New year, new shopping goals
Retail to remain buoyant due to strong growth in e-commerce and mega-mall development
The UAE’s retail market can look forward to exciting times ahead in the new year, as the industry remains buoyant due to an accelerating growth in e-commerce and mega-mall development.
While the online contribution to overall retail sales in the UAE remains a fraction of the total market size, e-commerce represents a huge opportunity for the industry, said Matthew Green, head of research and consulting for the UAE at CBRE.
According to Euromonitor figures, e-commerce equated to just 1.5 per cent of the overall retail industry spend in the UAE during 2016, a figure which it suggested could rise to 4.1 per cent by 2021, underlining the huge long-term growth potential for multi-channel businesses.
“Consequently, there is room for multiple market players, presuming that they can offer customers an attractive and compelling retail experience. Online shopping is evolving rapidly and we expect to see exponential growth in sales volumes over the next five years,” Green said.
“However, when it comes to smaller community and regional centres and some non-mall formats, trading conditions have become noticeably more testing,” said Green.
As a result, Dubai’s retail market has become increasingly fragmented, with a clear divergence evolving in the performance of major destination malls, such as the Dubai Mall and Mall of the Emirates. Retail development activity remains incredibly buoyant with approximately one million square metres of gross leasable area set to be handed over between 2017 and 2019. This includes super-regional malls such as the Palm Mall and non-mall retail developments such as Marsa Al Seef and Bluewaters.
“Looking ahead to 2018, we expect to see vacancy rates rise further across the market. However, it is likely that this trend will be driven more by the softening performance within secondary mall locations and within seasonally impacted non-mall formats, and less from the major destination malls which have traditionally cannibalised demand from the smaller centres,” noted Green.
Estimates show that mega malls are boosting the GCC’s retail market to nearly $300 billion (Dh1.1 trillion) by 2018. Thanks to new mega-malls from Mall of the World in Dubai, to Al Maryah Central in Abu Dhabi, and megaevents like Expo 2020 Dubai driving tourism growth. Total retail sales in the GCC are expected to increase at the rate of 7.3 per cent from 2014 to 2018 to reach a total
7.3% expected rise in retail sales in the GCC from 2014 to 2018
market size of $289.7 billion (Dh1 trillion), according to a recent Ardent Advisory report.
Sharad Bhandari, managing partner at Ardent Advisory and Accounting noted that the UAE is a highly developed market with hypermarkets and supermarkets dominating the retail space with its high per capita transactions being almost at par with those of the developed nations.
“We believe that the UAE will continue to remain a key market with segment specialisation and tailored customer experiences driving the market.”
With markets like Dubai coming close to saturation, retailers
2m square metres of retail space is under construction in UAE
are now favouring formats such as district or neighbourhood malls, and convenience stores targeting specific catchment areas. Ardent Advisory estimates that convenience stores were the fastest-growing retailer segment in the UAE, with the total number of convenience stores expected to reach 443 in 2018, up from 336 in 2014.
The UAE is most visited by tourists for leisure and business. Luxurious retail malls, competitively priced tax-free shops, adventure sports facilities, and convention centres are huge tourist attractions. The country’s political stability adds to its attractiveness
$90b estimated value of the UAE’s total retail sales by 2018
as a major tourist hub. With positive economic factors, increased consumer confidence, and supporting industries, the country’s total retail sales are estimated to reach $90 billion (Dh331 billion) by 2018.
The World Expo 2020 to be held in Dubai, in particular, will attract a lot of tourists to the UAE as well as spur growth in multiple industries across the country. According to the Dubai Department of Tourism and Commerce Marketing (DTCM), 25 million visitors are expected at the Expo 2020. All of these would boost retail sales further.
When it comes to improved
443 convenience stores expected in the UAE by 2018
engagement with consumers, retailers will need to make sure that their multi-channel customer experience is remembered, rewarded and refined each time consumers visit their physical or online store, said Sanjit Gill, general manager, ICLP. “Physical retailers have an advantage; it’s easier to use data and information in a more sophisticated way to bring all the benefits of the online world to shoppers than it is for online giants to become more experiential.”
Gill also noted that the retail industry is readying itself for the introduction of the value added tax (VAT) from next year.
Online shopping is evolving rapidly and we expect to see exponential growth in sales volumes over the next five years Matthew Green, head of research and consulting for the UAE at CBRE
UAE will continue to remain a key market with segment specialisation and tailored customer experiences driving the market managing partner at Ardent Advisory and Accounting General manager, ICLP
It’s easier to use data and information in a more sophisticated way to bring all the benefits of the online world to shoppers Sanjit Gill,
“According to Euromonitor International, consumer electronics are predicted to be hardest hit by the introduction of VAT. Recent ICLP research across the UAE found that electronics retailers are leading the way in building loyalty with shoppers. Are they getting ahead of the VAT challenge already and building deeper devotion with their consumers? Will we see other retailers follow suit by cushioning the blow of VAT by playing with their margins or meaningfully segmenting and personalising their customers’ experiences? Only time will tell.”