The retail industry has played a key role in the rapid development of Dubai over the past four decades and remains a firm pillar underpinning economic growth. The interplay between retail, real estate, air transport and tourism is fundamental to Dubai’s value proposition for consumers and investors. The city has established itself as the Middle East’s shopping capital, but the same developers that created malls of astounding proportions on the site of Silk Road souqs are now determined to innovate and expand, generating new opportunities for investment and fresh experiences for shoppers.
Dubai’s retail ecosystem is driven to a large extent by the franchise model, which brings together global brands and privately owned family firms that represent their interests in the country and region. The emirate also serves as the headquarters of regional retail and wholesale giants that may have started with a single small shop in Damascus, Basra or Manama, while brands born in Dubai itself are making their mark across the region.
New entrants find themselves competing in a more mature market, with AT Kearney’s Global Retail Development Index for 2015 warning the UAE retail sector was showing signs of market saturation. However, Dubai has ambitious plans for expansion of its retail footprint and its retail businesses are exploring underdeveloped segments of the market such as e-commerce.
Economic Impact
The significance of retail to Dubai’s economy is demonstrated by the size of its contribution to GDP when compared to other leading sectors. In the first nine months of 2015 wholesale, retail and repair accounted for 28.4% of GDP, followed by transport, storage and communications (15.8%), real estate and business services (15.2%), manufacturing (11.8%), construction (7.2%), and restaurants and hotels (5.4%), according to the Dubai Statistics Centre. The interdependence of these sectors is also a key ingredient of Dubai’s success story. The transport sector, which brings goods into Jebel Ali Port and millions of passengers into Dubai’s two international airports, helps underpin the retail sector, which in turn creates demand for the real estate and construction sectors as new malls and outlets are built and leased. Dubai’s destination malls bring stores, restaurants and hotels together under one roof, creating a one-stop shop for tourists and residents.
The emirate’s wholesale, retail and repair enterprises contributed a total of Dh79.9bn ($21.7bn) to the economy at constant prices in the first three quarters of 2015, up 5% from Dh76.1bn ($20.7bn) in the same period in 2014. According to Dubai Statistics Centre, 14.5% of the workforce is employed in wholesale, retail and repair, and the sector employs 14.9% of female workers.
Performance Measures
According to a retail sector report by banking group Emirates NBD, Dubai’s retail sales turnover was $42.5bn in 2014, up 7.3% year-on-year (y-o-y). The bank’s report estimates that based on a compound annual growth rate of 4-5%, Dubai’s retail sales turnover will reach $55.3bn by 2020. Emirates NBD reported a 15.3% y-o-y increase in wholesale and retail trade licences in the first quarter of 2015, which it said showed growing numbers of trading firms wanted a foothold in Dubai. Applications for licences grew by an average of 8.3% per annum between 2011 and 2014. In addition, lending to businesses in the retail and wholesale sector was up by 14.6% in 2014, accounting for 12.2% of all bank loans during the year and totalling Dh149bn ($40.56bn), up from Dh130bn ($35.4bn) in 2013.
For the fourth consecutive year Dubai came second to London in international real estate consultancy CBRE’s 2015 survey of 164 of the world’s top shopping destinations in 50 countries. CBRE found that 55.7% of international retailers had a presence in Dubai and reported that in 2014, some 45 new international brands were attracted to the emirate, including Hollister, Alexander McQueen and Cavalli Caffe. “Dubai continues to remain the clear destination of choice for the majority of brands looking to enter the region for the first time, frequently using the emirate as a stepping stone to wider regional expansion programmes,” Nicholas Maclean, managing director at CBRE Middle East, told OBG.
According to JLL and Emirates NBD, the available gross leasable area (GLA) in Dubai’s malls is expected to increase by as much as 22% between 2014 and the end of 2017 as new retail projects in the pipeline are completed. In its real estate analysis of the retail sector for the third quarter of 2015, JLL reported that the total GLA in Dubai has passed the 3m-sq-metre mark. It predicted that 136,000 sq metres of additional retail space would be completed in the final quarter of 2015, 403,000 sq metres in 2016 and 110,000 sq metres in 2017. Financial services consultancy Alpen Capital reports that Dubai already has a total of 1380 sq metres of retail space per 1000 residents, which is the highest concentration anywhere in the world.
