The battle of the
shoppers every day and nearly $2 billion in investment.
For the UAE’s top malls, the battle is fierce and the
stakes are enormous.
By Ranvir Nayar DUBAI
Business battles in the Middle
East rarely get bigger or fiercer than this. And the stakes rarely
higher. The last seven years have seen a 200 percent growth in
capacity and a total investment of nearly $1 billion. And the pace
of development continues unabated. The next three years will see
capacity more than double and additional investment of at least 3
billion dirhams ($900 million) in the UAE alone. Welcome to the
battle of the shopping malls.
While major, established players
like Al Ghurair City and Burjuman Centre are undergoing makeovers
and expansions, new players like Sahara Centre are making a foray
into the shopping mall market. Although each mall has its own
strategy and business plan, they all share the same goal: dethroning
Deira City Centre, the unchallenged market leader in the UAE, which
controls over a third of the total mall business in Dubai. A visit
to City Centre, as it is popularly known, is a must for both
residents and tourists alike.
The business of shopping malls
involves many interconnected elements; success depends on getting
the balance just right. From the architecture of the mall to the
choice of stores, mall management has to create a space that
everybody wants to visit – and spend money. Once the mall is built,
management can’t afford to rest on its laurels. It has to innovate
constantly. City Centre, promoted by the Majid Al Futtaim (MAF)
Group, seems to have got it right.
Stuck in traffic. City
Centre has a unique combination of stores and anchors. The mall
houses an up-to-date cinema complex, Cinestar; the region’s first
Carrefour superstore; Dubai’s only IKEA outlet; the largest
bookstore in the UAE; and a huge children’s play area, Magic Planet.
Jim Badour, the general manager of City Centre, says these anchors,
along with the other 240 stores that make up City Centre, are the
primary traffic pullers for the mall. The formula has worked so well
for City Centre that the mall attracts over 35,000 visitors a day –
more than twice the number of visitors to any other mall in Dubai.
The phenomenal success of Deira
City Centre has inspired its promoter to replicate the same formula
outside Dubai as well. In September 2001, the group opened its
latest and jazziest mall, Sharjah Centre, located in the neighboring
emirate. The Sharjah mall is modeled on City Centre, complete with a
Magic Planet. The MAF group has set its eyes on taking the same
formula to other countries in the region, and already operates malls
in Ajman and Muscat, Oman.
Little wonder, then, that all the
malls have City Centre in their sights. Malls such as Burjuman are
keen to lure some of the exclusive, high-end brands and the clients
from City Centre; for new malls such as the Sahara Centre, the
success of City Centre clearly served as an incentive and, to an
extent, its business model. For others, notably Al Ghurair, it was
more a question of reclaiming lost ground.
Although City Centre’s Badour is
not worried about competition, he says that the shopping mall has
never stopped innovating and improving. When the complex opened
seven years ago, it had only one level. However, seeing the
tremendous response, the management began building a second level
and since then has constantly been improving the facilities and
layout of the complex. “In the two years that I have been here,”
says Badour, “we have improved the layout of the Arabian Treasures,
upgraded the quality of the food court – which can now seat over 800
people – and improved the children’s play area, which is always
crowded. We try our best to live up to our motto: It just keeps
Two of the malls that have been
affected the most by City Centre’s success are Al Ghurair and
Burjuman. Today, both are learning from City Centre’s success. The
lesson is especially bitter for Al Ghurair, which, for several
years, used to occupy the same enviable position before City Centre
The Al Ghurair shopping mall was
revolutionary when it opened in 1981. The Dubai mall marked the
beginning of a trend that changed the face of retail business, not
just in Dubai but in the entire Middle East. Spread over 35,000
square meters, the Al Ghurair shopping mall was a giant in a market
used to small shops in the souks. In addition to size, the shopping
mall also had several other advantages. Instead of walking around in
the souk in the blazing sun, shoppers can roam in the
air-conditioned comforts of the mall, which groups together scores
of shops catering to most shoppers’ needs. Throw in a children’s
play area, some restaurants, cafés and public conveniences, and the
Al Ghurair mall was a complex with something for everyone.
Not surprisingly, the mall was a
hit. But the extent of its success came as a surprise even to its
management. Within a few years, the mall had captured a significant
share of the market, which increased non-stop until the late 1980s
when the mall stabilized at about 45 percent market share.
