UAE retailers aim to maintain robust sales growth

The Life: The UAE's malls have enjoyed a resurgence this year but keeping momentum is a must.

Retail therapy: many shopowners reported a robust rise in revenues in the first quarter. Rich-Joseph Facun / The National
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Shoppers have been visiting the UAE's vast malls in droves this year, with an influx of deep-pocketed tourists keeping the tills ringing. Many retailers reported a robust rise in revenues in the first quarter after benefiting from a strong Dubai Shopping Festival, easier credit and a nascent economic recovery.

But the retail therapy is not certain to continue, and according to the consultancy Verdict Research, there are key trends retail executives need to be aware of to keep the momentum going. Over the first three months of this year, Verdict interviewed 22 UAE retail chief executives and managing directors to get their top 10 tips as follows:

1 Further rationalising of store portfolios

The shutting of underperforming stores is already aggressively under way and retailers expect it to continue. They are looking closely at three types of shop: the recently launched store that has product offerings and price points ill-suited to its location; the over-sized unit with high rental rates and poor revenue generation per square foot; and the old store located in a tired mall with area demographics in flux.

2 Optimising mall mixes and agreeing sustainable rental rates

Leasing rates are the second most significant issue reported by retailers and a key priority for mall operators. Many retailers believe the best mix of stores is often inhibited by developers' enthusiasm for getting the best price in the short term.

3 Attracting and retaining staff

Under the revised labour law, which came into effect on January 1, once an employee completes a two-year working period, employers have no right to demand employees stay in the job or enforce any type of six-month ban on UAE employment. Verdict says retailers will now have to work a little harder to retain their top staff.

4 Commodity price inflation

As cotton prices continue to rise and oil prices fluctuate, large retailers are looking to leverage their buying power of raw materials. Richard Adams, a researcher at Verdict, says the smaller players will have to cut operating costs from other parts of the supply chain and pass small increases on to customers.

5 Managing brands

During the economic downturn, brand-owners' sales through their own stores outpaced those of local retailers, who often offer a variety of brands. The brand-owners are now looking to expand their own stores across the UAE, which Mr Adams says is likely to give them more control over the image of their brand. But he says retailers still have a role to play, predominantly in bringing brands to a different demographic of the population, and in keeping a brand's cost base low. Retailers will have to highlight these skills, Mr Adams says.

6 Dealing with currency fluctuations

The weakness of the US dollar, to which the dirham is pegged, is giving retailers a boost as tourists have great spending power. But as the US recovers and rates begin to rise, this spending power will be eroded, which could damage retail sales.

7 Fully utilising retail technology

Only about 1 per cent of total retailer spending in the UAE is devoted to IT systems, so retailers should try to invest in technology systems while, at the same time, ensure other areas of the business, such as store fronts and fittings, are not left looking dated. This way they can develop a clear and competitive advantage, Mr Adams says.

8 Leveraging the internet

Just 9 per cent of UAE consumers now consistently purchase goods online, according to Verdict. This is set to grow though, and a number of retailers are considering the web to boost sales.

9 Enhancing the impact of the Dubai Summer Surprises

Dubai Summer Surprises is shorter this year as the Dubai Events and Promotions Establishment tries to revamp the brand. This has been welcomed by retailers, but they now want the festival to be focused on the major entertainment products malls provide, such as ice rinks and ski slopes, in the hot summer months.

10 Liberalising GCC trade

While not a pressing priority, trade liberalisation is strongly supported by retailers who say onerous paperwork and relatively slow processing can keep merchandise at dock for days if not weeks.