Abu Dhabi, UAEThursday 6 August 2020

CORONAVIRUS

As Dubai malls reopen retailers find partial relief and new opportunities

Mall operators and tenants continue to ramp up online presence in the face of challenges like decreased footfall and a slowdown in retail activity

As Dubai joins other major cities worldwide in easing restrictions imposed to contain the spread of the coronavirus and re-opens shopping malls, retailers are breathing a sigh of relief but also adapting their businesses by ramping up their online offerings to attract customers.

After being shut for nearly a month, Dubai malls are allowed to open from 12pm to 10pm at 30 per cent capacity. Shoppers must also wear a mask, keep their distance and limit their time in the mall to three hours. Abu Dhabi malls are also preparing for reopening, but no dates have been set yet.

“Opening malls at 30 per cent capacity is definitely a good step towards testing life after Covid-19 and developing momentum towards return to normal," Rabia Yasmeen, senior analyst at Euromonitor International, said.

With stores being the lifeblood for every retailer, it is important to provide confidence to customers that it is safe to come back to shop.

Panos Linardos, chairman of the Retail Leaders Circle

Among those set to benefit are retailers who failed to capitalise on online shopping and those who struggled to deliver orders in a timely manner, she added.

In addition, steps to re-open the economy can potentially alter some retailers' plans to furlough staff, though this depends on customer footfall, retail activity and a slowdown in reported coronavirus cases, she said, all of which would boost retailers' confidence.

As in other parts of the world, large swathes of the retail sector have been impacted by lockdown measures aimed at containing the coronavirus, which forced store closures and slashed revenues.

"This pandemic has been a wake-up call for the entire retail industry," said Panos Linardos, chairman of the Retail Leaders Circle, a global platform that holds industry conferences in the US, Middle East and Asia. "Pre Covid-19, brick-and-mortar accounted for 98 per cent in the region and was already in an existential crisis. With stores being the lifeblood for every retailer, it is important to provide confidence to customers that it is safe to come back to shop.”

Nakheel increased sanitisation at all of its malls, including Dragon Mart 2, in anticipation for reopening. Photo courtesy Nakheel
Nakheel increased sanitisation at all of its malls, including Dragon Mart 2, in anticipation for reopening. Photo courtesy Nakheel

Health and safety measures in the malls include increased disinfection, temperature checks, thermal screening tests and ‘sanitisation tunnels’. For example, Nakheel has required that all customer service desk staff get tested for Covid-19, increased security staff by 30 per cent and installed sanitisation tunnels at larger malls for key workers.

Many retailers praised the government’s move to reopen the malls and emphasised steps taken to comply with health and safety requirements.

Takakiyo Fujita, managing director of Sony Middle East & Africa, said the phased opening helps "balance public health considerations with sensitivity to the challenges faced by the retail sector, a vital part of the emirate’s economy".

Pankaj Kumar, head of Omnichannel Retail at Jumbo Group, said he is confident that the proactive action and testing by the authorities will help the UAE "see a flattening of the curve soon, and people will gradually feel comfortable enough to venture out to the shops".

The government's decision to gradually restore retail activities highlights the importance of the sector as a key pillar in Dubai's economy and a major draw for tourists under normal circumstances.

Several prominent non-food retail businesses saw sales decline by as much as 60 per cent in the first half of March, compared to the same period last year, however, grocery retailers witnessed an increase in sales of as much as 40 per cent, according to KPMG.

Kuwait’s Alshaya saw its revenue plummet 95 per cent as it was forced to close nearly all of its 4,500 stores across 20 markets. Now, Alshaya, which has nearly 90 international franchise brands in its portfolio – including Starbucks, PF Chang’s and H&M – is reopening its UAE stores progressively “to ensure full implementation of government guidelines”, a spokesperson said.

“We will open certain restaurants where practical, and will continue with our e-commerce and digital catalogue offers as well as food and Starbucks delivery, carhop and drive-through services,” Alshaya said.

The pandemic forced mall operators and retailers like Alshaya and Carrefour to widen their e-commerce operations given the uncertainty of when restrictions might ease. The crisis is likely to change the business environment, how companies operate and their revenue streams going forward.

Emaar Malls collaborated with noon.com to roll out a virtual Dubai Mall on the site with 37 brands currently online, such as Go Sport, Sharaf DG and The Toy Store.

Majid Al Futtaim launched an online marketplace through carrefouruae.com for its shopping mall tenants. There are 28 shops currently on the site, including Borders, ELC and Tavola.

Tenants who signed up for the platform are entitled to commission-free transactions until the end of May and 30 days free last-mile delivery.

“In dealing with such unprecedented challenges, it is important that we work collaboratively with our partners and stakeholders,” said Fouad Sharaf, managing director for MAF Shopping Malls in the GCC.

Nakheel will also soon roll out a new service, whereby goods can be ordered online and picked up at a dedicated collection point.

But Mr Linardos of the Retail Leaders Circle said online shopping remains a very small portion of sales in the region. “Clearly recent online growth doesn’t nearly offset loss of foot traffic for the majority of retailers in the region,” he said.

With rent accounting for the majority of their fixed costs, “retailers are faced with survival decisions”, Mr Linardos said. “Their primary focus in the short term remains on preserving cash and staying in business.”

David Macadam, chief executive of the Middle East Council of Shopping Centres, said operating at 30 per cent capacity may not be financially viable for many businesses.

"However, it is a start to the resumption of business and the retail industry," he said. "Concerns about being in public places will remain a real issue for many people. Expectations for traffic flow in malls is limited and will likely remain subdued for many weeks and months ahead."

During the Covid-19 lockdown and as precautionary measures continue, mall operators have been offering some relief to their tenants.

Al Futtaim Group, which operates Dubai Festival City and Festival City Plaza, said last month it would offer a Dh100 million fund to cover up to three months’ rent relief for eligible tenants across its malls.

Nakheel also announced last month that it is offering a Dh230m relief package for its retail and hospitality tenants within its malls and small business owners within its master communities.

In the UAE and around the world, governments are weighing the difficult decision between protecting public health and reopening their economies.

"We believe that governments will have to balance the need of the economy with ensuring that the Covid-19 is contained," Monica Malik, chief economist of Abu Dhabi Commercial Bank, said. "As such we envisage that the restrictions will be eased in a phased and gradual manner."

Updated: April 28, 2020 06:07 PM

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