Dubai: Open fewer new stores. Exit the non-performing ones. Create omni-chnnel possibilities between offline and online sales where possible
This, in a nutshell, has to be the strategy UAE’s retailers will have to follow as the post-pandemic consumer landscape offers them new directions to pursue growth. The one thing that UAE retailers – or at least those who play it smart – should not worry about is online drowning out physical stores, like it did in the US and Europe and even parts of Asia.
Because, according to Deepak Babani, the UAE’s retail split is still years away from a ‘half-and-half’ situation. “When online sales in a market touch 50 per cent and over, that’s when physical retailers need to think ‘only online’ from then on,” said the CEO of the Eros Group, the tech and electronics retailer that will next month launch a major revamp strategy. “That’s not the case in the UAE, even after last year when online growth just took off because of COVID-19 and lockdown measures.
“Sure, in January to June 2020, online sales of mobiles and IT were up 70 per cent, but this year that’s tapered down to about 52 per cent. Even then, when you take the total electronics and home appliances sales in the UAE, online only contributes about 24 per cent.
“Online sales will continue to grow, but at a lower pace that offline retailers can adjust to.”
“We used to be the exclusive distributor,” said Deepak Babani of Eros. “Last year, we acquired the rights for Huawei IdeaHub, which is more in the B2B space, and also of Vaio (formerly of Sony).
“With Huawei, we are confident of hitting some high growth numbers going forward. The Vaio reintroduction is at an early stage - so it’s difficult to comment how soon we can have the full range retailing here. The new owner has plans to get back in strong.
“For now, we have introduced the regular models, including a gaming PC that’s priced at Dh20,000.”
Physical is holding up
The signs - and numbers - suggest that UAEs brick-and-mortar is holding up to the challenges. Both Emaar Malls and Majid Al Futtaim’s mall and retail arm reported solid numbers from the first six months of this year. The recently opened City Centre Al Zahia keeps drawing in the crowds in Sharjah, and the Dubai Hills Mall is the most eagerly awaited retail launch in the first-half of 2022.
Babani says that trying to compare the UAE retail dynamic to what is happening in the US does not help with the bigger picture. “Over there, instant accessibility for shoppers to malls can be an issue,” he said. “That’s not how it is in the UAE – a mall (or retail spot) is just a hop away. Being at a mall is part of the tradition. Make sure the stores are close to the consumer.
“As for the future, until a virtual store can come up with technology to give the shopper the feel of actually “looking” at a piece, I don’t foresee anything happening to physical stores.”
It’s not the traditionalist in Babani speaking. More retailers are veering towards finding a suitable mix between online and offline. Nothing illustrates this sentiment better than the online eyewear retailer eyewa confirming plans to launch up to 100 brick-and-mortar stores in the UAE, Saudi Arabia and elsewhere. And some serious investors are backing eyewa in this dual pursuit.
Eros is going through a transformation of its own. Next month, it will announce a major overhaul of its branding. On online and offline, out goes the ‘Eros Digital Home’ and in its place will be the succinct ‘eros.ae’. The store network has been shrunk from 30 stores to “15-16”, with average store sizes of 3,000-5,000 square feet. Online makes up 20-25 per cent of Eros’ turnover, and the “objective” is to get past 30 per cent in three years.
“We will not be opening in every new mall – that’s for certain,” said Babani. “On online, we will be getting more aggressive from October. We need to be – there was a need to realign many things. I think we have done that, and our customers will realise it soon.”
Thinking outside of retail
About three or four years ago, Eros was giving serious thought to get into new business lines and reduce its dependence on electronics retail and distribution. A plan was hatched to get into F&B, which at the time in Dubai was going through an extended period of growth. And Eros did make a dip with an F&B venture.
“Unfortunately, we weren’t successful,” said Babani. “So, rather than get into something we had no experience in, we feel it’s best to get into adjacent businesses. We started a lighting division – and we are seriously considering getting into logistics. Because we handle such large volume of logistics for our own needs, we can apply that knowledge for others.
“We have looked at two or three (local) logistics businesses that we could acquire and build on. But none of them materialised; either the valuations were too high or we were not convinced by the business model. Currently, we are still looking out, but nothing on the table so far.”
Eye on $4b
Whether Eros ends up getting into logistics or not, the target remains clear – be a Dh4 billion company by 2025. “That looks realistic because unless there is some breakthrough technology, we will grow organically to be that Dh4 billion entity,” the CEO said. “All these years, we have focussed on the foundation and that needs to be strong – and remain strong. We are here to stay.”