Retail sector looks rosy in the UAE
Retail groups in the UAE brace for more competition and change in consumer spending habits in 2015, writes Abdul Basit
UAE retailers seem optimistic about growth in 2015 and are ready to invest more for expansion but they are also aware of challenges such as competing with portals, attracting footfall and converting them into customers.
Retail sales in Dubai are expected to reach Dh160 billion in 2015 compared to projected sales of Dh152 billion in 2014. The year 2013 recorded Dh145 billion sales in the emirate.
New mall announcements and Dubai’s successful Expo 2020 bid have placed the UAE at the epicentre of a global retail revolution. In the run-up to Expo 2020, the next few years will prove to be critical as regional retailers and mall owners invest heavily in new technologies and trained manpower to maintain profitability, according to a leading expert on international retail trends.
Prakash Menon, executive director of Thought Leaders Middle East and one of the foremost authorities on global retail and supply chain patterns, said that huge changes in the retail environment were imperative due to major changes in the customer’s buying habits and behaviour as well as the competition between retailers to adopt innovative strategies while targeting customers.
No longer can retailers afford to ignore the changing patterns of buying behaviour in favour of traditional marketing. Factors such as the boom in construction of new malls, growth of the younger population, increase in purchasing power, entry of major international retailers and strong Gross Domestic Product (GDP) growth are encouraging regional retailers to think differently.
According to a report by market research specialists CB Richard Ellis, Dubai currently ranks only second to London as the city with the highest percentage of international retailers. The rank is based on a survey of 323 major international fashion retailers, of which 53.8 per cent (174 retailers) said that they currently have outlets in Dubai.
In its June 2014 report, A.T. Kearney pointed out that the Middle East continued to show strength as a dynamic retail market with five countries — UAE, Kuwait, Saudi Arabia, Oman and Jordan — ranked among the top 25 in the 2014 A.T. Kearney Global Retail Development Index (GRDI). This year, the UAE claimed the fourth position, with retail sales growing five per cent.
Menon added that the retail industry was, therefore, experiencing phenomenal growth over the past five years. One of the newest strategies was to deploy omni-channel retailing initiatives that involve in-store, online and mobile shopping activities.
It is an undeniable fact that consumers are evolving faster than the brands. They have become more demanding and tech-savvy, with access to real-time information. The challenge for retailers will be how to deploy innovative strategies to remain competitive in the digital marketplace to attract their target audiences.
Last year, Abu Dhabi witnessed the opening of its largest shopping and entertainment destination — Yas Mall at Yas Island. A considerable addition to the retail landscape, the mall adds 2.5 million square feet to Abu Dhabi’s retail supply.
“The Yas Mall will significantly improve Abu Dhabi’s retail offering and will reduce the amount of retail spending that is currently lost to Dubai, by competing with trophy malls such as The Dubai Mall and Mall of the Emirates,” Jones Lang LaSalle said in a note.
Another important development in the retail sector was the listing of Marka on the Dubai Financial Market. It was the first initial public offering on the bourse in the retail segment which was oversubscribed multifold.
Incorporated with a capital of Dh500 million and headquartered in Dubai, Marka is a premier retail operator targeting the mid-to-high-range segments. Since incorporation in 2014, Marka has partnered with leading global brands in the retail and hospitality sectors, pursuing a growth strategy focused on acquisitions, franchise agreements and unique retail concepts. Last month, Marka announced the acquisition of Retailcorp UAE, a subsidiary of Istithmar, in a deal valued above Dh220 million subject to adjustments at final closing.
Social media has great impact on retail sector growth
Abdul Basit
Social media is great for dialogue, and has been one of the major game changers in 2014. The most popular source of information will continue to gain momentum this year, according to experts.
The social media has a great impact on the retail sector in various profound ways. It is a computer-mediated tool that allow people to create, share or exchange information, ideas, and pictures or videos in virtual communities and networks.
According to a survey by Mohammed Bin Rashid School of Government (MBRSG), more than 135 million individuals are using the internet in 22 Arab countries, and there are more than 71 million active users of social networking. Mobile penetration is at a rate of around 110 per cent on a regional level and the most popular apps are for social media, with 26 per cent of respondents indicating that they use social networking apps most frequently.
