x Abu Dhabi, UAETuesday 25 July 2017

King of retail loses crown to London

Dubai is out of the top spot on a list of the world's biggest shopping destinations as analysts warn the prevailing franchise arrangement for brands entering the Middle East could deter global retailers.

Shoppers make their rounds in Mall of the Emirates. Dubai has fallen to second place behind London in attracting the most brands. Sarah Dea / The National
Shoppers make their rounds in Mall of the Emirates. Dubai has fallen to second place behind London in attracting the most brands. Sarah Dea / The National

Dubai is out of the top spot on a list of the world's biggest shopping destinations as analysts warn the prevailing franchise arrangement for brands entering the Middle East could deter global retailers.

Last year, Dubai and London jointly attracted the most brands among the major world cities associated with upscale shopping, pipping Paris, Milan and New York, according to the international property specialist CBRE.

But Dubai has fallen to second place behind London in the past year, despite a high-street crisis in the United Kingdom that has resulted in a number of brands going into administration.

Nicholas Maclean, the managing director of CBRE in the Middle East, believes Dubai can eventually consistently lead the pack, but he says retailers need to be given the opportunity to expand in the region without having to agree to a franchise structure.

"Some retailers are fiercely protective of their brands and want absolute management over those brands," he said.

"It's easy to overcome. We have to change the way retail is structured over here," Mr Maclean said.

Retail in the Gulf is dominated by local players such as MH Alshaya, Landmark Group, Al Tayer, Apparel, and Azadea, which are franchise operators or joint-venture partners for hundreds of international brandsincluding Zara, Starbucks, H&M, Gucci and Bloomingdale's.

Peter Walichnowski, the chief executive of Majid Al Futtaim (MAF) Properties, estimates that 10 companies in the region control 85 per cent of the brands, which he claims is a "doubled-edged sword" for mall operators. MAF is a major UAE franchisee for foreign brands.

"You can make 10 or 12 phone calls and see if you will lease your mall or not," Mr Walichnowski said.

But he said that retailers in the region could negotiate better rents in the malls than smaller players and successfully jostle for prime locations in the shopping centres.

"We have to be conscious of allowing for those one-off special type of shops that make your mall different to the one down the road," he said.

Mr Walichnowski added that current laws in Dubai meant that retailers could continue to rent property in malls even if their lease terms had expired, which made it difficult to keep the shopping mix fresh.

MAF is the biggest mall operator in the Gulf, with six malls in the UAE, including Mall of the Emirates.

According to the CBRE report, London attracts 55.5 per cent of all international brands, while the penetration in Dubai is 53.8 per cent. New York is the third-biggest retail destination, followed by Moscow, Paris and Hong Kong.

Retail sales in the UK have been weak in the past 18 months as austerity measures have dampened consumer spending, leading some brands, such as Jane Norman and La Senza, to go into administration.

But Dubai has experienced strong retail sales in the past 12 months as increasing numbers of tourists have visited the UAE.

Hamad Buamim, the director general of the Dubai Chamber of Commerce and Industry, said the emirate's infrastructure and business-friendly environment had helped to create one of the world's top shopping destinations.

"[The CBRE survey] confirms what Dubai has been trying to do to put the name of the city as one of the top international cities around the world," he said.

rjones@thenational.ae