The value of the UAE’s retail industry in UAE was estimated to be Dh152 billion in 2014 and was expected to reach Dh160 billion this year. The announcement of new mall projects and Dubai’s Expo 2020 win added momentum to the sector, along with the UAE being ranked fourth in AT Kearney’s 2015 Global Development Index report.

In another done by CB Richard Ellis, Dubai ranks second only behind London as the city with the highest percentage of international retailers.

The strong retail and transport infrastructure coupled with a young growing population, a high proportion of expats and a booming tourist sector have contributed to this growth. While the going has been good, there is a need to watch out for changes in consumer expectations and behaviour, which are being driven by 24x7 connectivity. Below are some trends that we feel will shape the retail industry in UAE and GCC in 2016:

Better integration of online and traditional retail

While online retail has been around for a while, until recently traditional and online retail operated as two distinct segments. This differentiation will increasingly blur, with many brick-and-mortar retailers such as Landmark, Emax, Sharaf DG and hypermarkets such as Carrefour, Lulu and Geant developing their own online platforms.

The recent introduction of online grocery shopping kiosks at Metro stations by RTA (a concept that originated in South Korea) is a direct response to needs of time-poor consumers.

Cash and plastic to give way to M-wallets

As per some reports, 75 per cent of retail transactions in UAE are still cash, followed by credit and debit cards. However, this will soon change — UAE reportedly has the highest smartphone penetration in the world at 62 per cent, a strong telecom backbone, and is ranked 23rd in the world on network readiness.

These point towards potential for M-wallet solutions. Beam wallet and M-Pay are some of the existing solutions, and the UAE Banks Federation recently announced that a mobile wallet project titled mWallet is ready for roll out.

The key for any m-wallet solution would be to offer consumers the benefits of instant availability, ubiquity and the ability to use the service across devices and channels.

Malls to reinvent themselves as “experiential destinations”

With an increase in online shopping and the accompanying convenience factor, large malls will come under pressure due to reduced footfall. Hence, these malls will need to find ways of reinventing themselves as experiential destinations, in order to woo customers back. This could be in terms of 4D/5D cinema experiences (for example, the Mall of the Emirates’ recently refurbished Vox Cinemas), adventure activities (skiing or Ice Skating, Indoor skydiving, sip lining, rock climbing, etc.), or exceptional dining experiences.

Having key concept stores that are an experience by themselves, like the Apple outlets at Mall of the Emirates and Yas Mall, could also be key factors.

Rise of community shopping

As a corollary to the above, there is likely to be a rise in consumer preference for smaller community malls, which offer the benefits of proximity, easier parking and also home delivery services, especially for basic everyday needs. Many of these mini-malls have come up in newer residential areas.

In addition to catering to basic retail needs, they have the opportunity to develop as community centers with other services like food-and-beverage (F&B) outlets, clinics, and kindergarten/day-care facilities.

Success of niche concepts

In UAE’s overcrowded retail landscape, it is far better to develop an offer that is focused on a core strength rather than trying to be too broad based. In recent times, new concepts such as Cha Cha Chai and Shawarmanji have focused on delivering a core offering. Rather than trying to be all-purpose restaurants, they have focused on creating a specific offer and making sure that they deliver it well. Outside of the F&B space, there are innovative concepts too, think Z-Degree, an online tire replacement service, or Shampooch, an online pet grooming service, that have succeeded in creating a niche. We expect to see more, and many of these would use the internet to connect with consumers and deliver products/services faster and at a lower cost than traditional channels.

While the fundamentals of UAE’s retail sector are likely to remain strong, the industry will need to keep track of changing consumer dynamics to ensure that it remains ahead of the game.

Retailers who are able to leverage UAE’s demographic, infrastructural and technological strengths better will come out stronger in the long run.

— The writer is CEO of AMRB, a research consultancy.