VICTORY OF DUBAI IS THE VICTORY OF BUSINESSES

Expo 2020 Win to Boost the Retail Sector

By Atique Naqvi | Dubai, UAE | Originally published in TRENDS magazine

Arab women in a shopping mall.

Retail and tourism sectors are likely to get an unprecedented boost if the UAE wins bid to host Expo 2020, which is to be announced in November this year, says an AT Kearney analyst.
Dr Martin Fabel, Partner and head of Consumer Industry and Retail Practice, AT Kearney Middle East told TRENDS Mena that Expo 2020 will translate into more real estate development, more tourists, more business activity and trade and will eventually result in more retail potential for the UAE. However, retailers will have to carefully consider the right location and layout choices for new stores, he said.
“Due to progressive saturation of the UAE market, retailers need to become more sophisticated to find additional sources of growth. Format diversification and multichannel development will be a key lever aiming at interacting with shoppers in different shopping occasions.
“Young consumers who dominate the region and are increasingly educated with good jobs, have the disposable income and are keen to spend. But often restless – hence using online, social media to cherry pick. Retail players need to look across channels and hence integrate multi-channel,” said Dr Fabel.
“Healthy convenience products are gaining prominence due to an increased health conscious population combined with an internet-connected generation with busy lifestyles,” he added.
Fabel also sees expansion of local retail chains. “The local retailers are mainly growing locally and in nearby markets. Especially in countries like Saudi Arabia where there is large untapped potential still for local retailers. Players are moving from regional strong-holds to national presence (eg: Bin Dawood/Danube from West to Central and East provinces). In more mature markets such as the UAE, retailers are exploring Abu Dhabi and Northern Emirates besides Dubai, but also looking to move to new markets – like Lulu into India, Majid Al Futtaim into Saudi Arabia and Egypt.”
Last week, AT Kearney’s 2013 index of top ranked emerging markets for global retail investment indicated the continued strength of the GCC’s retail sector. In the 13th edition of Global Retail Development Index (GRDI), four GCC countries retained their position in the top 20 list – U.A.E. (#5), Kuwait (#9), Saudi Arabia (#16) and Oman (#17).
Globally, Brazil continues to lead the table for the third year in a row and as Chile retains #2 position, Uruguay moves upward to #3, according to AT Kearney, a global management consultancy.
“The GCC retail sector has witnessed exponential growth in 2012 fueled by increasing tourist flows and new retail projects. In 2012, Dubai saw the entry of US-based brands Victoria’s Secret, Cheesecake Factory, and IHOP through franchise agreements.” said Fabel.

A shopping mall in Dubai.

The UAE moved up index from #7 to #5, as its high retail sales and per-capita consumer spending, rising consumer confidence, slight population increase and its position as a regional tourism hub make it an attractive destination for retailers. Demand continues to grow in Dubai, despite it being saturated with global brands. European concepts are fully represented now and no longer represent a way for malls to stand out. Demand is now shifting to American concepts and food and beverage.
“Retailers are updating and repackaging their existing offerings. Chalhoub Group, a leading luxury retailer, opened the largest shoe store in the world in Dubai Mall, featuring leading brands such as Gucci and Louis Vuitton. Prada opened its biggest boutique in the Middle East in Dubai Mall at the end of 2012. In Abu Dhabi, major investments in infrastructure, universities, arts and cultural events are taking place and consumers are demonstrating an appetite for luxury concepts,” said Fabel.
Climbing three spots to #9, Kuwait is the second most attractive country in the region for international brands. Its economy grows steadily and outlook remains favorable amid increasing consumer spending and a greater presence of international retailers. International retailers Cheesecake Factory, Victoria’s Secret, and COS entered in 2012 with franchise agreements with Kuwaiti retailer MH Alshaya Co. Prada opened its second Kuwait store at The Avenues in early 2013.
Despite falling two spots to #16, Saudi Arabia remains a growing retail destination with massive untapped potential. Consumer confidence levels are among the highest in MENA, and many market studies show that Saudis are among the most eager consumers in the world. Retail sales are expected to increase by 11 percent in 2013. There is plenty of room for the growth the retail sector as retail sales per capita and disposable income remains lower than some of the neighboring locations.
Oman dropped nine spots to #17 after its strong GRDI debut in 2012. Its retail development slowed down while other faster-growing and developing markets surged forward. Still, Oman remains relatively stable, with steady economic and retail growth and strong consumer confidence. The top grocery retailers such as LuLu, Carrefour, and Al Safeer represent more than half of the market, and modern retail represents 44 percent of the market. Outside of the capital, Muscat, modern retail opportunities are limited, and traditional stores and souks remain very popular.
“Consumers across the region are becoming more sophisticated, demanding differentiated product and retail formats, with trends such as fresh food taking hold as young consumers strive for healthier lifestyles. Overall, the GCC’s strong representation in the index is indicative of the opportunities that exist for retailers wishing to enter the market or expand their brand in fast-growing markets,” said Fabel.