Here’s an idea: take the shopping out of shopping malls

Everyone knows that online is transforming retail. But the big question for traditional retailers is what to do about it. Peter Nowak writes that Apple’s new store in Dubai and a clothes shop in Montreal offer a way forward: make it about the experience.

Apple last month opened a new flagship location in The Dubai Mall that is more of a technology academy than a store.
Powered by automated translation

We’ve all been there. You need a household item, a book or even an article of clothing, so you hop on the bus or in the car and travel down to the nearest mall. When you get there, you can’t find the item in question so you look for a store employee to help. But the one person you finally find is busy helping a long line of other customers. When you get your turn at last, you find out the store doesn’t have the item.

Frustrated, you fire up Amazon or Souq.com – now owned by Amazon – and you find it easily. With a few clicks or taps, you’ve purchased it and, within days, it’s delivered to your door. Soon, it’ll be delivered even faster – within hours, if Amazon’s experiments with drones are any indication.

Put it all together and traditional retailers have good reason to be worried. In the UAE specifically, shopping malls are going to have to rethink their fundamental roles.

E-commerce has long been a threat to traditional retail, but the veritable cheque is about to come due. In the United States, where Amazon and eBay kick-started online shopping some 20 years ago, bricks-and-mortar retailers are going bust at a record rate, according to Bloomberg. Fourteen chains including Payless Shoesource, the electronics retailer Radio Shack and the women’s clothing outfitter BCBG filed for bankruptcy protection over the past three months alone. The reason: They just couldn’t compete with the convenience and limitless selection found online.

The UAE is in the early stages of the same trend. According to data compiled by the Department of Economic Development and Visa, consumers here are shopping online more frequently and spending more when they do. Twenty-five per cent of consumers are now making online purchases at least four to six times a week, up from just 13 per cent last year. The average spend, meanwhile, is up to Dh1,479 from Dh1,375.

The Souq.com chief executive Ronaldo Mouchawar says his company, which was purchased by Amazon in March, has experienced 50-per-cent growth year-on-year in the UAE alone.

It's no wonder entrepreneurs such as the Emaar chairman Mohamed Alabbar are looking to grab a slice of the burgeoning e-commerce market. Mr Alabbar this week said that Noon.com, his Gulf region-oriented competitor to Amazon, is on track to launch this year.

So what are traditional UAE retailers to do against this growing existential threat?

They can look at what Apple is doing, for starters.

The iPhone maker last month opened a new flagship location in The Dubai Mall that is more technology academy than store. The company used the opening to mark the global launch of its “Today at Apple” programme, which lets customers take part in various hardware, software and creativity workshops. And of course, they’re free to buy things from Apple while they’re at it.

Apple is thus shifting its stores toward being experiential outlets rather than simply transactional locations. Consumers may be able to buy the company’s products online, but they’ll have to go into a store to have someone explain how to use them.

Other, newer retailers – particularly those that started as e-commerce operations first – are also applying data to their physical stores. Many of these new-wave retailers require customers to have online profiles that list their preferences or habits, which helps in-store staff better cater to their needs.

Montreal-based Frank and Oak is a good example. The men’s clothing company started online only in 2012, but has since expanded to 14 physical stores in North America. Customers enter their preferred styles and sizes and can make appointments on their phones to come in and try new items. When they arrive, staff are ready for them. It beats randomly wandering in, hoping to find what you’re looking for.

If the US experience is any indicator, this won’t be an easy shift for many retailers, hence the growing number of bankruptcies. Ultimately, there will be fewer stores, which means a shift is coming for malls too.

The answer for the malls is more food and entertainment.

Some numbers suggest the UAE may already be oversaturated with food and beverage vendors, with sales stagnating or declining at 64 per cent of businesses surveyed last fall by KPMG.

However, most respondents feel positive about the long-term forecast, and they should. With the UAE’s population expected to grow to 10 million by 2030, aided by more expats and Expo 2020 tourism, the restaurant business is likely to boom.

UAE malls may therefore see even more restaurants, movie theatres, skating rinks, ski hills and the like as the rising tide of e-commerce takes the shopping out of shopping malls.

Winner of the Week: Google

The search company announced the expansion of its Google Assistant to a host of devices this week, from refrigerators and robot vacuums to even Apple’s iPhone.

Loser of the Week: Facebook

The company found yet another bug in its ad measurement system. And on Thursday the EU fined it €110 million for having misled regulators on its privacy practices.

Peter Nowak is a veteran techno–logy writer

business@thenational.ae

Follow The National's Business section on Twitter