Capital push – UAE

© Sacha Orloff | Dubai Mall | June 2011

by Ed Attwood

For time immemorial, the Gulf’s shoppers have headed en masse to the bright lights and glitzy hoardings of Dubai’s retail scene. But the recent growth in major Gulf cities have seen the biggest brands concentrate their firepower on other hubs. In Saudi Arabia, Riyadh and Jeddah are emerging as major shopping destinations in their own right, while Doha and Bahrain have also earmarked retail as a key requirement not only to satisfy their own well-heeled clientele, but also to attract tourists as well.

In the UAE, specifically, Abu Dhabi’s shopping sector is a key part of the city’s 2030 vision, and reports suggest that the UAE capital could have as much retail space as Dubai in the next five years or so. Gone are the days when Abu Dhabi residents would take the short trip down the highway to see the latest luxury collections, with most of those available right now on the doorstep. One of the companies leading that charge is the Chalhoub Group, whose UAE trading arm — Allied Enterprises — has recently announced a major push into Abu Dhabi.

“In Abu Dhabi ten years ago, the local attitude was that they always considered Dubai as where fashion was ‘happening’,” says Mansour Hajjar, managing director of Allied Enterprises. “So if you opened a shop in Abu Dhabi, they wouldn’t have been convinced that the collection we were showing there was the latest collection. It has taken some time gradually to make this change happen. You also have a certain attitude in Abu Dhabi of being so elitist that they wouldn’t even go to malls in general.”

As one of the biggest luxury retail brands in the region, the Chalhoub Group sells around 280 brands in over 370 stores across fourteen countries in the region. Apart from home-grown brands such as Tanagra and Faces, the group also has retail joint ventures with Louis Vuitton, Christian Dior and Christian Louboutin.

For luxury traders wanting to find a foothold in the UAE capital in previous years, that elitist way of thinking posed some unexpected obstacles. For instance, the highest class of shopper wasn’t particularly keen on mixing it with consumers on their weekly trip to the local hypermarket. The Chalhoub Group came up against this problem when it was asked by a local developer to add several of its brands to the Marina Mall’s luxury extension in 2006.

“When we looked at the layout, we saw there was a problem: high-end consumers will usually come with a driver and want to be isolated from the Carrefour consumers,” recalls Hajjar. “So we convinced them to create a side entrance where those customers could be dropped off by their driver, get in the area discretely and do their shopping without having to mix with everyone else. Those same consumers would not have the same problem in Dubai; in places like Mall of the Emirates and Dubai Mall, there are clearly defined luxury areas, where it is not so much of an issue.”

However, Abu Dhabi’s retail scene is set to change hugely over the next few years, with luxury playing a vital part in that expansion. Recent data from Jones Lang LaSalle claims that the capital is undersupplied by about 700,000 sq m, relative to the substantial spending power of the population and rising tourism spend. The occupancy rate in regional malls in the metropolitan area sits at 95 percent, and there is a waiting list for top-ranked space in both existing and future development. A slew of major malls have either been completed, or are coming online in the near future, including Paragon Mall on Reem Island, Mushrif Mall on Airport Road, the Dalma Mall and BMC Mall near Mussafah, and Yas Mall.

Unsurprisingly, the Chalhoub Group is investing heavily in the potential growth on offer in Abu Dhabi. Hajjar says that the Allied Enterprises team has started its operations in the capital from scratch, rather than just extending their substantial Dubai coverage.

“We wanted the teams to fully focus on Abu Dhabi, rather than treating it as a satellite of Dubai,” he points out. “Earlier this year, we opened a new office in the city, providing back-office services and support. We’ve just opened six new stores in the past two months in Abu Dhabi Mall, with plans to open a total of 26 altogether this year.”

Other than the six stores in Abu Dhabi Mall — which include branches of the new children’s brand Katakeet, plus CH Carolina Herrera, Marc by Marc Jacobs and Lacoste — the firm will also add two stores in Mushrif Mall, six in Bawabat Al Sharq and four in Al Ain Mall.

“Studies we have done show that in Al Ain there are wealthy clients from important families, and there’s plenty of scope in the city,” adds Hajjar. “Today you have two major malls in Al Ain, and you also have a lot of industrial growth in the area, with electronics and aerospace firms basing themselves nearby, so there is also a market for those employees as well.”