Footfall Forecasts
The construction of new retail space is being driven by forecasts that predict growth in both Dubai’s resident population and tourist numbers. According to the Dubai Statistics Centre, the emirate’s population reached 2.45m in 2015, up 5% from 2.33m in 2014. When the population reaches 2.65m it will have tripled in size from the year 2000 and doubled since 2005, the year the Mall of the Emirates and Ski Dubai first opened.
The number of visitors to Dubai is also growing rapidly. In 2014 Dubai International Airport handled 70.4m passengers, surpassing London Heathrow to become the world’s busiest international airport. In 2015 the hub retained its title with just over 78m passengers passing through its terminals, representing an 11% annual increase. Figures from Dubai’s Department of Tourism and Commerce Marketing showed that the emirate had 14.2m international overnight visitors in 2015, up 7.5% on the previous year. If visitor numbers increase at 7-8% per annum, the emirate will meet the Dubai Tourism 2020 Vision’s target of 20m visitors by the new decade. “Dubai is by far the most cosmopolitan city in the region,” Said Daher, CEO of Azadea Group Holding, told OBG. “Having such a diverse cultural environment should be seen as a real opportunity rather than a challenge. Diversity creates and provides a lot of opportunities for the retail business, as we can build capabilities differently in Dubai and then implement them in other countries.”
In 2014 Dubai Duty Free (DDF) had record sales of just under Dh7bn ($1.9bn), taking Dh107m ($20.13m) in one day. It employs 6000 people operating across 32,000 sq metres of retail space at Dubai International Airport and 2500 sq metres at Al Maktoum International Airport, that latter of which is expected to grow to 64,000 sq metres by 2022 following an expansion.
DDF’s executive vice-chairman and CEO, Colm McLoughlin, believes the emirate is one of the world’s most exciting and innovative retail hubs. “Dubai is well ahead of the game, and I believe it competes favourably with the traditional luxury shopping cities,” McLoughlin told OBG. “Still, Dubai has to continue expanding as the population expands, and [developers] should not be afraid of taking new approaches. Virtually every brand in the world is represented somewhere in Dubai.”
Expo Expectations
A key focus down the line is Expo 2020. Dubai hopes to attract around 25m people to the site during the six-month event, which appears to be a reasonable expectation when compared to the last two international expos in Shanghai in 2010 and Milan in 2015. Expo 2010 attracted 73m visitors, while the organisers of Expo Milano 2015 achieved their goal of meeting a more modest target of 20m. The theme of the expo in Milan was “Feeding the Planet, Energy for Life,” and the site itself was an international showcase for best practices for sustainability in food production, as well as a forum for debate around these issues. In the six months surrounding the event, Milan became a focal point for thousands of cultural offerings, both within and outside the event.
The organisers of Dubai’s Expo 2020 – where the theme is “Connecting Minds, Creating the Future” and whose logo, unveiled in late March 2016 was inspired by a 4000-year-old ring found at an ancient archaeological site in Dubai – are also hoping to generate a string of interconnected events, both directly related to Expo 2020 and in parallel with it. To encourage this interaction with the wider community, Dubai will need to rely upon improved and smarter transport links, as well as reinvented destinations beyond the expo, which will help ensure that visitors circulate between the show and the shops in Dubai’s malls. To this end, major investments are being made in new destination malls designed to cater to the influx of visitors to Expo 2020 and beyond. The sustainability of those developments, and the expo site itself, is a key consideration for the country’s master planners. The downside risk for retailers is that Expo 2020 draws visitors away from the rest of the city, as happened during the London 2012 Olympics, and leaves the emirate with an oversupply of retail space in the short to medium term after the event.
