DUBAI GLOBAL RETAIL TOURS: DEBORAH WEINSWIG OCTOBER 5, 2016

OCTOBER 5, 2016 GLOBAL RETAIL TOURS: DUBAI 1) Shopping malls are akin to giant department stores: shops in the mall are viewed as conces...
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OCTOBER 5, 2016

GLOBAL RETAIL TOURS:

DUBAI







1) Shopping malls are akin to giant department stores: shops in the mall are viewed as concessions in a department store by mall owners. 2) Malls are leisure destinations in Dubai, mixing retail with services.



3) Major Western retail names are here in abundance, creating a major franchising market.



4) Online shopping remains very niche, although it is growing.



5) There’s no major push for omni-channel offerings by retailers in this market.







DEBORA H W EINSWIG



M a n a g i n g Di re c to r , F u n g G l o b al R e t ai l & T ec h n o l o g y d e b or a h w e i n s w i g @ f u n g 1 9 37 . c o m U S : 64 6 . 8 3 9. 7 0 1 7 H K : 85 2 . 61 1 9 . 1 7 79 C N : 86 . 1 8 6 . 1 4 20 . 3 01 6



Fung Global Retail & Technology is publishing a series of Global Retail Tours, highlighting observations from our visits to major cities around the world. This report looks at retailing in Dubai. Here are our top takeaways:



DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016

GLOBAL RETAIL TOURS: DUBAI

DUBAI KEY FACTS

2014



Population

3.4 million



Area

3,885 sq. km (2,414 sq. mi.)

Source: Dubai Statistics Center/Brookings Institution/Statistics Centre – Abu Dhabi/Abu Dhabi eGovernment Gateway Fung Global Retail & Technology is publishing a series of Global Retail Tours, highlighting observations from our visits to retailers in major cities around the world.

Fung Global Retail & Technology is publishing a series of Global Retail Tours, highlighting observations from our visits to retailers in major cities around the world. This city briefing focuses on observations from our store visits in Dubai. These visits were concentrated on the Mall of the Emirates. Dubai is located on the southeast coast of the Persian Gulf and is the most populous city in the United Arab Emirates (UAE). The city is a financial and commercial hub for the UAE and the Middle East, and 28.7% of its GDP comes from tourism and trade, compared to 5.2% for its oil-rich peer, Abu Dhabi. In 2015, Dubai was the fourth-most-visited city in the world, after London, Bangkok and Paris, according to the MasterCard Global Destination Cities Index. Figure 1. Notable Stores at a Glance Apple Store: A new store format, with an avenue of trees and a giant digital screen upping the element of spectacle

Abercrombie & Fitch Fragrance: A great-looking shop, but we wonder if there is sufficient demand for the brand’s trademark fragrance to justify such a store

Source: Fung Global Retail & Technology

DUBAI: A CITY BUILT FOR SHOPPING Source: Shutterstock DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016 Dubai is famous for its shopping malls, several of which combine retail with leisure services. To a large extent, the strength of Dubai’s malls is a result of the environment: in a hot, desert climate, there is little to do outdoors and little willingness to do much in the scorching heat. We toured the Mall of the Emirates, which was opened in 2005 and extended in 2015. The shopping center features 560 international brands over a gross leasable area of 233,467 square meters. International retail names from the US and Europe dominate the center, from midmarket banners such as Topshop and Superdry to luxury names such as Gucci, Dior and Burberry.

LUXURY, LIFESTYLE AND CHILDRENSWEAR ARE PROMINENT High-end retail names are abundant in the mall, and include not only luxury brands, but also premium lifestyle brands such as Tommy Hilfiger, Kurt Geiger, Molton Brown and L’Occitane en Provence.

High-end retail names are abundant in the mall.

