Retailers look to the future - Emirates24|7

Retailers look to the future



As double-digit inflation and a global slowdown threaten to engulf the region, retailers and mall owners are debating ways to continue bringing in consumers – and we haven’t even begun to talk about the competition yet.


“All businesses are affected by inflation and recessions, even retail. Retail is part of the overall economy,” Majid Saif Al Ghurair, President of BurJuman Centre and Reef Mall, and Chairman of MECSC, told Emirates Business. “The industry cannot be insulated, particularly the middle and lower-middle segments. More upscale retailers will perhaps not face the same level of exposure.”


Lawrence Pinto, editor of the trade journal Retail ME, says the region will not continue to remain immune to  the current global slowdown, and says the effects will be felt over the next couple of years.


“We have already seen the inflation rate shooting up and prices of essential commodities rising, by more than 100 per cent in some cases. Although the UAE government is trying control grocery prices, it is difficult for any government to keep a check on inflation given the rising oil prices and short supply of food grains,” he says.


“The global slowdown is also expected to result in fewer people going on holidays, which means fewer tourists, fewer airline passengers and less spending.”


These and other ways to keep consumers coming in – and spending – are being discussed at the 13th annual Middle East Council of Shopping Centres (MECSC) Convention, which ends on Tuesday at the Dubai International Convention and Exhibition Centre.
The convention attracts some 300 of the region’s prominent business leaders and examines current trends and explores future scenarios and new opportunities.
Several high-profile international guest speakers, including management thinker Dr Kjell A Nordström, designer Karim Rashid and architect Eric Kuhne, are addressing best practices, environmental sustainability, investment and development, relative to the Gulf in a bid to understand how malls can stand clear of an increasing amount of retail clutter.


In fact, retail realtors will need to ramp up their offerings in the face of an increasingly competitive marketplace. At the end of 2007, according to a report by the independent London-based shopping centre consultants Retail International, the Gulf had 7.75 million square metres of Gross Leasable Area (GLA) of organised retail space, a 2.1 million square metre increase on the previous year.


A similar, if not larger, increase is projected for 2008, and some 4.4 million square metres in GLA is already in production with delivery through to 2011.
Retail International principal Simon Thomson says that towards 2020 current forecasts predict a completed supply of organised retail footage in excess of 18.5 million square metres across the existing GCC nations. “The next year or so could therefore prove to be a testing time for some of the major retail developments in the Gulf due to come on stream during this period,” the report says.


In terms of specific projects, Pinto points to the delivery of several iconic, billion-dirham shopping centres around the region over the next few years, including the Dubai Mall and the Mall of Arabia in Dubai, the Central Market in Abu Dhabi, 360 and the Mall of Kuwait in Kuwait, Bahrain City Centre and several huge projects in Saudi Arabia, Egypt, Jordan and Syria.


Also pumping billions into retail real estate is the UAE’s Nakheel, which announced 100 new malls around the region earlier this week. 


“Most of these projects will be looking at attracting leisure and entertainment components as major anchors to drive footfall,” says Pinto. The Dubai Mall, for example, which opens this August, not only hosts 1,200 stores but also features an Olympic-size ice rink, an indoor-outdoor streetscape area and an 80,000 sq ft children’s edutainment complex.


But this is merely a reflection of what consumers are now asking of their malls. Like Al Ghurair says, a visit to a mall is not just a shopping trip anymore. It’s a full day out on weekends with the family.


“We’re seeing more shops opening, more brands operating here, more mega malls,” he says. “Malls now need to start rethinking their strategies, in terms of what segments they want to attract and who their clients are. They cannot continue to replicate existing retail offerings. Rather, they need to be a combination of many things, and finding the right balance between all these elements is a key factor in being successful.”


Thus far, however, industry projections have been optimistic. By the end of 2009, the retail sector will contribute as much as 50 per cent to Dubai’s GDP. In the same time frame, retail spending for the UAE as a whole is expected to surpass the Dh37bn mark, with Dubai accounting for a massive Dh27.8bn chunk of that total amount.