And then it stagnated. As has
happened with countless other success stories, the Al Ghurair
shopping mall grew complacent and believed its customers to be
captive clients with nowhere else to go. So sure was the mall of
itself and its grip on consumers that it did not even look around to
see what was happening in the market. The management also forgot one
basic rule of retail: to attract customers continuously, you need to
constantly innovate, upgrade and improve your facilities. You do not
get repeat customers unless you give them something new or unique in
the mall all the time. Mall owners have to be constantly on their
toes and have to be willing to spend money on improvements.
Taking a nap. Dulled by success and the initial lack of
competition, the Al Ghurair management turned lax, while its market
share remained firm for nearly a decade. Then, competition arrived
and found the market leader napping. When a spate of shiny new
shopping malls hit the Dubai market, customers abandoned Al Ghurair
faster than rats deserting a sinking ship.
Between 1995 and 1997, Dubai
became home to half a dozen new malls, which covered a broad
spectrum of the market. Among them was the Burjuman Centre. Spread
over 30,000 square meters, Burjuman had 180 stores and a very well
defined strategy. Located in a newly developed area of Dubai,
Burjuman chose to follow its neighborhood and go upscale. Its
collection of retail outlets read like a list of the world’s top
fashion names: Louis Vuitton, Donna Karan, Calvin Klein, Ralph
Lauren, Bally. But it was not just the brands that were attracting
customers by the thousands every day; Burjuman’s food court also
proved a hit.
Burjuman’s strategy of adopting
top brands as its unique selling point was immensely successful,
especially among the Dubai elite, who finally had one place that
brought together all the brands they wanted. Over time, it became
almost a ritual for Dubai yuppies to be seen hanging about at
As Burjuman flourished, yet
another hugely successful mall opened up, barely five kilometers
away. Al Maya Lal, a successful UAE retailer, saw a gap in the lower
and middle segments of the market and diversified, setting up Lamcy
Plaza, whose specialty was offering quality goods at discount
prices. The price-quality formula worked like magic, and Lamcy Plaza
is now one of the most successful malls in the UAE.
“They targeted a very important
segment of the market, which had been left vacant by competition.
Today, a lot of Asians from the income bracket of 6,000 dirhams or
so visit Lamcy Plaza; in fact, even the rich Asians visit the mall
when no one is looking,” says a competitor.
Other shopping centers, such as
Oasis, have adopted the strategy of hosting a few huge shops that
offer the widest possible choice. According to the manager of a
rival shopping mall, “If you are looking for things for your baby,
you will definitely go to Oasis Centre, even if it is a bit out of
the way, because over there, you are sure to find what you are
Over the years, the role of
shopping malls has evolved significantly in the Middle East. In a
region where outdoor entertainment is limited, partially due to
climatic reasons, visiting a shopping mall has become a very
important part of a family’s outings. In many Saudi Arabian cities
and in the UAE, it has become a ritual for families to visit
shopping malls in the evenings, often after dinner.
“Retailing the world over is a
major component of any economy no matter how sophisticated or
primitive it may be,” says Simon Thomson of Retail International, a
British retail consultancy. “In the UAE, as in the rest of the Gulf,
shopping is as much a recreational activity as a necessity. It is
cross-cultural and appeals to all ages and both sexes.”
It has became imperative that
shopping provide family entertainment, ranging from bowling alleys
to cinemas and children’s play areas. Thomson outlines the recipe
for shopping mall success: “Provide quality and value for money.
Good location. Easy access. Abundance of car parking. Proper
merchandise and tenant mix. Correct market position. Provide what
the customer and shopper wants and not what the owner or architect
thinks the customer should have.”
The rush to construct new malls
is not limited to either Dubai or the UAE. A survey by Retail
International found that 10 countries in the Middle East shared 4.4
million square meters of shopping space, and a fresh supply of 2.2
million square meters is still in the pipeline, which would take the
total space available to over 6.5 million square meters in three
Abu Dhabi, Sharjah, Jeddah,
Beirut, Doha, Cairo, Riyadh, Manama, Alexandria and Kuwait City will
each have shopping space of over 250,000 square meters. Dubai itself
will account for over half a million square meters, making it by far
the largest market in the region. Retail International predicts that
the growth in Dubai will continue until the year 2025, even if the
growth rates start to sap after 2005.
Millions of meters.
According to Retail International estimates, the UAE will have
nearly a million square meters of shopping space in the next three
years, making it the most developed Middle Eastern market. The per
capita shopping space in the UAE will be over two square meters, one
of the highest in the world.
