Year in review 2014: Big UAE malls make big headlines; small ones make money

The country’s retail sector is expected to grow by more than 33 per cent in 2015.

The Mall of the World will be the world’s first temperature-controlled city, which will be built along Sheikh Zayed Road in Dubai, and will be capable of receiving 180 million visitors a year. Marwan Show more

First, the big news.

The biggest moment on the UAE’s retail scene this year came on November 19 when Yas Mall, the country’s second-largest, opened its doors in Abu Dhabi.

And the biggest announcement came on July 5, when Dubai Holding announced its plan for the Mall of the World, a project sprawled across 48 million square feet that will house what would be the world’s biggest indoor theme park and air-conditioned outdoor walkways.

But it was not the eye-catching mega-malls that drove sales growth in the retail sector in 2014.

While visiting the mall still remains one of the top leisure activities and some mall stores posted impressive growth, according to Euromonitor International the fastest-growing retail sector is convenience.

“The fastest-growing outlet types were convenience stores and forecourt retailers, with 26 per cent and 9 per cent value growth respectively,” said Nikola Kosutic, a research manager with Euromonitor International.

While there was no comparable figure for the big malls, the trend is definitely towards community malls.

Nakheel plans to focus on community malls as part of a wider goal to triple the amount of retail space it owns and manages in the next five years. The company leases 2.3 million sq ft of retail space with Ibn Battuta Mall and Dragon Mart. Both malls are expanding, with Dragon Mart set to double its retail space.

"With hectic lifestyles and increasing business opportunities, consumers are willing to invest less and less of their free time into shopping for necessity grocery items and they are turning to more convenient options," Mr Kosutic said.

Tourism is a strong growth provider for the likes of The Dubai Mall, which is the country’s largest, but the smaller and more provincial malls still have great revenue potential.

They cater to the immediate neighbourhood, whereas the destination malls are catch-alls. An example of a community project is Dalma Mall, which serves Mohamed bin Zayed City and the Musaffah area of the capital.

“We focus on value offerings because we know our customers and understand the needs of the local community,” said Mohammed Al Mazrouei, a board member of The Developers, Dalma Mall’s owner and operator.

“Retail is not just about sales. It is about community,” he says.

Overall, the country’s retail sector is expected to grow by more than 33 per cent next year, according to a report by Ventures Middle East.

An Oman Arab Bank report said retail sales in the UAE were expected to reach US$92 billion in 2017 from about $65bn this year.

Nearly 500,000 sq metres of new retail space in Dubai will come online by 2016, adding to the 2.9 million sq metres already available, said the property consultancy JLL.

The brick-and-mortar offerings have long been the staple of the UAE’s retailing experience, but the strengthening of the country’s online sales is becoming evident. The convenience and security of online sales have caught the public’s and retailers’ attention, with more and more companies joining the digital offering. The digital world offers a wider product range, undercutting the established players.

“We’ve seen the emergence and surge of e-commerce become a game changer in how customers interact with retailers,” said Omar Abushaban, head of operations at Plug Ins. “Everything from pricing and assortment to branding and communications has been affected by the growth of e-commerce in the Middle East.”

The battle for the dirhams in people’s pockets has always been fierce, but is widening to include online sales and midsized malls.

Looking ahead, the UAE may have a relatively small population but its shop-’til-you-drop personality means there is still room for players of all sizes to join the party.

Mr Kosutic said per-capita retail sales in the UAE amounted to US$4,000, compared to figures of $4,000 for western Europe and $9,000 for North America.

“This means there is still a lot of room for growth,” he observes.

According to a Euromonitor forecast made this year, retailing in the UAE will average growth of 7 per cent a year over the next five years, much higher than the 1 per cent rate expected for western Europe and North America.

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