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What the UAE’s retail industry needs to thrive in 2021 onwards

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Is the retail sector really losing its lustre for investors? Not if the experiences offered can improve and evolve, say experts.

Prior to the 2020 pandemic, the region’s retail sector was arguably already losing its lustre among investors. Overall, the industry had been facing a multitude of known significant challenges – ones that only grew and exacerbated as a result of the coronavirus outbreak.

That being said, not all hope is lost – if the sector is able to evolve and adapt quickly in a post-pandemic world.

“[When lockdown first took place] what was required was lots of agility, lots of rethinking the future and mostly [accepting] a complete change in the behaviour of the consumer,” explains Mansour Jean Hajjar, Head of UAE and India at Chalhoub Group. “The home played an important role in changing behaviour. The home became the office, the school, and the entertainment centre, [so] it has had a real impact on the way consumers are looking at their purchases going forward.”

While Hajjar – speaking at Cityscape Summit 2020 – believes that the future “will be brighter than what it is today,” he acknowledges that this can only happen if the retail experience doesn’t go back to what it was pre-pandemic. Citing a study conducted by Chalhoub Group, he reveals that the company found that 30% of consumers shopped online for the first time this year, meaning more individuals are “discovering convenience”.

He continues: “For them, perhaps going back to the brick-and-mortar of retail is not as relevant as before. So, it's very important for us to rethink the future in a way to re-engage with our customers – how to bring them back to the store to make them enjoy these experiences.”

The key, Hajjar says is better and more collaboration between mall developers and retailers.

“We need to give a new meaning to the malls,” he says. “[We need to realise that] most of the people are not coming only for buying, rather for a [complete] shopping [experience]. They need to find the most safe environment as what they have at home, but experience something that they cannot find online.”

Accordingly, the executive calls for a change to the key performance indicators (KPIs) that malls traditionally monitor.

“Some of the KPIs include: ‘productivity per square metre’ or ‘footfall’. Instead, we need to look more at ‘net promoter score’: How happy people are with the experience. Are they advocates and promoters of a store? How would they rate the customer experience itself?”

THINK THINGS THROUGH

For Dounia Fadi, Chief Operating Officer at Berkshire Hathaway, the use of technology will determine resilience and investor interest going forward. 

“Looking at Dubai’s culture and the way the weather is, the malls are part of our culture... physical retail is not going to become obsolete, and it will always be needed,” she says. “But adopting technology is very important. [At the beginning of the pandemic], those who were already adopting the technology and had e-commerce platforms were ahead of the game and could balance their sheets.”

However, technology is just one factor, amongst many of a well thought out business plan.

“The experience that you offer to the customer through a physical shop or place is very important; you have to provide an experience that will keep the customer coming back. In terms of where you're setting up shop, a lot of study has to go into that before you decide on going for it. Understanding the sector's dynamic and also understanding the customers' sentiments and behaviour will determine if the business model you have will succeed or not.”

She continues: “I think a lot of people have been observing and learning from this experience and I think whatever will come moving forward will be better and stronger, and more resilient to any future surprises.”

HYBRID RETAIL & HOSPITALITY

While most traditional retail has been able to move online quickly, the same cannot be said for the hospitality sector, as it relies on physical experiences.

Naim Maadad, CEO and founder of Gates Hospitality elaborates: “The sheer speed of change caused a lot of issues in the marketplace. There was no time… we had to shift principally overnight in order to have brand extension. The only way to do so was through the shift to the digital age in the hospitality sector. [And] it's nearly impossible to do that, because 80% of the journey is the experience. The feeling of what you are about to enjoy, what you're exploring etc.”

He continues: “Whilst other industries can actually make that shift very rapidly, hospitality and tourism generally have a massive task ahead because we can't just do that online. A lot of it can be done online [through brand extension] but the actual experience itself misses out.

“We need to learn how to live with this; we need to pivot and we need to make sure that we find solutions for our business to continue moving forward clearly.”

Similar to how businesses are adopting a hybrid model for in terms of office space – part WFH (working from home) and part on-site – Maadad believes the same could work for the hospitality and retail sector.

“I think there's going to be two business models: one is where you shop online and it comes to your house; [at the end of the day] we are living in the age of convenience. But the other part is that engagement; the innovation where you spend the day at a mall or shopping arcade,” he says. “This is where we need to be a lot more engaged with our audience; we need to make sure that the innovation aspect is extremely clever. It is retail, but it's also 'theatre', it's also engagement.”

While he foresees the next two years as being ones to watch, Maadad says that the right planning needs to start now.

“I believe the next 12-24 months will be extremely challenging. Developers and retailers need to make sure that we keep pushing that envelope, and stay creative, stay innovative, and drive interest in our businesses,” he says. “Being agile, nimble, and creative are the way forward in order to navigate through these unprecedented times. Extreme vigilance and extreme planning will help us stick around for the foreseeable future.

“[The UAE] has one of the better markets around the globe, but the responsibility is massive and I think it's on everyone's shoulders. We all need to be accountable and drive forward,” he concludes.

 

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