The surfeit of shopping space may
be a boon for shopaholics, but this is disastrous news for the
retailers and mall owners. For the mall owners, the risk is twofold.
The direct consequence of supply outstripping demand is that rents
in the shopping malls drop, thus directly affecting the mall owner’s
returns. The other, and perhaps greater, risk is that the stores
operating within the mall are unable to make much money, thus
forcing them to skip rent payments or fold. In either case, the
landlord again loses out.
Excess supply has had another
very negative impact: market segmentation. Faced with increased
competition, most malls have started occupying niche segments of the
market. For instance, the Wafi City mall in Dubai, which was already
pretty posh, has recently undergone a makeover and expansion, aimed
at taking the mall even further upscale. Other malls have begun
focusing on ethnic groups. The Al Bustan mall is focusing on Arab
nationals, while the Al Ghurair mall is targetting UAE nationals and
some upscale Asian and Gulf nationals.
“The market is very crowded now,”
says Al Ghurair’s Avijit Yadav, “and each person is trying to appeal
to his own niche. It is a real fight. All the shopping centers are
suffering now as the market is getting fragmented and each outlet is
left with fewer and fewer buyers. Competition is going to become
more and more intense.”
But even as most of the malls are
hurrying to carve out their own niches, the market leader, Deira
City Center, is sitting comfortably on top of the heap. “It is true
that in a few years,” says Badour, “Dubai and the entire UAE has
passed from a lack of retail space to a surplus. The competition
will divide the market up. It is the weakest players who will suffer
The first signs of trouble are
already on the horizon. Some of the new malls, like Mazaya Centre on
Sheikh Zayed Road, were built on the expectation that as Dubai
expands southwards, there will be a greater demand for shopping
malls in the new areas. However, Mazaya Centre is now thought to be
in deep trouble. Empty on most days, many of the shops in the center
have stopped paying their rent, and it is reported that Mazaya may
be looking for a buyer.
Burjuman is currently
implementing programs – costing hundreds of millions of dollars –
that will bring some of the world’s most famous upscale brands in an
exclusive contract. For instance, the new Burjuman will have the
only Saks outlet in Dubai. Burjuman is putting a lot at stake with
its expensive expansion plans, but general manager Eisa Ibrahim is
confident that it will work and strengthen Burjuman’s appeal to
Al Ghurair City embarked on a
massive expansion plan in 1998, with the first phase due for
completion later this year. Yadav says that the makeover, which has
a budget of $375 million, will see the addition of nearly 50,000
square meters of retail space, taking the total retail space to over
80,000 square meters. At the end of the expansion, Al Ghurair City,
which is already a mixed-use mall, will also have 30,000 square
meters of office space, 700 apartments, a parking lot for 3,500
cars, a 600-seat food court and a multiplex movie theater.
Yadav says that the entire center
is being remodeled as part of the program, with a lot of emphasis on
creating an Arab ambiance: special colored tiles will be used to
decorate the roof and floor of the renovated mall. “We still have a
very strong emotional bond with the Arabs,” says Yadav. “We are
aiming to be a mall with a complete shopping experience but with a
modern Arabic accent.”
Thomson says that mixed-use malls
represent the future. Hence, Al Ghurair City seems to have started
off on the right note. However, its expansion program has been
delayed and has also been affected by the sharp slowdown in the Gulf
economies and the events of September 11th.
The next 18 months will be
crucial for all the UAE malls. With the expansion of Burjuman and Al
Ghurair completed, Deira City Centre will finally find real
competition of comparable size and style. The intensity of the
battle for the customers will definitely be cranked up a few
notches. Let the shopping begin.
Goodbye to the souk
Gulf consumers can now buy anything they want,
anytime they choose. But have they lost more than they have
By Saad Dawood MANAMA
In the last few decades, the Gulf
has seen more change than any other region in the world. In fact,
such rapid development may never be witnessed again – anywhere.
Catalyzed by oil, the area has undergone an incredible
transformation in the span of a single generation. Even though the
oil boom is starting to ebb, the momentum of change continues to
manifest itself across Middle Eastern society in numerous ways: some
subtle, some not. For the global entrepreneur, it’s an immense
market that’s finally come of age.