“We are seeing the maturing of the social-buyer. The way people shop and the decision-making process today involves a series of interchangeable online and offline activities, and social media conversations are a huge part of that,” Vishesh Bhatia, chief executive officer of Jumbo Group, told Khaleej Times.
“What do your friends feel about a product, how trending is it on social media, how does the brand relate to you and engage you in a two-way dialogue, even the sharing of negative experiences and how a brand moves quickly to rectify things – all this is happening in real time and very much in the public domain. The impact of social media is even more apparent in highly B2C sectors like retail and hospitality,” Bhatia added.
Deepak Babani, chief executive officer of Eros Group, said social media has been one of the major game changers in 2014 and will continue to grow.
“Retail chains have also embraced the medium and optimised their media budgets in a more effective way. The social media also allows consumers to interact with their favorite brands in a more direct manner and get feedback in quick time.”
Sean Connor, general manager of Plug Ins, said brand dissonance and advocacy have become largely dependent on the honest testimonials that you can sometimes only find on social media.
“Customer’s preferences, lifestyle, and habits are never more vivid than they are on social media because our facebook, linkedin or twitter accounts have become an extension of our personalities.”
“This platform has allowed customers to leave a clear digital footprint for retailers to follow and engage with. Retailers that invest in understanding and engaging customers through social media will win in the coming years,” Connor added.
Emax chief executive officer Neelesh Bhatnagar said: “Undoubtedly, social media platforms have become paramount for the retail business. Consumers are on facebook, Twitter and other social platforms which retailers can ignore only to the risk of their business. Amid the fierce completion in the retail sector, retailers have a vested interest to reach out effectively to their consumers and track their behaviour.”
“Smartphones and internet-enabled devices have given birth to the digital consumer who is connected around the clock and with this region having the highest mobile penetration, social media will be of more importance for the retail sector. Hence, the retail sector should consider all channels, including social in order not to miss the ample opportunities that this channel provides,” Bhatnagar added.
Mahesh Chotrani, assistant vice-president of Jacky’s Electronics, said social media has a great impact on the retail sector in various profound ways. It helps us project our offerings to the customers, and also to connect with them. “Consumers now prefer to reach out on the business’ social media pages. In addition, it is the best platform which enables us to continuously listen to the needs and wants of our customers and their response to our offerings.”
Sam Ghori, general manager of Toys R Us, said social media is great for dialogue with customers and enables us to promptly manage their expectations.
“In terms of business lead generation it is starting to take off in the sector of toy retail.”
Amit Rupchandani, managing director, Obi Mobiles Mena, said: “In the smartphone retail industry, we are in a unique position as we are fuelling these growth trends, but we are also growing due to these very trends. It is a symbiotic, two-way relationship.”
Shivam Goyal, business head of SportsOne, said social media has become a significant trend for retail in several parts of the world.
“The trend is slowly taking shape in the region. It is definitely set to have a major impact on the industry across different verticals and we are also preparing ourselves for the same using direct mediums like facebook, youtube and twitter. Social Media helps in creating brand affinity amongst your consumers which is one of the most important factors and we are adapting to this trend enthusiastically.”
— abdulbasit@khaleejtimes.com
Outlook for 2015
Khaleej Times spoke to key retailers in the UAE. They were upbeat on the prospects of the retail sector, especially for first half sales because of the Dubai Shopping Festival in January and the Abu Dhabi Electronics and spring edition of Gitex Shopper.
Deepak Babani, chief executive officer, Eros Group, said 2015 will be a challenging year albeit with opportunities which if tapped can prove to be a turnaround year.
“We are a bit cautious as it will be a year in which work on projects announced in 2014 will be done and the results of which should arrive in 2016. It will be a year of consolidation and seeking opportunities.”
Expansion is the keyword for Jumbo Group. Vishesh Bhatia, chief executive officer, Jumbo Group, said the group’s growth strategy is being realised through expanding and diversifying the business in its key and emerging markets. He said Jumbo’s wide-reaching network of operations currently covers the UAE, Oman, Kuwait, Qatar, Bahrain, Northern Iraq (Erbil) and the plans are on cards to explore new markets in Africa.
