior staff given some weeks of annual leave. This will keep away retrenchments.
“These actions all provided for together will provide some breathing space for retailers to regroup in eight to 10 weeks when the worst is behind us.”
Factor in tourist absence
Tourists contribute a significant part of Dubai’s retail sales, and it will take time until they are back. Residents could instead be encouraged to shop more to help retailers.
“Dubai’s magic was created by our retailers and we owe it to them in their time of pain,” added Chimnani.
Brick-and-mortar retailers have ramped up their online offerings to offset the loss in store traffic. “In the last few weeks, there has been a significant surge in online retailing,” said Vikrant Rohatgi, Head of Global Strategy Group at KPMG Lower Gulf.
“This has not been limited to only the essentials/grocery, but also others such as electronics and fashion. A number of retailers are seeing their online sales double - or triple - compared to the same time last year.”
Deploy the technology
With the authorities stipulating that visitor traffic capped at 30 per cent, a few retailers are adopting tech to provide real-time occupancy monitoring at stores to adhere to social distancing guidelines. “Technology helps them not only to comply with occupancy restrictions but better understand and optimise in-store customer journeys and buying patterns,” Linardos added.
But given the current turnout numbers, there appears to be little need for all retailers to spend or utilise technology to limit customer densities at malls and within stores.
For instance, TKD Lingerie, which operates two boutiques in Jumeirah Town Centre Dubai and Mushrif Mall, Abu Dhabi, said their stores are small enough to take care of customers… without the use of technology. “To best protect our staff and minimise contact within our team, we have moved to working in single shifts,” said Kate Kikano, Managing Director of TKD Lingerie. “Each member does two shifts in a row on a weekly rotation.”
The retailer is benefiting from a 3-month rent free announcement by its Dubai landlord, the Al Zarooni Group.
“We are yet to receive any communication from our other mall [landlords], but are hopeful rent will not be charged for the period that we were closed,” she said. “It will take the economy a long time to recover from the effects of COVID-19.
“We will be reaching out to our landlords to request rental levels moving forward that are in line with the current market conditions.”
Kikano will not be the only one making that reach out.
“Some retailers have redirected their staff on other projects - Carrefour assembled teams for augmenting the fulfillment requirements for the growth of home delivery," said David Macadam. "Others enabled their idle sales teams to drive online sales by contacting directly and selling to the existing customer database.”
There were retailers who trained staff and adopted hybrid labour models to ensure employee retention and business continuity.