Constant transformation renders retailing in the UAE exciting

June 17, 2015 | By RetailME Bureau

There was a time when shoppers considered buying stuff from small street-side shops in traditional souks as a highly fulfilling shopping experience. Back then the concept of an air-conditioned, plush shopping mall didn’t even exist – a trend that started in the UAE only around two decades ago following which the spurt of shopping malls lead to the now-popular ‘mall culture’.

Today with shopping malls situated at a distance of a few kilometres across the emirates, the novelty around mall visits has been lost. However, retail being a highly dynamic sector and particularly in a region like the UAE where developers and retailers are very quick to observe and implement new trends, they were swift to break monotony by developing newer offerings in the form of outdoor shopping spaces.

That’s why in the recent past we’ve seen a flurry of outdoor shopping spaces coming up including Citywalk, Al Wasl Square and Boxpark in Jumeirah and The JBR Walk and The Beach at Jumeirah Beach Residence; of course not to forget the upcoming The Pointe at the Palm.

In a tête-à-tête with Ajai Kumar Dayal, CEO, Tridayle Consult, RetailME discusses the transformation of retail in the UAE, particularly Dubai looked upon as a globally famous retail hub

From street shops to giant malls, please tell us about the kind of transformation that retail has undergone in Dubai.

I came to Dubai way back in 1988. And come to think of it even three decades ago Dubai was quite developed. Back then business was mainly conducted in areas such as Bur Dubai, Deira and Mina Road, mostly around Nasser Square. Everything that one needed for home – from grocery to clothes and even consumer electronics – were available in these areas, which were busy shopping hubs in Dubai.

However, the developments that took place thereafter were significant. We saw the emergence of the shopping malls, a highly innovative concept in those days. Al Ghurair Centre was the first mall in Dubai that offered not only retail elements but also entertainment, which is today considered as a mainstay within any shopping mall, through a concept called ‘Sindbad’. While it was faring alright, it wasn’t doing exceptionally well simply because back then people weren’t really accustomed to visiting shopping malls to purchase goods. The general feeling that pervaded among shoppers was that everything would be priced high within a shopping mall.

Traders operating out of the traditional markets were also reticent about going into the shopping malls. And back then traders, unlike today when brands dominate, were doing business. The concept of a branded store was uncommon. In fact, there was only a single store in Bur Dubai that would sell branded garments like Wrangler jeans.

Things started changing rapidly towards the 1994-95 period. One development that literally shook the market was the launch of City Centre Deira (referred to as Deira City Centre until a while ago). In fact, even Majid Al Futtaim wasn’t sure of what the mall offerings should be since nothing like that was attempted before in Dubai. They finally decided to house mid-market brands. But once the mall opened and witnessed the astounding response, there was no looking back.

For consumers the transition from souq style shops to air-conditioned malls housing beautiful stores was of course a pleasant experience. And one of the biggest changes for them was the experience of shopping at a hypermarket. Again City Centre Deira introduced Continent as their first hypermarket spread across 100,000 sqft floor space with 50 cash tills and staff went around in roller skates. Consumers were amazed to see such a huge shopping space of that dimension. Later the mall replaced Continent with Carrefour. Other malls quickly followed this.

With the rapid spurt of malls, how did each fare against such fierce competition?

Of course, every time a new mall came in, it picked up momentum and the older malls saw decline in traffic. While each mall created its own clutch of loyal audience, it also ate into the share of the existing ones. That’s how the space developed. And today we’ve numerous shopping malls within a small radius.

In such a highly competitive market, every mall has to differentiate itself from the others. And to do that creating interesting spaces as well as getting into the right location are crucial factors for success and survival of the mall. When Mall of the Emirates came up at Al Barsha people wondered why a giant mall was coming up in this location. Today it is a huge success due to several unique factors it introduced to the market like Ski Dubai.

Similarly, The Dubai Mall boasts several such highly interesting elements including the luxury retail zone, entertainment concepts such as the Dubai Aquarium and Underwater Zoo in addition to Burj Khalifa and the Dubai Fountain. On the other hand, malls such as City Centre Deira and Mirdif also boast unique factors such as a lot of choice in mid-market brands and amusement options like iFly Dubai, respectively. Today developers think very carefully before setting up a mall structuring the retail offerings accordingly.

Now consider this. From the size standpoint, City Centre Mirdif and Dubai Festival City Mall too started with the ambition of acting as regional malls but today they largely cater for the catchment residing in the vicinity of these malls. Easy access is another crucial factor for the success of any mall. City Centre Mirdif is a straight drive from Motor City and Arabian Ranches as well as located close to Sharjah helping the mall to cater for these catchments too.

We see considerable rise in the number of community malls. Are they eating into the footfall of the giant malls?

Now we see a clear positioning of the malls. There are regional malls catering for a large geographical area and on the other hand we’ve what are referred to as community malls and neighbourhood malls. People have become differentiating in their choice of shopping at malls. They will visit a regional mall only when they have multiple purchases to make for which they’re looking for more choice in addition to socialising. However, for their daily needs they prefer a community mall or even a neighbourhood mall that’s more conveniently located and essential shopping can be done quickly. And of course, giant malls are landmark locations for tourists visiting the UAE unlike the smaller community malls that are largely driven by the resident population. So while there is certain amount of cross-pollination happening, they aren’t really eating into each other’s space.

What does the future look like for the rapidly emerging outdoor shopping spaces?

With regard to the outdoor shopping spaces, we’re really just at the early stages of development. And as of today these shopping concepts are struggling during the summer months. It is very difficult for people to walk around an open-air shopping centre during summer. The open-air shopping centres do some business of course, but there is about 30-to-40% drop during the peak summer months. It isn’t easy for retailers to make roaring business during the pleasant months to sustain a drastic drop during summer. In such a situation, the mall developers will have to think of ways to make these spaces more amenable for tenants – it could be through a different rental structure and leasing arrangement.

It is very early days and developers and retailers will have to think carefully about making the experience pleasant for consumers. Action brings clarity so unless you venture into something new, you won’t be able to gauge its impact on retail. And in this region developers and retailers learn very fast so that’s a huge positive.