According to Abdulmagied Seddiqi, chairman of Ahmed Seddiqi & Sons, more governance of the sector is required to ensure the growth of retail space is balanced with consumer demand. “A bridge needs to be rebuilt between retailers and mall developers to the benefit of the end consumers. This can be achieved through stronger regulations and by creating an authority to oversee the entire sector, including the national malls.”
Mall Of The World
In 2016 work is expected to commence on the site of the Dh25bn ($6.81bn) Mall of the World, which is to include 744,000 sq metres of retail space with the capacity to receive 180m visitors annually. The development, which will be built by Dubai Holding, sits between the sea and the main Sheikh Zayed Road, and will be built facing the Mall of the Emirates.
The challenge facing the architects is to rethink the retail experience for Dubai, to create a site that integrates seamlessly with its surroundings and that enables visitors accustomed to shopping in air-conditioned buildings to rediscover the open air. It is a tall order, but one that has echoes of Milan’s own retail rebirth in the mid-19th century, when its iconic Galleria Vittorio Emanuele II created a new home for its boutiques and cafes in the heart of the city, stretching from La Scala to the Duomo.
In September 2015 Morgan Parker became Mall of the World’s COO, and in announcing the appointment, vice-chairman and managing director of Dubai Holding, Ahmed bin Byat, explained the development’s concept in more detail. “What we are creating is essentially a seamlessly integrated core of the city, the model for which is being carefully designed to serve the emirate’s economic agenda and strengthen Dubai’s global positioning in tourism and unique urban living.”
For his part, Parker described the vision for the site as “a permeable, flexible urban fabric”. According to Dubai Holding, Mall of the World will be a pedestrian experience featuring department stores, street markets and high street shops, as well as entertainment venues, hotels, wellness and cultural centres, and residences connected by an integrated public transport network.
Local media reports in September 2015 suggested that the original timeframe for construction of the site, with an expected completion date of 2018, could require review, as part of the site is currently occupied by Dubai Police Academy, which must be relocated before construction can begin in earnest. Nevertheless, it is expected that Dubai Holding will want to see such a high-profile project completed in time for Expo 2020.
Although the plan may have its detractors in Dubai, who question the location of the new mall so close to Mall of the Emirates and the impact it may have on main arterial traffic routes, there are also those who back the plan and believe it remains firmly on course. “It is still well under way, and the project’s architects have never been busier,” David Macadam, CEO of the Middle East Council of Shopping Centres (MECSC), told OBG.
Meydan
The Mall of the World is just one of the ambitious developments planned by state-backed companies in Dubai. In August 2015 the Meydan One project was announced, which will include Dubai One, the world’s tallest residential tower, the world’s longest indoor ski slope and a 540,000-sq-metre shopping mall, which is about the same size as The Dubai Mall’s total area.
The new development is expected to create 78,300 residences, placing the overall population in the Meydan area at 310,700. Many of the Meydan area properties, which are just south of Dubai International Airport, are being built for Emirates Airlines pilots and their families.
Dubai South
Dubai South, an emerging 145-sq-km, purpose-built, master-planned city, will be home to a new residential community in 2018. Formerly known as Dubai World Central, the project is overseen by a government entity known as the Dubai Aviation City Corporation.
Ultimately, Dubai South will be home to 1m people and sustain some 500,000 jobs, powered by the city’s businesses and industrial areas, which include the expanding but operational Al Maktoum International Airport. Dubai South will also have attractive real estate and housing options for the upper and mid-market segments.
Nakheel
Retail is also playing an increasingly important role for another government-owned developer, Nakheel, which was responsible for building Palm Jumeirah, The World Islands and Palm Jebel Ali. In October 2015 Nakheel’s CEO, Sanjay Manchanda, told local media he expected 25-30% of company revenues to come from retail by 2016.
The company has a retail portfolio with a combined GLA of 316,000 sq metres and has an additional 1.07m sq metres of GLA in the pipeline. Its existing properties include Ibn Battuta Mall and the Chinese goods mall Dragon Mart – soon to be renamed Dragon City – both of which are currently undergoing expansion.
