Dubai retail has to adapt to survive

18 April 2016

Concerns about overcapacity and online competition will challenge the emirate’s position as a shopping destination

Going shopping in Dubai is an experience. Mall owners boast that shoppers can go skiing, ice skating, scuba diving, sky diving, and enjoy dinner while watching a movie.

These attractions, which were greeted with much bewilderment when they were first launched, were years ahead of their time.

Retail centres such as Mall of the Emirates and Dubai Mall have benefited from being entertainment destinations and have helped Dubai’s retail offering become one of the best in the world.

As demand grows, more retail space is being built. Emaar is planning to build a mega retail centre at its Dubai Creek Harbour development as well as expand its existing Dubai Mall, Nakheel is developing 10 projects with 10 million square feet of leasable retail space, the Al-Futtaim Group is expanding the mall at Dubai Festival City, and Majid Al-Futtaim has just completed an expansion to Mall of the Emirates and a new City Centre at the International Media Production Zone (IMPZ).

With so much new space being built, there are concerns that Dubai will be oversupplied with retail space in the future. The billions of dollars that are being invested are also starting to be threatened by an increasingly important player in the Dubai retail market: the internet.

Online shopping benefits from not having the overhead of renting a store. In other markets it has quickly gained a substantial chunk of the retail mix and its share of the market is growing as consumers become more price sensitive and price aware.

Under pressure mall owners from around the world are looking to Dubai as an example of how to attract people to malls not just for shopping but also for entertainment.

Dubai is starting to feel those pressures too. Residents are turning to the internet for bargains, shipping and logistics is becoming more efficient, and better deal are easy to find with such a strong US dollar and, thanks to its peg, UAE dirham.

To maintain Dubai’s edge as a premier retail destination two things will have to happen.

First, it will have to embrace the internet and retailers will have to develop a strong online offering or risk losing customers to foreign players.

Second, as Dubai’s malls are copied with attractions such as ski slopes planned for retail centres in Saudi Arabia and Egypt, mall owners will have to innovate and develop new and exciting experiences for shoppers to revel in.

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