_The trends in Dubai's retail market

Dubai’s retail expansion comes as developers use retail as an anchor for their mixed-use developments. Super regional malls such as The Dubai Mall and Mall of the Emirates remain the top choice for existing and new brands to operate in. Meanwhile community and neighbourhood centres have gathered pace in recent years, as they add value to the residential communities and ensure continuous revenue streams for retailers and mall operators/developers. 

Trends 

Modest growth in sales: The general macroeconomic conditions which resulted in the slowdown in retail sales growth in 2016 are still largely in place. This is expected to contribute to a continuing challenging environment for retailers. Once used to double-digit growth (c. 10%-15%), UAE retailers are now seeing modest single-digit growth in sales. 

Retail strategies: Weaker market conditions coupled with a strong supply pipeline are driving retailers and mall operators to offer promotions and price reductions to entice customers and maintain strong footfall. Strategies such as the three-day ‘Super Sale’ (May 18-20), is part of the Dubai Festivals and Retail Establishment’s (DFRE) robust scheme to further boost Dubai’s retail sector. Boosting sales, particularly ahead of Ramadan and the quieter summer months, is expected to further enhance and build on the emirate’s strong position as a central shopping hub.

Electronics market: According to a study by Dubai Chamber and Euromonitor International, Dubai has emerged as a profitable consumer electronics market with a value of USD 2.5 billion in 2015. This is expected to grow 4.7% to reach USD 3 billion by 2020. The electronics market is supported by Dubai’s position as a regional hub for trade flows and re-exporter of devices in the region. This segment of the retail market is also supported by the UAE’s young and tech-savvy population, which is continuously upgrading smartphones and tablets. The emirates’ improving and expanding connectivity, growing popularity of social media platforms, and increased investment in Dubai’s image as a leading Smart City, are expected to encourage more consumers to buy electronic devices.

Product diversification: The emirate’s saturated retail market is forcing developers to differentiate their mall and retail offerings in order to stand out from the crowd. Outdoor, urban-lifestyle shopping grounds such as Box Park, Citywalk and the Dubai Design District (D3) are becoming in new sub sector in Dubai. Similarly, providing unique retail concepts such as Marka’s Paris 68, a home-grown retail concept stocking on collections created by local designers, high-street names and students, is driving footfall and outperforming various existing brands. 

Online disruption: E-commerce in the region still lags behind mature markets. However already traditional retailers are facing competition from e-commerce leaders such as Amazon; a trend likely to continue and expand into the future. With plans to introduce Noon.com to the market and the sale of Souq.com to Amazon, we expect product availability in online channels within the region to increase dramatically, subject to the right infrastructure being in place. Based on research and estimates by Chalhoub Group, e-commerce sales are expected to account for USD 1.5 billion of the Gulf’s high-end luxury segment within the next four years. With a large population under 30, high levels of internet penetration and governments actively focused on investing in technologies and entrepreneurship, the online retail industry is expected to soar by 2021. 

It is our view that brick & mortar stores will continue to be essential given shopping centres in Dubai provide family entertainment in addition to shopping, however retailers may look to realign their real estate strategies to reduce operating costs and to invest further into online channels. 

Read our latest Dubai Market Overview in full here.