In May 2015 Nakheel launched Ibn Battuta Mall. The development comprises some 71,000 sq metres of retail and restaurant space in 600 new outlets. One month prior to the opening of Ibn Battuta Mall, Nakheel announced an extra 120,000 sq metres of space at Dragon Mart, consisting of 1100 new retail, food and beverage (F&B) units. Nakheel says that the shopping centre is already the biggest Chinese goods store outside China and that it attracts around 65,000 visitors per day.
In addition, the developer is working on 10 new retail projects, including the 280,000-sq-metre Deira Mall, The Pointe at the tip of Palm Jumeirah and the 40,000-sq-metre Circle Mall, with 235 retail units in Jumeirah Village Circle. The Pointe, which has 135 outlets, is due for completion in December 2016 and developers say that over 100 F&B operators have already signed up.
The company is also building Nakheel Mall at the end of the trunk on Palm Jumeirah and says that 60% of the 300 outlets have already been leased ahead of a 2018 opening date. In October 2015 Nakheel announced it had awarded Dh2.3bn ($626.1m) in construction projects for three of its retail ventures, which would see 6700 shopping, dining and entertainment outlets completed by 2018.
Outdoor Living
A few weeks after Nakheel announced these new projects, each with a two- to three-year construction timeline, a 37,000-sq-metre retail space on one of its existing developments opened after four years of legal wrangling. The Golden Mile Galleria, which is anchored by a Spinneys supermarket covering 1100-sq-metres, typifies a growing trend in retail development in Dubai. Tailored to meet the demands of the affluent community in which it is based, the development also embraces outdoor living. The Golden Mile looks out onto a landscaped garden, called Al Ittihad Park, complete with a jogging circuit, exercise stations, seating areas and a cycle hire stand.
The Palm Jumeirah Express monorail runs above the area, but the station serving the Golden Mile Galleria and the surrounding apartments is yet to be opened. However, the park is well used by joggers, strollers, families with children and pet owners.
Prior to the opening of Spinneys, the area’s residents had to drive to a large hypermarket in a destination mall, such as Carrefour in Mall of the Emirates, for their groceries. Now they have a local modern souq right on their doorstep.
Developers have seized on the word souq in introducing new retail centres. A prime example is Nakheel’s Warsan Souk, which forms part of a new gated community. The retail space, which covers some 60,000-sq-metres, will be spread across the ground and first floors and three-bedroom townhouses have been constructed above.
Emaar Malls, the owners of The Dubai Mall, used the term souq in the rebranding of the community malls it has built to serve its residential developments. The Ranches Souk opened in 2015 in Arabian Ranches II, and the company says the brand will be used at The Meadows, The Springs and any future community developments.
It includes 35 fashion, grocery, F&B and service brands designed to serve community residents. “Community malls and outlets are a huge opportunity in Dubai,” Nick Peel, CEO of Marka, told OBG. Marka floated on Dubai Financial Market (DFM) in October 2014 and is focused on bringing new retail and F&B brands to the UAE.
For Danish jeweller Pandora, the evolution of Dubai’s retail space offers opportunities. “From a retail point of view, you have to be careful,” Thomas Knudsen, general manager of Pandora Middle East, told OBG. “As a brand you will need to have a solid base in local malls and not only in the larger destination malls popular with tourists.” Mohammed Abdul Rahim Al Fahim, CEO of the Paris Gallery Group of Companies, echoed this sentiment. “Community malls offer strong prospects for growth for retailers as they have a unique environment with a strong tenant mix,” he said, adding that paying attention to local preferences is key to success. “Perfume brands have had exceptional success in the GCC and are now heavily reliant upon the region for global profitability,” Al Fahim told OBG.
