the retail industry in the gcc

8/3/2019 The Retail Industry in the GCC

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5/4/2012 Tamimi Consultancy FZC


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Retail Market Adding in Jordan, Lebanon, Egypt, Syria, Iran and Iraq, the pan-Middle East retail market is

projected to top US$ 100 billion. With a combined Gross Domestic Product (GDP) expected toreach US$ 600 billion (in 2006) and a population of 34 million people, including about 500,000high-income professionals, the GCC is the world's 17th largest economy. It produces 16 millionbarrels per day (bpd) of oil and exports 13 million bpd generating about US$ 250 billion inannual revenue.

In a recent survey report by retail international, 5.3 million square meters of retail floor space isalready available and the retail sector is estimated to be worth $US 100 billion annually.Currently the four main drivers behind this retail phenomenon are the cities of Dubai, AbuDhabhi, Riyadh, and Jedah. Dubai remains at the core of this development, hosting 1.3 millionsquare meters, with Abu Dhabhi, Riyadh, and Jedah each having between 750,000 and 800,000square meters.

This is set to double in few short years with an additional 4.6 million square metres of GrossLeasable Area (GLA) currently under construction. Dubai Festival City, Dubai Mall, and Mallof Arabia will add some 1.2 million square meters alone. Elsewhere in the region another750,000 square meters will be added through developments in Doha at Le Villaggio and ThePearl-Qatar, in Kuwait with the Mall of Kuwait, Al Shobily Grand Mall in Khobar, SaudiArabia, and the new Bahrain City Center project in Manama.



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Retail Market The justification behind this extraordinary

acceleration in retail development is two-fold. Firstly, the world tourismorganization estimates that the number oftourists visiting the region will grow to 68million by 2020. Again, Dubai has taken

lead with 5 million visitors in 2005, whichwill climb to 15 million tourists by 2010.

Secondly, the population throughout theGCC countries is estimated to be 36million, with the average annual projectedpopulation growth set at 3% (worlddevelopment indicators 2005). Therefore,

the regions population should increase toover 50 million (up 40%) by 2015; Riyadhspopulation alone will treble to over 15million inhabitants.



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Evolution With good reason, Dubai is regarded as the Shopping Capital of the Middle East and increasingly

dedicated consumers regard the emirate as a top-class shopping destination. Shopping is undoubtedlyone of the citys greatest draw cards. It is largely divided into two main typesthe old souks in Deiraand Dubai Souk in Bur Dubai, and the glossy new shopping malls around Beniyas Square, Al-Rigga,and Al-Hiyafa Road. New shops and malls seem to pop up every other month, to cater to theseemingly insatiable desire for retail therapy. What will be the worlds largest shopping mall, TheDubai Mall, is slated to open in 2007 with over 1,000 outlets. The airport is also a shopping paradise,

with excellent duty-free facilities.

The beginning of this world class shopping destination is marked by the opening of Al Ghurair City.Launched in 1981, Al Ghurair was the first shopping mall in the Middle East and now one of the topfive destinations visited by tourists in Dubai. Throughout its 20-year history, Al Ghurair City hasacted as a pioneer in the regional retail business. Combining the culture and tradition of the city ofDubai with a modern shopping experience, it has played an integral role in providing for theshopping needs of the local population as well as for the thousands of visitors to Dubai who flockthrough its doors every year.

While the region was basking in the sunshine of this one-stop shopping destination, along cameanother red letter day in the history of Dubais retail front: the opening of Deira City Centre under thebanners of Majid Al Futtaim Group. After the Dubai City Centre created history, next was Sahara Mallin Sharjah, which again changed the scenario of retail in the UAE. Sahara Mall did not have anyhypermarkets; they had only good shops, a major food court, and a childrens play area. Sahara Mallrelied on the fact that children decide the buying behavior of the parents



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EvolutionAfter the Deira City Center and Sahara Mall, alot of shopping malls started mushrooming allover the UAE, that were in the league of theDeira City Center. Things changed with thearrival of Ibn Battuta, which came up with theconcept of the specialized mall. Mega mallsand high-end malls started targeting high-endconsumers; Burjuman and Wafi City Mall areexamples also. Major changes in Dubai Retailhappened with the arrival of the Mall ofEmirates, which caters to high-end users, and

they offered the unique option of skiing.



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Innovation & Uniqueness

Deira City Center kick started the concept of Carrefour, as it was a new concept for the UAEpeople and has since become an enduring trend the hypermarket started. Dubai followed inthe footprints of Singapore, and they are not only presently successful but in the future theymight surpass it. Malls are being built regularly and have been striving to create a niche for

themselves. Examples of criterion for creating those niches are as follows:

Malls not only provide a rich shopping experience but a mode of relaxation:Sahara Mallhas created an image of a family destination with a magnificent area dedicated to children.Without any hypermarketing attributes, it has been doing quite well. These types of malls haveevolved with time and major changes have been made in the name of progress.



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Innovation & Uniqueness

Theme Based Malls:

Started with the opening of Ibn Battuta, which is based on the travels of the great explorer,Ibn Battuta. They have created a unique experience in the mall.

Mall of the Emirates has a ski slope, which transformed it into a landmark for Dubai, and

people who come to Dubai from all over the globe make a point to visit it. It helps in attractinghigh levels of consumers to the mall.

New malls like Marina and Dubai Mall are creating more experience-based shopping. Dubaimall is offering the concept of Jurassic Park and Space travel that will enrich the shoppingexperience for visitors.

Dubai is labeled as the Favorite tourist destination, and subsequently, in coming years itsmalls are going to focus on being major tourist attractions.