The MECSC Convention has been expanded this year to include a new Retail Zone designed to showcase existing brands and newcomers seeking to expand their presence in the region.

The zone sits alongside a Leasing Fair and Trade Expo, which has attracted several first-time exhibitors including car accessory retailers Yellow Hat, retail merchandise unit manufacturer Blueprint Projects and FEC International, which designs and realises entertainment centres.



Q&A: Kjell A Nordström


Better known as the economist who wears leather trousers, Dr Kjell A Nordström earned himself a fan following in the world’s boardrooms when his book, Funky Business – Talent Makes Capital Dance,


co-authored with Dr Jonas Ridderstrale, was published in 2000. He is in Dubai to speak at the annual MECSC Convention, which closes on Tuesday.


An international bestseller that was translated into 31 languages, it is a manifesto for what our time requires from business firms and their leaders. It turned him into an overnight management celebrity, and in the 2007 Thinkers 50, the world’s ranking of management thinkers, he was placed number 13.


His subsequent book, also with Ridderstrale, Karaoke Capitalism: Management for Mankind, teaches how to successfully compete on competencies, create capitalism with character, and how to have a great life while also making a living.


Nordström is presently an Assistant Professor at the Institute of International Business (IIB) at the Stockholm School of Economics. Emirates Business caught up with the management guru ahead of his talk at the Dubai International Convention and Exhibition Centre on Tuesday.


Have you been to Dubai before? What are your impressions of it?


Yes, I have. The key impression is: This is what the future looks like! Not only for Dubai – for many regions and cities around the world. It is the Las Vegas of the Middle East.


How would you explain your books to people who have not come across them thus far?


Our books are an invitation to think! And to think in a different way. In a way our books are user manuals to our time.


What can we expect from your lecture today?


I will focus my lecture on the capitalism of today. How does it work? What are the key changes? And what kind of companies will we see in the years to come.


How do your theories relate to the Middle East?


Our theories and ideas are developed to be as independent of time and space as possible. The region should not face a problem for the principles of Funky Business.


Funky Business says talent makes capital dance. But by finding and recruiting the most talented people, and even mavericks, like you suggest, aren’t companies setting themselves up for management problems?


It is potentially a management problem to bring stars aboard. However, the trick is to recruit people for their attitude rather than their skills. That means people share something of a level somewhat deeper than the daily operations.


 If business is changing and individuals will not be loyal to companies, as Funky Business suggests, what is business changing into? What new directions must strategists look to?


Strategists must understand that capitalism 2.0 is an attraction game. A firm has to be attractive non-stop. 24/7, 365! All business is now showbusiness. Just look at Porsche, Virgin or iPod.


One of the things you talk about is creating niches, finding tribes and operating within these. How can retailers do this effectively in a cosmopolitan market such as the


UAE, which is home to nationals of 120 countries?


That the UAE is home to so many nationalities is no problem for tribal thinking. The people’s republic of Britney Spears cuts across [borders] and can be found anywhere. It is young, primarily women with a number of other key characteristics. They exist independent of national background. This is something most tribes tend to do. Basically you structure humanity along other lines than nationality.


So what can brands learn from tribes like Nike? In your opinion, are these brands to learn from? And if they are, what can we learn from them?


What the Nike tribe or the Nike brand can teach us is that a tribe member could be ANYONE. Young, old, man, woman, Russian, Hell’s Angels, Buddhist, etc. Do not limit yourself. But corporations cannot make tribes. They can reflect those tribes that exist and perhaps push them in one direction or another.


Why do you say we are condemned to freedom? When does freedom become a curse?


Freedom is a curse in the sense that it puts an immense pressure on the single human being to choose. And once you  can choose you end up with all the responsibility.


How do you apply the Funky Business principles to your own 'Funky U'?


I personally apply all the principles, of course. Focused, networks, branded, and so on, like our books say – and my God, it works!


What do you do to top Funky Business and Karaoke Capitalism?  What’s the next book called?


The next domains for business to explore are human psychology and women, or EVE(oulotion).