A 5.7-km waterside boardwalk is the focal point of the Dubai Water Canal Development, a huge construction project being developed by a consortium including Meydan, government-owned Meraas Holding and the Roads and Transport Authority (RTA). The canal, which will run 2.9 km from Business Bay to the Gulf, will be accessible by the boardwalk and a 1.1-km beach. The scheme will include 1.3m sq metres of retail, hospitality and residential development, as well as 760,000 sq metres of open space for outdoor recreation. On a much smaller scale, Meraas’ BOXPARK project near Al Wasl Road in Jumeirah is more contemporary and urban. Built from shipping containers, BOXPARK is designed to both serve local communities and act as an alternative destination for visitors to Dubai. Retail tenants include Swatch, Nike, Toms and many F&B outlets.
Destination Malls
While community malls may be addressing pent-up demand from some of Dubai’s 2.47m residents, its leading destination malls are reporting record footfall, occupancy and turnover. In October 2014 Emaar, the builder and operator of The Dubai Mall, floated its retail operation on the DFM as Emaar Malls and delivered strong financial results for its shareholders over the next 12 months. At the end of its financial year 2015, Emaar Malls reported a 23% rise in net profit from Dh1.35bn ($367.7m) to Dh1.66bn ($450.8m).
In February 2015 the company reported that a record 80m people had visited The Dubai Mall in 2014, making it the world’s most-visited retail destination, with its revenues alone accounting for 5% of Dubai’s GDP. In early 2016 work is due to be completed by Dutco Balfour Beatty on The Dubai Mall’s new Dh1.4bn ($381.1m) Fashion Avenue expansion, which will connect the mall to the world’s tallest building, Burj Khalifa. Emaar Malls hopes the expansion will enable it to reach a target of 100m annual visitors to The Dubai Mall within the next few years.
At the end of September 2015 Mall of the Emirates announced the completion of its Evolution 2015 extension, adding a total of 36,000 sq metres on the top floor of the mall, which also houses Ski Dubai. The new space has been taken by 40 retailers, including more than 20 fashion brands, such as British fashion house AllSaints, yoga-inspired sports clothing brand Lululemon Athletica and US retailer Abercrombie & Fitch. Majid Al Futtaim’s existing fashion brands Juicy Couture and Jane Norman are opening flagship stores as part of the development.
Brand Champions
The expansion of Mall of the Emirates was completed 10 years after the destination first opened, and 20 years after its owner Majid Al Futtaim opened Deira City Centre, which was the first Dubai mall anchored by a hypermarket.
The company’s success has been built on the construction of malls, but also on the acquisition and management of key retail franchises. Majid Al Futtaim Group owns 100% of the Carrefour franchise in 38 markets across the MENA region, Central Asia, South Africa and Russia. The company has a total of 60 hypermarkets and 70 supermarkets in 13 countries, and expects to reach 140 hypermarkets and 210 supermarkets by 2018, and add six new territories. In addition, Majid Al Futtaim Fashion has nine brands across seven markets. It has agreements with Hollister, Abercrombie & Fitch, Juicy Couture, Hoss Intropia, Halston Heritage, Jane Norman and Peacocks, and says it has become the partner of choice for a large number of international brands entering the region for the first time.
Control of international global brands by privately owned family firms has been a hallmark of the retail success story in Dubai. In its recent publication “Souks To Malls”, MECSC records the rise of these companies across the region and highlights how many either started in Dubai or gravitated towards its markets for luxury fashion, fragrances, cars and jewellery. For international companies hoping to secure a foothold in Dubai, striking a licensing deal with these trading groups can be the key to success in one of the world’s most profitable markets.
Family Firms
As holding companies, these family firms typically have a broad portfolio of enterprises in addition to their retail businesses. Al Habtoor Motors, which was founded in 1983, imports 60,000 vehicles from Japan and has exclusive UAE rights to Mitsubishi, as well as representing luxury carmakers Bugatti, Bentley and McLaren.