And the Chalhoub Group has no plans to stop there. By 2013, it is targeting 50 shops in the city, with more being added to newer locations on Reem Island and Sowwah Island, as the various segments of Plan 2030 kick in. But whether Yas Mall will be a part of that growth is still up for discussion. Hajjar says that his firm “would like” to be present on Yas Island, but that the developers behind the mall are revising its layouts, and that the Chalhoub Group are unclear on the centre’s future plans.

Hajjar’s team has also been hard at work identifying the average make-up of the Abu Dhabi consumer as opposed to the Dubai shopper. If you thought they were one and the same, think again.

“In a nutshell what we have noticed is that the fundamental difference is the attitude of consumers towards wealth,” he says. “The Abu Dhabi consumers tend to be more elitist, and express their personality more through individuality and uniqueness, while Dubai consumers are more materialistic — it’s more about the net worth.”

All in all, the group is spending heavily on Abu Dhabi in a bid to boost already strong UAE results. Last year, Allied Enterprises saw seventeen percent sales growth over 2009 after what Hajjar terms as “a year of consolidation and readjustment” after a slow period in that previous year.

“What helped us was in 2009, during the consolidation, we revised our portfolio of brands, and we also revised the financial health of many stores,” Hajjar says. “2009 taught us a lesson of being more selective, more focused, more selective in the types of brands we need to bring, and making sure that new openings have to meet the demands of the consumers and certain financial criteria.”

That lesson paid off last year, but results so far in 2011 have been even better, with first-quarter sales growth hitting seven percent. 

“In 2011, we had initially planned for a normal year of growth, so five to six percent,” the managing director says. “We have been surprised by two aspects; the first was that the results were much better and the second was that the influx of tourism into Dubai was way beyond expectations. Sadly this has been due to events in the region, which benefited Dubai; tourists that might have wanted to go to Egypt, Tunisia or Syria, or who were seeking the sun, came to Dubai.”

Even more impressively, the group posted a 21 percent growth in fashion sales during the first quarter, aided by the Dubai Shopping Festival, and what Hajjar describes as growing consumer confidence in the UAE.

“I don’t have the latest numbers, but I do remember that towards the end of 2010, consumer confidence rose by ten percent versus the end of 2009,” he adds. “So already by the end of 2010, there was already a lot of confidence in the UAE. And also in Dubai, I think the real estate story is behind us now.

“Another side is the return of tourism into the market. If you compare Dubai to Abu Dhabi, in the latter you have steady growth, so every year this is constant. But in Dubai you see big ups and big downs, a rebound and then another rebound, fuelled by the tourism. For instance, we’ve never seen as many Saudi licence plates in the streets of Dubai as we’re seeing right now.”

The addition of Dubai Mall into the emirate’s shopping environment — adding an extra 20 percent of retail space into the market — has paid off hugely not only for developer Emaar, but also for those firms that invested heavily in the mall, like Chalhoub Group. Recent figures from Emaar showed that footfall in the Dubai Mall rose by 27 percent in 2010 to 47 million visitors, while major competitor Mall of the Emirates saw 30 million shoppers pass over its threshold.

However, while the entry of Dubai Mall has clearly not affected Mall of the Emirates, it certainly has cannibalised business from the smaller malls that once led the field. The BurJuman, located in the older Bur Dubai area of the city, has responded to lower numbers of consumers by announcing a complete revamp of its offering earlier this year. But the Allied Enterprises managing director says that the mall — in which the Chalhoub Group has invested heavily — still has plenty of potential.

 “As a matter of fact, we haven’t seen major decline [in the BurJuman] — we’ve seen some declines obviously – in all of our stores,” says Hajjar. “But for very high-end brands that are part of the Chalhoub Group we’ve seen declines that are reasonable.

“What one likes about the area in the BurJuman is that the shopping area is beautifully designed and is very pleasant environment. Shops like Saks Fifth Avenue pride themselves on their customer service, and also to a certain extent you avoid the crowds you can get at other malls.”

Read more on: http://www.arabianbusiness.com/capital-push-407429.html

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