“Our growth strategy envisages between 23 per cent and 27 per cent increase in 2015-16, and a threefold increase in turnover to Dh15 billion by 2020. We recognise the ambition of this goal …. I see no reason why this dream cannot be realised,” Bhatia said.
Neelesh Bhatnagar, chief executive officer, Emax, echoed the similar views.
“Building on the results we’ve achieved for the years 2013 and 2014 and the outlook of electronics retail, we are confident that 2015 will be another great year for us in the markets where we operate.”
About the expansion, he said Emax will pursue its expansion into new emerging markets in the Mena region, mainly Iraq, Egypt and North Africa to cater to the needs of the local customers.
“This will definitely boost our business results and will help us hit our target to reach 100 stores by 2017,” he said.
The similar sentiment was echoed by Mahesh Chotrani, assistant vice president, Jacky’s Electronics.
“We are very optimistic on the growth for 2015 and are expecting to grow in double digits.”
Sean Connor, general manager, Plug Ins, said 2015 looks promising from a commercial standpoint with the first half of the year bursting with promotional events.
“We’ll kick off the new year with the much-awaited Dubai Shopping Festival and follow that up with the Abu Dhabi Electronics Shopper and the spring edition of Gitex. If last year is any indication, we are expecting the 2015 DSF to be the best we’ve ever seen.”
Amit Rupchandani, managing director, Obi Mobiles Mena, said: “We are working on launching an even stronger portfolio of products in the first half of 2015, with the aim to capture five per cent of the market share by the end of 2015.”
“At Obi, we are brand builders and sales channel builders on a global scale. We can be profitable at more aggressive price points than other multinational brands as we use youth-centric positioning and excellent partner relationships,” Rupchandani said.
“Having launched in India with a better-than-anticipated response has helped us set the pace for the Obi expansion blueprint. We have earmarked substantial investments for our global expansion. We are now focusing on consolidating and further strengthening our position in India and the Middle East markets, while expanding to Africa and South America in early 2015,” he added.
The optimism seems contagious across all retailers in Dubai.
Sam Ghori, general manager, Toys R Us, said: “We are optimistic about 2015 with a great line-up from global toy licensees already on the horizon that will ensure we carry the most on-trend and hottest toys at our stores and live up to our promise of being the destination of choice for kids and kids at heart.
Shivam Goyal, business head, SportsOne, said: “Considering the growth drivers mentioned above, the outlook for 2015 looks bright. Also, taking into account the great results we have achieved in the last two years, we expect to maintain the growth momentum and meet our target of 40 stores by 2016, from the current 11 stores.”
2014 performance
Retailers said sales met expectations and numbers were encouraging in 2014 with a double-digit growth. Despite being a roller-coaster of a ride with highs and lows in sales, the overall sentiment is one of satisfaction.
Babani said 2014 was a roller coaster year with some highs and lows. And like a rollercoaster, you come out feeling happy and energised.
“We feel the same as we negotiated a positive year with a growth of just over 10 per cent against last year.”
Upon completing 40 years of operations in the Middle East and Asia, the Jumbo Group’s Bhatia said: “We have witnessed a sales surge in the half year April/September 2014 -— a growth of 38 per cent compared to last year -— and are now well placed to report a record sales turnover of Dh5 billion in the fiscal year 2014/15 across the group.”
Emax’s Bhatnagar was also upbeat and said 2014 has been an amazing year for the group. “We’re closing the year on a highly positive note, well on our way to hit our targets. Emax sales increased by 28.7 per cent in this year compared to the same period in 2013. The market conditions continue to be buoyant and we expect this buoyancy to gain more traction in the years ahead.”
The scene was no different at Plug Ins. “We’ve seen near double digit growth across the estate in terms of sales and even better visitor numbers. Our Dubai Mall store alone has seen 40 per cent increase in visitors this year,” Connor said.
Toys R Us also posted double-digit growth in 2014.