Another branch of the Al Futtaim family, run by Omar and Abdulla Al Futtaim, owns the Festival City Shopping Mall, and also has exclusive licensing agreements with retail and automotive brands including IKEA, Marks & Spencer, Toyota, Lexus, Honda, Dodge and Volvo. The Al Tayer group, which was founded in 1979, employs 8000 staff and represents many retail, luxury and automotive brands, including Jaguar Land Rover. In 2015 its Sheikh Zayed Road Jaguar Land Rover dealership had the best sales figures of any Jaguar Land Rover showroom in 146 territories around the world.
Luxury watch brands have been central to the success of another Emirati business, founded in Souk Bur Dubai in the 1940s. Ahmed Seddiqi & Sons now represents 50 brands in 52 outlets and employs 480 staff. Seddiqi believes the company’s experience in customer service will sustain its future, even as young people shop more online. “As the new generation grows older, they will rediscover the tangible approach to retail rather than digital when it comes to luxury items,” Seddiqi told OBG.
The Al Fahim family, which is based in the neighbouring emirate of Sharjah, has its own retail brands, Paris Gallery and Watch Gallery, as well as franchises both in the Gulf and beyond, for global brands Burberry, Cartier, Ferrari and Sergio Rossi covering fragrances, watches, eyewear, accessories and fashion apparel.
Although it was founded in Damascus in 1955, Chalhoub Group now runs its business, which comprises 600 stores in 14 countries employing 11,000 people, from Dubai. It has exclusive franchises for 280 luxury brands, including Louis Vuitton, Chanel and Christian Louboutin.
Jashanmal was founded in Basra, Iraq in 1919 but is now based in Dubai. It has 150 shops ranging from department stores to travel agencies, and also acts as a franchise owner or joint-venture partner with many international brands. Rivoli Group, which was founded in 1988 by Adel Zarouni and Ramesh Prabhakar, now has 110 international luxury brand franchises, 2000 employees and 380 stores. Nilesh Ved’s family had run a gold bullion company in Dubai since 1904, but in 1999 he took the company in a new direction, acquiring the Nine West franchise. By 2015, his company, the Apparel Group, was employing a total of 10,500 workers in more than 1000 stores and with over 50 international franchises, including Aldo, Nine West, Tommy Hilfiger, Charles & Keith, Sketchers and Tim Hortons.
Also one of the largest retailing groups in the UAE, Azadea Group, which is based in Lebanon, owns and operates more than 55 international franchise concepts in fashion and accessories, F&B, home furnishings, sporting goods and multimedia in a total of 13 countries across the Middle East and Africa, overseeing more than 600 stores.
Joyalukkas, originally a family jewellery business established in India in 1956, took off in 1987 when the current chairman, Joy Alukkas, flew into the UAE to open a showroom. The Joyalukkas brand now has 6000 staff serving 10m customers in 11 countries around the world and will open its 110th store in the US in 2016. “I believe Dubai has the potential to handle a third of the world’s gold trade,” John Paul Alukkas, executive director of Joyalukkas Group, told OBG. “Being closer to the main market in India and having become such a strong global trading hub, Dubai has gained a competitive advantage.”
Landmark
There are also companies in Dubai that have created their own brands and successfully exported them around the region and beyond.
Established in Jeddah in 1987 with one of the earliest Body Shop franchises, the Kamal Osman Jamjoom Group now operates as a franchisee, franchisor and independent brand organisation, with a turnover above Dh1.2bn ($326.6m) and 800 stores across eight countries. The company has six own-brands and three that are franchises. According to Mark Pilkington, CEO of the group, it is by focussing on its own brands that the company has had success. “A strategic analysis of the retail industry in this region has determined that it is not sustainable to have two players getting margins,” he told OBG. “The franchise model raises costs by having two parties making profits, and this is behind the higher prices you see in Dubai.” Targeting Muslim Arab, central and South-Asian countries, the group focuses on customising its offering to different target markets. “Going alone allows for greater customisation since people in the region have different needs. When operating with a local brand you need to raise the game, customers need to have the feeling it is an international brand.” Mukesh “Micky” Jagtiani, who once drove a London taxi, built his family’s baby goods shop in Bahrain into the Dubai-based retail giant Landmark Group and has amassed a personal fortune of $5.5bn, according to Forbes. With 1791 outlets across GCC countries, the wider MENA region and India, the company has 50,000 employees and 25 of its own brands, including Baby Splash, Splash, Centrepoint, Shoemart, Iconic and Max, as well as control of 40 global franchises.