Expatriates. The Gulf’s cultural
disintegration is accelerated by the phenomenal numbers of
expatriates living and working in the region – six out of every 10
people in the UAE, for example, are expatriates. Rampant progress
has met with little opposition, and satellite television, the
Internet and rising standards of education have increased the pace
Gulf consumers on the whole are
easily divided into four segments: extremely wealthy locals,
not-so-wealthy locals, affluent expats and not-so-affluent expats.
While each group drives specific markets, the not-so-affluent expats
continue to be the defining force overall. Local women, enjoying
increasing independence and freedom, are fast becoming a major
V. Nandakumar, the advertising
and promotions manager for one of the Gulf’s largest retail groups,
the EMKE Group, explains market sentiment: “The expat is here to
make a quick buck, save up and head back home, which makes him a
consumer with a nose for sales, special offers and bargains. Only
the affluent nationals head for top-branded stores. However, with
the arrival of affordable international brands, a lot of nationals
are also rethinking their priorities. The fact is that as long as
expats form the main consumer base, the market will be dominated by
This is not to say that expensive
brands are not at home in the Gulf. The luxury goods, home and
personal products markets are niche but very lucrative. In Saudi
Arabia, the market for furniture and interior decorations is set to
expand annually by over $2 billion, fueled by rapid changes in the
More and more Gulf consumers are
also shopping online. Analysts are divided over whether this is due
to the novelty factor, or whether the Gulf shopper may actually
prefer buying online. Internet penetration levels are nowhere near
Western averages, but the number of Internet users grows
exponentially each year and, once adequate penetration has been
achieved, the Gulf consumer’s online preferences will become
evident. Masood Ali, a branch manager for a Dubai bank, purchased
his last three cell phones online from local websites. “I was
getting marginally cheaper prices in the market,” he says, “but
buying online and having it delivered to my office is far too
convenient and time-saving for me to think otherwise. I just wish I
could sell my used phones online as well!”
His wish could come true very
soon. The Gulf’s leading online retailer, UAEmall.com, which
attracts about 3 million visitors a month, is planning an online
auction area. But as the e-tailer has discovered, conventional
wisdom doesn’t apply to the region’s market dynamics. After a
successful launch, the website enjoyed a regular flow of visitors
but few online purchases. Sales jumped, however, when the management
decided to replace online payment systems with COD
(cash-on-delivery) options; apparently credit cards are still a
no-no with the Gulf’s netizens. Several banks in the region have
catered to this sizeable niche by introducing electronic-use-only
credit cards with either pre-paid or restricted credit limits.
Stocking up. Small retailers have
traditionally served the market. In recent years, however, many
medium- to large-scale retailers have mushroomed in the region, some
of them chain stores with multiple outlets. Well-known international
superstores have also entered the region. The proprietor of a small
store in the suburbs of Bahrain is devastated by these developments.
“Business shrank by about 40 percent this year,” he says. “People
prefer to stock up at the bigger supermarkets. My store is only used
for emergencies and by those who don’t have cars.”
The hypermarket phenomenon is
fast spreading across the Gulf. The wife of a successful businessman
in Dubai comments, “Hypermarkets are really convenient, but I always
end up buying more than I intend to. The five-for-the-price-of-three
offers are really irresistible. My husband is amazed and says I have
enough stock to open my own store!”
Operating on volume rather than
mark-up, hypermarkets are a bit like sharks – they can only survive
if they move fast enough. An older shopper is naturally opposed to
the concept. “I miss the old souks,” she says. “The atmosphere, the
noise. You had to bargain with the shopkeepers to get good prices.
These so-called supermarkets are just unending shelves with fixed
prices and impersonal cashiers waiting to take your money. You can
be in and out without speaking a word.”
Traditionally, the moneyed class
flew West for the summer and lined the coffers of foreign brands.
They now find many of these brands at home. The market has responded
extremely well to child-related wares and offers limitless
potential. Some of Mothercare’s Gulf franchises account for more
than a third of the company’s international sales. Franchising in
the Middle East is estimated to grow at about 27 percent annually,
through a continuous inflow of leading brands such as Marks &
Spencer, Debenhams, The Body Shop, Levi’s, DKNY, Haagen Dazs,
Christian Dior, Rolex, Calvin Klein, Benetton, The Gap and countless
It is arguable that the East may
be paying a far steeper price for progress than the West. Not to
deny the inevitability of evolution, it is nonetheless a sobering
thought that centuries of tradition are surrendering to cold
economics. The world is entering a new era of single currencies,
treaties and trade pacts, but as borders collapse and economies
merge it becomes clear that perhaps we are losing more than we will
ever gain. Like raindrops scarring a freshly painted canvas,
humanity’s colorful cultural divides are slowly dissolving into pale
shades of gray.
