Case study: Majid Al Futtaim’s W-shaped recovery


January 5, 2021 | By RetailME Bureau

Alain Bejjani, CEO, Majid Al Futtaim – Holding

Every human being on this planet is a customer. There isn’t a single person who can say that they have never spent a penny to buy anything. Fortunately or unfortunately, buying and selling is the underlying fabric of any economy and society. That probably explains why despite all the recessions, crises, and downturns, retail has proven to be a hugely resilient sector.

The dawn of the new decade wasn’t entirely ideal for the retail sector with the outlets being forced to close, the purchasing power of regular customers reducing and an exodus of people from the region after having lost their jobs. According to a report by KPMG, several prominent non-food retail businesses saw sales in the first half of March drop by as much as 50-60% compared to the same period last year. That number spiraled further down during the lockdown months.

However, what was also witnessed due to Covid-19 was an evolution of both consumer and retailer behavior. A report by PwC revealed that shopping using a smartphone increased (53%), half (51%) of consumers are purchasing groceries online and of those 92% are likely to continue to do so post-pandemic.

According to another report by Dubai Future Foundation released in Q2 2020, Dubai-based Majid Al Futtaim (MAF), which operates 27 shopping malls, saw a surge in online sales, with a 59% year-on-year increase in online customers in March 2020. Saudi Arabian retailer BinDawood Holding saw a 200% increase in its online sales since the escalation of the Covid-19 crisis. Some retailers even innovated with their e-commerce approach by shifting to existing e-commerce platforms. Dubai-based Emaar, for example, set up a virtual Dubai Mall on noon.com during the lockdown months, where customers could shop virtually at many of the mall’s well-known stores.

Many retailers agree that the pandemic was the much-needed push for the retail sector to get out of its set ways and accelerate its transformation towards a retail ecosystem that is fit for the future. But did all of these transformational efforts works? Is there still a ray of hope for the recovery of the region’s retail sector? Majid Al Futtaim’s data suggests that if current recovery patterns continue, the UAE’s retail economy is moving quickly back to 2019 levels. 

The W-shaped recovery 

Data analysed by Majid Al Futtaim (MAF) and revealed by CEO Alain Bejjani landed on the conclusion of a W-shaped recovery for the company in 2020, which means that it showed tremendous promise for the Middle East’s retail sector, dipped back into a sharp decline and then finally entered into a full recovery period.

The figures are examined in five parts: Pre-lockdown, lockdown, post-lockdown, recovery months, post-summer, and end-of-year.

The pre-lock down months of January and February saw sales and growth similar to the same period in 2019 for Majid Al Futtaim malls.

The UAE government announced the nation-wide lockdown on March 25, 2020 to protect the health and safety of the general public and employees, and to mitigate the spread of COVID-19. The malls began partially reopening beginning April 25, 2020, but shoppers remained cautious. During this time, Majid Al Futtaim witnessed a 60% decline across all categories, except hypermarkets and supermarkets (Carrefour), which saw a 35% year-on-year increase due to stay at home regulations.

E-groceries and other “essential items” witnessed a massive surge in demand worldwide during these months, which resulted in many outlets being overwhelmed and having to hire and reskill their employees. Instacart, for example, North American grocery delivery and pick-up service, announced hiring 300,000 full-service shoppers in March, and a month later it announced plans to hire an additional 250,000 to meet increasing customer demand for online grocery delivery and pickup in the USA and Canada. Similarly, MAF had to reskill and redeploy over 1000 employees throughout the MENA region. MAF’s leisure, entertainment and cinema employees were reskilled to join the Carrefour business temporarily to assist with online order fulfillment, food packing, stock replenishment and other tasks.

Post lockdown, in May and July, there was a gradual recovery with shopper sentiments changing slightly for the benefit of retailers. With the exception of leisure and entertainment due to government restrictions and general population uneasiness, a lot of other categories that MAF deals with started seeing a V-shaped recovery. Come August, the company reached its recovery peak with a 2% year-on-year retail increase compared to August 2019 excluding tourism. This included a 6% growth in fashion and 17% in hotels.