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Dubai being projected as a business hub

As Dubai is also becoming a major player in international conventions, people who visit willalso want to experience all the malls. As one industry insider explains, Initially, whoevervisited Dubai would like to visit DCC for shopping. This is becoming very true with the othermalls also. As initiated by DCC, the hotel and mall together concept has made them majorplayers. Others are following that trend: MOE has Kempinski with them and Ibn Battuta isplanning to build a five star hotel.

Shopping FestivalsDubai has two festivals in a year, the DSF and DSS. In both the casesDubai has been showcased so well that people all over the world come to Dubai. Both of theseevents are held to attract travelers, and great deals are available in all the possible retail outlets.All retailers actively participate in the bonanza.

Dubai is growing at a very rapid pace and the policy makers of Dubai have been progressivewith reforms. According to the last strategic plan, the goals they set for 2010 were achieved in2005, and they have a new vision for 2015. With this pace they are sure to achieve much beforethe targeted schedule. Mega projects like the Palm Jumeriah, Palm Deira, and The World, willaugment the shopping experience and increase the GLA of retail space in UAE. Dubai claimsthat it is larger than life and they are succeeding with that vision. Considering thatincreasing numbers of tourists are arriving, the future is bright for at least the next 4-5 years.



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Dubai now on par with London as globalshopping capital

Dubai's rapid rise as a leading retail destination has reached new heights following the releaseof a new survey which shows that the emirate now shares the top spot with London as themost popular retail city in the world.

In its annual survey, real estate analysts CB Richard Ellis mapped the global footprint of 323 ofthe world's leading retailers across 73 countries and found that 56% of brands are present in

Dubai, matching London at the top of the list.

Michael Leighton, a retail analyst at CB Richard Ellis, said the reason that Dubai has been ableto grow rapidly as a retail hub is because of its franchise model, which makes it possible forretailers to enter the market with local knowledge and minimal investment. "So it's quite a lowrisk play for retailers with very high returns," he said.

Dubai's location and its focus on building world-class malls have also been driving forces inthe emirate's evolution as a leading retail presence. The recession also prompted more retailersto enter Dubai as they were forced to focus more on emerging markets and locations whereconsumer spending is still relatively high, he noted.



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US Retailers top incoming brands

Of the six brands that entered Dubai last year, all were from the US, where retailers wereparticularly hard hit by the recession. Noting that 98% of operations in the UAE are franchised,compared to just 6% in the States, Leighton said it has taken a while for US retailers to getcomfortable with the way of doing business in Dubai.

"The mentality of US retailers has always been to operate your own business, in your own

country, and be in complete control. So it's been an education process to get them comfortable,"he noted. Among the US retailers that have entered Dubai over the past year were Crate &Barrel, Pottery Barn, and Cheesecake Factory.

While acknowledging that Dubai may have reached a limit in terms of its capacity for newmega malls, Leighton says there is still an opportunity for new brands to be added as malls tryto stay ahead of the competition.



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UAE second biggest retail market

"Yes, Dubai has probably reached a saturation point in terms of grade A shopping malls, butgrowth happens in different ways. For landlords, it's about asset management andrepositioning their malls, so you see a lot of them refreshing their tenant mix in an effort tokeep their products ahead of the market.

So rather than just expanding, they have looked at their portfolio and their units and in some

cases pulled out their lesser trading stores. So it is more of a consolidation exercise rather thanexpansion from a retailer's perspective," he said.

Thanks mainly to the tremendous growth of Dubai's retail sector, the UAE is the second-biggest retail market in the world, just behind the UK, the survey noted. However, as AbuDhabi emerges as a major retailing destination in its own right, it is very possible that the UAEcould overtake the UK.

"I don't see why the UAE couldn't pass the UK in the coming years. Franchise operators are stillvery hungry to take on new brands, and brands are becoming much more interested in comingto the region. And Dubai is benefitting mostly because it is the first port of call and the hub forexpansion across the region," he said.



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Conclusion

Dubai has achieved a Singapore-type success with great efficiency. For example, Dubai issponsoring festivals like Dubai Shopping Festival and Dubai Summer Sale in the same waySingapore has the Singapore Summer Sale and Uniquely Singapore.

Dubai also replicated the model of offering the best shopping malls with best brands available,much like Singapore. As achieved in Dubai, Singapore also targets major conventions and

exhibitions; Dubai is also bringing in other major events happening.

Other than retail, Global Logistics is also very efficient considering that Dubai is a port city,like Singapore. So it is quite clear that Dubais goals replicated Singapores model. With thespace and money available Dubai is creating a larger than life experience, and hopes tosurpass everyones expectations.

On the other hand, Dubai has been able to differentiate itself, as we have discussed in-depthabove.



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LONG TERM SUCCESS What Dubai should do to sustain successDubai has a 96% population of expatriates, so retail efforts

should cater to them. But for at least the next seven years they need not to worry as there is enoughdemand and to sustain success.

The government policy is to make sure that the tourist inflow is maintained. Then, it will become oneof the most visited cities in the world.

"Dubai's retail sector is likely to grow by 5.5 per cent in 2011. The key factors behind the optimisticforecast are attributed to the strong underlying economic growth, increasing household consumptionand the inflows of tourists to the emirate. With its steady rise, the retail sector has emerged as one ofthe most important economic sectors associated with the growth of modern Dubai. Dubai ChamberDirector-General Hamad Buamim

"Dubai is among the nine main shopping destinations of the world including New York, London,

Paris, Milan, Singapore, Hong Kong, Tokyo and Shanghai. The emirate has earned this position due tothe unconditional support of its leaders and the hard work of the business community" Binhendi said.

Dubai is poised to become a global fashion hub, due to geographic positioning and favourabledomestic demand for luxury goods. The Emirate already hosts many international retailers anddesigners, and represents the second largest retail market globally.


the retail industry in the gcc

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