Strategies for success
Cartier is one of top names in
luxury in the Gulf. Guy Leymarie, the company’s CEO, outlines his
vision for the company’s future.
How do you assess the Middle
East luxury goods market? And how has Cartier performed in
The Middle East is a
traditional luxury goods market. It is a market that will grow. It
traditionally makes up 8-10 percent of our turnover or a bit
more.The Middle East market is similar to the Chinese market at the
level of treating clients. We have to integrate a certain number of
local cultural parameters. Cartier restructured itself in the
Middle East last year. We are still a long way off what we could be
doing in the Middle East. The brand has to reestablish itself in
How did you go about
restructuring in the region?
We restructured by establishing a
local structure for the first time. In the past, we worked through
an agent. We established a young, capable local team. We associated
ourselves with local partners – because when we talk about the
Middle East, we are talking about a large region with different
business cultures and very different market structures – and will
continue to do so.
That depends on the
country. In some countries, we operate directly and in others we
will work with partners.
In which Gulf countries will you
seek a local partner?
What about the UAE?
We operate directly
there, and our first-year results are more than satisfactory. We
expect a lot from this market, and it is a country where we will
give ourselves the means to succeed.
What is your point of sale
It is important to take a very
domestic approach to this market – franchises and a certain number
of retailers, a distribution network for watches that is selective.
We’ll apply the same principles that we use in other markets to this
region. In 2002, we hope to open two to three new boutiques.
How many boutiques will you open
It would be difficult to say and
wouldn’t mean anything. We will have a presence in order to maintain
our position as the world’s leading luxury goods and watch and
jewelry brand. All this has to do with our potential to grow, the
rhythm of growth and, of course, the opportunities. The number of
boutiques has nothing to do with the strength of the brand.
Sometimes it’s better to have one huge boutique that totally
reflects the brand’s values than three or four smaller ones.
What about boutiques in the
We were badly represented in the
Middle East. It was essentially watches. There were few diversified
products, such as leather goods, on the market
Would a Cartier boutique that
sold other brands be conceivable?
There is no
multibrand concept at Richemont. The key words are integrity,
verticalization and autonomy for each brand.
Do you think Richemont might
be taken over by one of the luxury goods empires in the
I don’t know about Richemont. I only
represent Cartier, so I can’t really talk about the group.
Will LVMH’s entry in the luxury
watch segment change the market?
LVMH has great
brands, especially Zenith and Tag Heuer watches. The greater number
of players in watches has led to the growth of this market. The
capacity of the market to generate new players is extremely healthy.
Why is Cartier the leading
First, the brand has
a long history. It is charismatic and mythical and has become a
reference. In the watch sector, Cartier is in a class of its own.
Choosing a shape is essential. With other watchmakers, form follows
function. At Cartier, the inverse is true. It is the shape of
Cartier watches that is exceptional. The mythic status took 150
years to establish. Our role is to make this myth live.
LVMH seems to have recently
adopted an approach that is similar to yours.
Other brands use Cartier as a
model, though you have to be wary of confusion. When you talk about
creativity, you are not necessarily talking about fashion. Cartier
has never confused luxury and fashion. Part of Cartier’s strength
comes from its ability to adapt itself to new lifestyles. The client
What are the brand’s main selling
Our savoir-faire, in both watches
and jewelry, more than a marketed product. There is a mystique to
the brand. Cartier has strong symbolic value.
It your strategy for the Middle
East different than for the rest of the world?
What are the leading products in
Each market has its
characteristics. It’s in our interest to adapt Cartier to its
environment. Cartier in Japan, Cartier in the United States – the
products aren’t exactly the same. When a product sells well, it
sells well everywhere.
What about counterfeiting, which
is a problem for Cartier in the Middle East?
There are no
countries that are dragging their heels in the region. There are
counterfeiting centers in the world that are more active than the
Middle East. Counterfeiting exists everywhere. We’ve always taken a
double approach: legal and educative. We will continue to fight
counterfeiting and parallel marketing.
What are your objectives for
A few years ago my predecessor
and mentor, Alain Perrin, said that Cartier would never be quoted on
the stock exchange because everyday speculation on the stock market
damages the myth and the magic of the brand. All the magic of
Cartier cannot be summed up in a simple growth figure.