Electronics
Consumer electronics is one of the key segments in Dubai’s retail sector. Growth is driven by high incomes as well as tourism. Handheld devices are top-selling products and are recording strong sales growth. “We are working to grow quickly in smartphone lines, Mohammed Hilili, general manager of Lenovo in the Gulf region, told OBG. “Trends in terms of screen sizes are different from one country to another. You need a large portfolio of products in a place like Dubai to adapt to the requirements of each segment of the market.” According to Nilesh Khalkho, CEO of Dubaibased electronics retailer Sharaf DG, the electronics market has evolved dramatically over the past decade, and the UAE market is no exception to the rule. “While 50-60% of the electronics market was concentrated in high streets and hypermarkets 10 years ago, now it only accounts for 29% of the market. Other GCC and Middle Eastern markets are not yet as organised and consolidated as the UAE market and they still remain more agency-centred,” Khalkho told OBG. Sharaf DG has a total of 31 stores across the UAE, Bahrain, Oman and Qatar, with the first store set to open in Egypt in 2016. The company is also looking to enter the Saudi Arabian market. Electronic retailers are increasingly looking to e-commerce to tap into a growing number of mobile internet users, while higher rents in shopping malls are pushing retailers to shift focus to e-commerce to grow their revenue and customer base. Although the UAE has the lowest percentage of online purchases worldwide, according to consultancy Frost & Sullivan, e-commerce is predicted to grow to be worth Dh36.7bn ($10bn) by 2018, and have a transformative effect on businesses, creating new start-ups and job opportunities. The retail sector has been identified as one of the most promising areas for online growth, despite environmental factors like unreliable delivery – there is no national post service in Dubai and no physical addresses – providing barriers to growth (see analysis). New businesses, such as delivery app Fetchr, are providing innovative solutions to such hurdles. By making use of GPS coordinates provided by customers’ mobile phones, Fetchr is able to deliver items from e-commerce retailers and businesses directly to the consumer, wherever their location.
Outlook
Although the sector’s performance is strong, retailers looking ahead to 2016 see some challenges on the horizon. While the emirate is not overly dependent on tourists from any one country, visitors from Saudi Arabia and Russia are a major growth driver, and the impact of low crude oil prices on those economies, along with the strength of the dirham, which is pegged to the US dollar, are among factors that give retailers cause for concern.
Gargash Enterprises and Galadari Automotive, the exclusive distributors for Mercedes-Benz and Mazda in the UAE, both saw the market slow down in mid-2015. “We are facing a natural correction of the automotive market,” Karl-Johan Sandesjo, general manager of Gargash Enterprises, MercedesBenz, told OBG, adding that its performance in the first half of 2015 was up 15% y-o-y. “After the announcement of Expo 2020, we faced a mini-boom for a year or so,” Sandesjo said. Ewan Ramsay, general manager of Galadari Automobiles, told OBG that Mazda performed well in 2014. “Mazda sales were up 24% in 2014, enabling the company to make significant investments in new facilities.”
Nevertheless, for those retailers focused on the sale of smaller-ticket items or luxury goods, Dubai’s efforts to market on a global scale help to bring a new stream of business, particularly around sales events such as the Dubai Shopping Festival. Moreover, the ongoing expansion of the emirate’s international airports should continue to attract visitors in increasing numbers, ensuring a steady stream of shoppers for domestic malls.
“GCC consumers will remain strong and stable clients for the next few years,” Patrick M Chalhoub, joint CEO of Chalhoub Group, told OBG. “However, we expect to see greater numbers of Chinese customers if prices remain competitive, along with Africans. Dubai will benefit with the opening of Iran and a return of Russia in the market.”
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