A new retail model

While many consumers have welcomed a return to brick-and-mortar retail, the retail business model has fundamentally evolved

The shuttered malls and shopping centres that dot the GCC’s retail landscape were symbolic of the economic blow caused by the Covid-19 pandemic in 2020. Research firm GlobalData estimates the pandemic wiped out Dhs13.5bn in sales in the UAE alone in 2020. However, the recent rise in footfall at retail outlets and a continued surge in e-commerce transactions indicate that the worst is behind us.

Strong support by landlords during the pandemic was critical in helping retailers overcome the challenges caused by prolonged shutdowns. Emaar, for example, announced waivers on base rent when shops closed doors due to Covid-19.

The retail sector’s revival now heralds a broader recovery of the region’s economy. In the UAE, the Dubai Chamber of Commerce forecasts that the retail industry will rebound by 13 per cent to reach $58bn by the end of 2021, supported by pent up consumer demand, Covid-19 vaccination efforts and Expo 2020 Dubai. Research also forecasts that UAE retail sales will maintain a positive 6.6 per cent annual growth in the medium term to reach $70.5bn by 2025, with store-based retailing growth forecast at a CAGR of 5.7 per cent.

Indeed, shoppers have been quick to return once stores reopened. The huge crowds that thronged this year’s Dubai Summer Surprises shopping extravaganza is just one example that underlines the positive trend that began when restrictions started easing nearly a year ago. While many consumers have welcomed a return to brick-andmortar retail, the retail business model has fundamentally evolved – both during the pandemic and as industries look to a post-Covid recovery. In particular, the e-commerce trends that we witnessed during the pandemic are unquestionably here to stay.

At GMG, we have certainly noticed a shift in the behaviour of returning customers. GMG Sports’ e-commerce platforms reported a 200 per cent growth in sales during Ramadan as compared to the previous month. External research shows a similar trend. A recent report by online payment services provider Checkout.com notes that approximately

WHAT HAS EMERGED IS A MORE ROBUST OMNICHANNEL MODEL THAT LEVERAGES THE DIGITAL INNOVATIONS OF THE PAST YEAR AND CO-EXISTS WITH THE SOCIAL FUNCTION OF IN-STORE SHOPPING

47 per cent of consumers in the region expect to shop online even more frequently in 2021 than they did at the height of the pandemic in 2020.

That is not to say that e-commerce will replace brick-and-mortar stores, far from it. Across much of the Gulf, shopping malls are part of the social fabric. They are utilised not just for shopping but as a preferred setting for social interactions of all kinds. Moreover, the malls here are major tourist attractions. In the UAE, Dubai Mall alone welcomes over 80 million visitors annually.

What has emerged is a more robust omnichannel model that leverages the digital innovations of the past year and co-exists with the social function of in-store shopping.

Often, we see customers utilising our online portals to research merchandise and then come to the store to see and touch and complete the purchase. This type of customer is often better informed, so their interaction with our salesfloor staff is more engaging and rewarding. Within this retail model, we see the evolution of the click-and-collect model, where consumers purchase goods online and collect them from the store when making their next trip to the mall to drop the kids at the cinema or meet a friend for coffee.

Today there’s also a great opportunity in leveraging social media for online shopping. ‘Social commerce’ (s-commerce) uses social media channels such as Facebook and Snapchat as mediums to promote and sell products and services. Social media penetration is near-ubiquitous in Kuwait, Qatar, and the UAE at 99 per cent, figures show. Indeed, experts forecast that s-commerce will be one of the region’s key e-commerce trends over the next 2-5 years. Already, 14 per cent of consumers surveyed say they most frequently conduct their online shopping specifically within a social media app. A recent report by Snap says the ‘Snapchat generation’ in the UAE and Saudi Arabia alone is estimated at $425bn. Aside from traditional e-commerce, this social commerce trend could unlock millions in new revenue.

Ultimately, last year’s events require that we reshape the Gulf’s retail model in a culturally conscious way. The simple utilisation of various shopping channels – whether physical or digital – is not new. And it’s not the point. As the postCovid recovery accelerates, what matters most is how retailers devise the ideal combination of these channels for their customers and in what end they deliver authentic customer experiences. Getting that calibration right will enable businesses to reap the benefits of a rebound in consumer spending while also keeping the Gulf an attractive international retail destination.