SportsOne’s Goyal said: “Being a new concept, our sales have increased phenomenally, by 50 per cent from 2013 to 2014. We expect to sustain a high level of growth over the coming years, especially since the region is focusing on hosting mega sports events and local governments are encouraging a healthy lifestyle to curb the so-called lifestyle diseases and reduce burden on healthcare budgets.”
Challenges ahead
The retail industry needs to be prepared and adopt rapid changes over the next few years. The industry sees all signs of growth next year but it is also expected to be a period of consolidation and building a solid CRM platform. Business leaders believe the industry must quickly adjust and modify existing models to adapt to new operating norms.
Eros Group’s Babani said with many malls openings in 2014, the newness will subside next year, making it a period of consolidation and building a solid CRM platform.
Jumbo Group’s Bhatia beieves the underlying challenge for the electronics retail sector is that of earning a positive bottom line. Technology sells, without doubt. But technology is now ubiquitous and all tech retailers sell the same products. Differentiation will remain the challenge for retailers.
“At Jumbo, we have adopted a strategy of extending unique experiences to customers through a curated range of products instore and online buying experiences. The extensive $1.3 million renovation of our flagship store in the Mall of the Emirates will set a new trend in retailing
We are also looking forward to CES as an indicator of 2015 trends. It is one of the most high-profile global consumer technology tradeshows that takes place every January in Las Vegas, and sets the tone for the rest of the year,” he added.
Bhatnagar said UAE’s consumer electronics market is one of the largest in the Gulf, accounting for close to 40 per cent of regional spending and serving a potential market of almost 2 billion people.
Chotrani said: “We see all signs of growth for the retail industry in Dubai in the following year.”
Commenting on new trends, Plug Ins’ Connor said: “We have seen new brands like Huawei, Lenovo and Hisense alter the competitive landscape in consumer electronics. It’s no longer a duopoly between Apple and Samsung. We’ve seen far reaching impacts tied to this shift.”
Online sales gaining momentum
Abdul Basit
In today’s world consumers are the king, as they have an abundance of choice for shopping such as physical stores, as well as websites and apps on their smartphones.
But, the online business of power retailers in the UAE is still in its early days and they are confident about a significant pick-up in the coming years. The old notion of a linear customer journey is rapidly evolving into a much more mosaic approach. In response, retailers are seeking to understand how shopping behaviours are changing, as consumers gain more choice, access and power across channels.
“Online sales for consumer electronics are still in a very nascent stage as price differentials are not much on authorised distributed products,” Eros Group chief executive office Deepak Babani toldKhaleej Times.
“Internationally many countries have had successful e-shop extravaganzas but UAE is still a bit away. It is not so much as the medium but the fact that accessing electronic goods in a physical format [like a store] is easy given the number of malls and stores spread across the country,” Babani added.
Vishesh Bhatia, chief executive officer of Jumbo Group, said: “Our online business was launched in November 2014 and so it is early days yet to make any estimate. What we have seen in these few weeks is a remarkable testimony to the trust factor that Jumbo evokes.”
“Well against online trends, we have seen 65 per cent of buyers paying online, which contrasts vividly with the industry trend that sees just 30 per cent paying online. The other feature that has been well received is Click-and-Collect: pay online and collect from any of Jumbo’s 20 stores in the UAE. A huge advantage over pure-play online sites,” Bhatia added.
Emax chief executive officer Neelesh Bhatnagar, said: “Today, despite Emax being a new entrant to the e-commerce world, we are very optimistic about this as an evolving channel of sales.
Landmark’s own online portal has provided Emax with a successful online platform to drive sales. As e-commerce continues to grow rapidly in this region, Emax will keep tapping into the massive opportunities that emerge from this channel.”
Sean Connor, general manager of Plug Ins, said: “Our e-commerce channel is still relatively new. We expect significant growth in e-commerce over the next year with further development and focus on this channel.”
“We’ve seen the emergence and surge of e-commerce become a game-changer in how customers interact with retailers. Everything from pricing and assortment to branding and communications has been impacted by the growth of e-commerce in the Middle East. It is estimated that the UAE makes up 55 per cent of the total e-commerce spend in the GCC which is why it’s perceived as the digital gateway to the Middle East,” Connor said.