However, post-summer there was a steep decline in most categories including supermarkets, which although less steep, continued through October. The trend in retail was somewhat proportional to the increase in Covid-19 cases as this was the period when the second wave was predicted and the number of infections reported within the country gradually started increasing again after seeing a steady drop in the previous months.

The end of the year sealed the deal for the W-shaped recovery of retail across categories to 2019 levels. With the economy opening up to events, the announcement of Dubai and Abu Dhabi shopping festivals, mega sales such as Black Friday and White Wednesday, and the holiday season kicking off, shoppers started being more liberal with their expenditure and spending more within the country.

Overall, 2020 performance for the UAE’s retail economy can be forecasted at approximately 10% lower than 2019, but this is still a huge improvement from where it was mid-year.

This is not a precise indication of the recovery of the retail sector but with all the efforts being taken by the industry and its various stakeholders including the government, federal authorities, landlords, technology solutions providers and the wider business community, sustaining this progress might actually be possible.

 

 

 

Previous Article Next Article

SHARE

YOU MAY ALSO LIKE /


Rajiv Warrier, Chief Executive Officer, Choithrams

Since the launch of its first store in the UAE five decades 

Continue Reading

March 20, 2024 | By RetailME Bureau
Dr. Dhananjay Datar Chairman & Managing Director ADIL Trading Co. LLC

Dr. Dhananjay Datar Chairman & Managing Director ADIL Trading Co. LLC holds 

Continue Reading

February 29, 2024 | By Rupkatha B
Hani Weiss, Chief Executive Officer, Majid Al Futtaim Retail

In 1995 regional retail conglomerate Majid Al Futtaim introduced Carrefour to the 

Continue Reading

February 26, 2024 | By RetailME Bureau
Prashant Parameswaran, Managing Director and Chief Executive Officer of Tata Consumer Soulfull

Tata Soulfull, a leading name in the ‘good-for-you’ snacks and breakfast cereals 

Continue Reading

February 22, 2024 | By Rupkatha B
Jean-Luc Graziato, Chief Commercial Officer of Majid Al Futtaim – Retail and Alia Al Harmoodi, Acting CEO of the Environment, Health and Safety Agency

Majid Al Futtaim – Retail, which holds the exclusive franchise to operate 

Continue Reading

February 20, 2024 | By RetailME Bureau
Krishna Dhanak, Managing Director, Alpen Capital

In an exclusive interview Krishna Dhanak, Managing Director, Alpen Capital shared insights 

Continue Reading

February 19, 2024 | By Rupkatha B
Majed M. Al-Tahan, Co-founder & Managing Director, Danube Online

As digital transformation across the retail industry continues to accelerate, the expectations 

Continue Reading

December 19, 2023 | By RetailME Bureau
Frederic Levy-Perrault, CEO, Al Raya Supermarket

Saudi Arabia-based grocery retail chain Al Raya Supermarket serves over 100,000 customers 

Continue Reading

December 15, 2023 | By RetailME Bureau
Ahmad AR. BinDawood, Chief Executive Officer, BinDawood Holding

BinDawood Holding has a rich Saudi heritage, spanning over 50 years, 38 

Continue Reading

December 13, 2023 | By RetailME Bureau
Majid Al Futtaim Retail commits to Collaborative Impact Goals at COP28

Majid Al Futtaim Retail, which owns the exclusive rights to operate Carrefour 

Continue Reading

December 8, 2023 | By Rupkatha B
BinDawood Holding Company earns Honorary Shield for Compliance Excellence

BinDawood Holding Company has earned an Honorary Shield, a distinguished recognition by 

Continue Reading

December 6, 2023 | By RetailME Bureau
First Movers Coalition for Food to create up to $20-bn value chain for sustainable farming

The World Economic Forum, with support from the Government of the United 

Continue Reading

December 5, 2023 | By RetailME Bureau




Download Images RetailME Magazine