Childrenswear and other kids’ products are common to both segments: many of the luxury and premium brands we saw either put children’s goods front and center in their stores or operate dedicated kids’ stores separately. Midmarket retailers are part of this trend, too: for example, Abercrombie & Fitch operates an Abercrombie Kids store in addition to its main store in the mall. Dedicated kids’ stores are not the only way in which international retail brands are extending their reach. We also saw Abercrombie & Fitch’s opulently decorated fragrance store. The Mall of the Emirates is also home to a new concept store from perhaps the world’s biggest lifestyle brand: Apple. The store features an avenue of trees and a giant digital screen, along with Apple’s trademark white interiors and wooden tables. Apple Store, Armani Junior and Abercrombie & Fitch Fragrance

Source: Fung Global Retail & Technology DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016

A MALL LIKE A DEPARTMENT STORE UK names dominate the mall’s department store offerings. The upmarket is represented by Harvey Nichols and the middle ground by Debenhams and Marks & Spencer. But the shopping center itself is akin to a giant department store. A representative of Majid Al Futtaim, which owns the mall, told us on our tour that his company views the shops in the mall like concessions in a department store. In practical terms, this means stores tend to be shallow and glass fronted, so that shoppers can see inside them from the common areas of the mall. This reduces the impression of there being separate stores in the space.

FRANCHISING IS BIG BUSINESS Franchising is a very sizable business in Arab countries such as the UAE.

Most US and European retailers are present in Dubai under franchise agreements, and the volume of Western names means franchising is a very sizable business in Arab countries such as the UAE. Major UAE franchisees include Mall of the Emirates owner Majid Al Futtaim and Abdulla Al Futtaim Group. Other big Middle East franchisees include Alshaya from Kuwait and Fawaz Al Hokair from Saudi Arabia. Hollister, Forever 21 and Superdry Store

Source: Fung Global Retail & Technology



BUT MULTI-CHANNEL IS SMALL FRY Internet retailing accounted for just 1% of total retail sales in the UAE in 2015.

As we noted above, retail shopping serves as a leisure activity in Dubai, in part because of the hot climate and desert surroundings. This appears to suppress demand for e-commerce and omni-channel retailing: shoppers in Dubai are more interested in going to the mall than are shoppers in countries where shopping is less about leisure. Internet retailing accounted for just 1% of total retail sales in the UAE in 2015, according to Euromonitor International. However, e-commerce is

DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016 growing fast from this tiny base: Euromonitor forecasts compound annual growth of 19% in Internet sales (in constant prices) in the five years from 2015. In the experience-rich Mall of the Emirates, we saw no major omni-channel push by retailers; there was no promotion of online shopping or buy-online, collect-in-store offerings, for example.

MIXING LEISURE AND RETAIL In line with this emphasis on the mall as a leisure venue, the Mall of the Emirates incorporates a host of services complementing the retail offering. One flagship leisure venue is the 24-screen Vox movie theater, which incorporates 4D technology that brings physical motion and sensations to watching a film. Since September 2015, the cinema has featured a restaurant from celebrity chef Gary Rhodes; dishes are delivered to cinemagoers in their (deluxe) seats for them to enjoy while watching a movie. Four of the 24 screens offer this premium dine-at-seat service. Source: Fung Global Retail & Technology

The mall’s second major leisure venue is the indoor ski slope, Ski Dubai, which features an 85-meter-high slope and five different runs of varying difficulty. Even more unique than a ski slope in the middle of the desert is Ski Dubai’s penguin colony. Visitors can view and touch some of the 29 penguins housed in the complex. The penguins are trained to recognize their names, come when they are called and pose alongside visitors for photographs. Source: Shutterstock DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016

AWAY FROM THE MALL The preponderance of Western names was not unique to the mall format. Elsewhere in Dubai, we observed major international banners such as IKEA and food service brands such as Tim Horton and Subway. Source: Fung Global Retail & Technology





DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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OCTOBER 5, 2016 Deborah Weinswig, CPA

Managing Director Fung Global Retail & Technology New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 [email protected] John Mercer Senior Analyst

HONG KONG: th 8 Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: 852 2300 4406

LONDON: 242-246 Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0)20 7616 8988

NEW YORK: th 1359 Broadway, 9 Floor New York, NY 10018 Tel: 646 839 7017

FungGlobalRetailTech.com



DEBORAH WEINSWIG, MANAGING DIRECTOR, FUNG GLOBAL RETAIL & TECHNOLOGY [email protected] US: 917.655.6790 HK: 852.6119.1779 CN: 86.186.1420.3016 Copyright © 2016 The Fung Group. All rights reserved.

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