Sam Ghori, general manager of Toys R Us, said: “We have only recently launched our online presence, so it is too early to comment. We are still deep rooted in brick and mortar retailing as we feel customers still believe in shopping within the retail environment and thus we are rigorously putting all our efforts behind constantly innovating and refreshing our store environment to deliver lasting customer experiences.”
Amit Rupchandani, managing director of Obi Mobiles Mena, said: “We have entered into an online collaboration with Snapdeal.com in India, which has resulted in seven per cent of our total sales. Online stores are going to contribute substantially to the market share in the coming years, and we are focusing on strengthening our presence on online platforms across all the regions.”
— abdulbasit@khaleejtimes.com
Predicting growth patterns for the mobile phone industry, Rupchandani said the smartphone industry growth in emerging markets is soaring at more than 32 per cent CAGR in 2014. But there are also reports of staggered growth in certain markets as consumers are exploring options or delaying purchases. It is vital to have very disruptive price points for success in emerging markets.
“We believe the smartphone retail industry can double its growth by increasing accessibility in the market through aggressive pricing and a strong pipeline of products.”
Toy R Us’ Ghori said: “Shifting demographics, household downsizing, more educated consumers, new channel formats — among other trends — require that the industry quickly adjust and modify existing models, approaches and processes to satisfy the needs of future customers in order to be successful and profitable. 2015’s line-up will ensure we maintain our position as market leaders in the toy retail industry.”
Buoyant about sports retailing, Goyal said: “With the rise in tourism, health and fitness awareness, and sporty trends, growth of the sports retail industry is definite.”
Opportunities to grow
Competing with online portals whose USP is low prices will be one of the major challenges for retailers this year. All retailers sell same products, so differentiation is another challenge for retailers.
Eros Group’s Babani said retail has had a busy year with new mall openings. However, this has also posed its own challenges in attracting footfall and converting them into valued customers.”
Identifyinng consumer trends in 2015, Jumbo Group’s Bhatia said there have been a few category-defining launches that have the potential to shake up the consumer spending direction.
“While the usual favourites continued to rule the roost, we’ve also seen innovators and market disrupters such as the dual-screen YotaPhone and Obi Mobiles by former Apple CEO John Sculley.
The consumer electronics retail industry needs to be prepared to adapt to rapid change over the next few years. This will impact what we sell and, more importantly, how we sell.”
Elaborating on the group’s OmniChannel marketing strategy, he said: “Over the years, buying patterns and decision-making processes have evolved to include a mix of online and offline behaviours. There is a need to ensure that an online presence doesn’t just tick off boxes, but also addresses today’s changing realities and customer expectation for an anytime, anywhere, seamless shopping experience.”
Not averse to change, the Jumbo Group reacts to competition by pushing for more innovation in its products. Bhatnagar said: “The changing landscape is another challenge and we’re overcoming that by adapting to change. Customer expectations, for instance, are increasingly changing and we are trying to keep pace with that. Our adaptation to change covers every aspect of our business, from store design to sale channels, product category and availability, customer experience and service, and our marketing communication.”
Aware of the threat posed by e-commerce, Jacky’s Chotrani said: “2014 has seen a major shift where traditional retailers have moved to e-tailing. However, both the businesses differ in terms of operations, thus a major challenge in that space is competing with pure online portals whose USP is low prices, so the challenge remains in creating our niche in this respect.”
Obi’s Rupchandani said the Mena region presents a massive opportunity for new smartphone devices, with a huge margin of consumers in the mid and affordable smartphone segments.
“Consumers today want the best feature-rich smartphone experience at desirable price points, without compromising on quality. There is also a growing trend of feature phone users moving towards smartphones. Our analysis has revealed that consumers today are more likely to switch brands as long as they have sufficient incentive. Obi is uniquely positioned to leverage all these changing market dynamics.”
Speaking on behalf of Toys R Us, Ghori said: “We have been fortunate in 2014 with a good influx of inbound traffic to the UAE, which has been our best performing market of the financial year.”
For new retailer SportsOne, the challenge has been to enter a market full of established brands.
