UAE retail market to grow by 5.6% over 2018 – 2021

Ahmed Al Khaja, CEO, Dubai Festivals and Retail Establishment (DFRE), an agency of Dubai Tourism, talks about the UAE retail environment and the impact of technology on consumer behaviour

UAE retail market to grow by 5.6% over 2018 – 2021
Ahmed Al Khaja, Chief Executive Officer, Dubai Festivals and Retail Establishment (DFRE)

Retailers with physical stores appear to be having a tough time globally. How can stores fully utilize online presence/stores to complement their physical stores? How can more online brands adopt the Amazon Go model of using both the offline and online retail models to expand their business?

Online retail presents a significant opportunity for our industry partners to provide customers with a full 360 retail offering, complementing the variety of existing physical stores we benefit from in the region.

Whilst we are observing many e-commerce platforms enter the Dubai market, such as locally-owned and Amazon-backed, the appetite for an in-person store experience remains strong with CBRE reporting that people still prefer visiting a traditional ‘bricks and mortar’ outlet. Building on these findings, an estimated 1.5 million square metres of extra retail space is set to be delivered over the next three years, reinforcing the continued demand for physical outlets in the region.

To ensure continued successful business growth, retailers must analyse how they can incorporate both online and offline retail strategies to meet the diverse needs and shopping habits of today’s consumer, catering to those who have little experience with e-commerce and the shoppers who are already prominent users of digital platforms.

It is important to understand the unique role each channel plays, so that the efforts of retailers in creating a strong market presence are combined rather than cannibalising each other. As the retail industry takes huge strides in technological efficiencies, the in-store experience is integrating more e-commerce traits, such as smart stock checking and cross store collections, whilst online stores such as Amazon are now using physical outlets as an avenue to meaningfully engage with customers, building strong, trusted and lasting relationships.

How is the situation for retailers in the Gulf? Are they ahead of the curve when it comes to having an online presence?

The retail sector in Dubai has undergone vast change over the last few years and it continues to enjoy successful industry growth. The value of retail sales is expected to reach an estimated AED 160.7 billion ($43.8 billion) by 2021 and the emirate’s retail market is expected to grow by an average of 5.6 per cent over the 2018 – 2021 period according to projection figures from Dubai Chamber.

Dubai remains one of the most attractive offline shopping destinations in the world due to its unique retail landscape. Residents and tourists can enjoy diverse experiences including state-of-the-art malls, independent boutiques and traditional souks. Underscoring its attractiveness as a high-profile shopping hub, Dubai is currently second in the world (behind London, UK) when it comes to the presence of global brands in one city.

In the last 24 months alone, we’ve seen international retailers opening outlets in the city, including well-recognised names such as Charlotte Tilbury and American Rag, which is a testament to how robust the city’s retail sector is.

As online shopping takes more prominence in the region, ‘bricks and mortar’ retailers have continued to evolve to meet the changing needs of the consumer and adopt a multichannel retail offering. Brands such as Lifestyle are paving the way in this space by elevating the physical experience of shopping.

The retailer recently launched in-store touchscreens for shoppers to browse products, providing a seamless shopping experience that fuses both the speed and convenience of a digital platform, and the customer service excellence of a physical store.

How will technology shape physical stores in 2019? How important is experiential retail in the Gulf?

There are a number of important elements that will have a significant impact on retail in 2019; technology, experiential and sustainability. As shoppers are increasingly becoming global citizens of a highly connected world, customers are raising their expectations when it comes to retail and we recognise that technology plays a huge part in this. From augmented reality apps that allow shoppers to try on clothes, to in-store tablets that enable customers to submit preferences, technology will transform entire retail locations into connected hubs.

Innovative brands such as Samsung Gulf Electronics, which unveiled its new Multi-Experience Store in Dubai earlier this month centreing around gaming, photography and a full suite of connected devices, is just one example of how dynamic brands can meet the changing trends of modern-day consumers.

In addition to the enormous impact technology can offer the region’s retail landscape, the physical customer experience is still vital in attracting residents and visitors to Dubai’s thriving shopping locations. Local and international brands are investing in experiential shopping activations to engage customers in even more imaginative ways, such as global make-up brand Charlotte Tilbury, who demonstrated the value of experiential shopping with its Beauty Wonderland playground-themed installation during this Dubai Shopping Festival. The Beauty Wonderland activation blended cutting-edge digital innovation with luxurious interiors to enable customers to enjoy a totally immersive retail offering.

Finally, one of the biggest influences on Dubai’s retail industry is the shift towards a more eco-conscious shopping experience. In line with the government’s UAE Vision 2021 to create a more sustainable future and reduce energy consumption, industry partners are increasingly looking at ways to ensure their retail spaces are energy efficient, as well as provide a natural, greener environment.

Mall of the Emirates has completed the first phase of a solar photovoltaic (PV) plant that is expected to generate 3GWh of clean energy and save AED1.4 million on energy costs every year, while City Centre Me’aisem and My City Centre Al Barsha have installed solar panels in order to increase sustainability. Further evidence of the city’s commitment to green retail is highlighted by Waitrose and Spinneys, who became the first supermarkets in the UAE to trial charging for plastic bags in an attempt to decrease plastic usage in the region.

What does DFRE expect to be the most dominant trend of 2019 and why?

As the customer experience gains more prominence, an emerging trend to focus on is “shoptainment”, where residents and tourists can enjoy diverse experiences that include both shopping and entertainment. Dubai is a pioneer of ‘shoptainment’ with many retail destinations also offering world-class activities and entertainment, such as Ski Dubai in Mall of the Emirates, Burj Khalifa near The Dubai Mall, and mixed-use venues such as City Walk, Boxpark and La Mer, which bring enhanced value to visitors. Our innovative retail calendar, an initiative conceived alongside Department of Economic Development (DED) and our key strategic partners to further enhance Dubai’s thriving economy, focuses on providing a comprehensive programme of unmissable shopping and entertainment acts, making Dubai a must-visit shopping and leisure destination.

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