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Retail Meccas: Dubai

With its vast futuristic shopping malls, the city has become one of the fastest-growing retail centers in the world.

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With its vast futuristic shopping malls resembling small cities more than just retail destinations, Dubai has become one of the fastest-growing retail centers in the world. The industry is forecast to grow from an estimated $34.2 billion in 2013 to $50.09 billion by 2016, an increase of 47 percent.

The meteoric rise of retail has been driven by the emirate’s growing population of expatriates as well as locals with high disposable incomes; its safe-haven status in the often-volatile Middle East and, most significantly, a sustained tourism boom. According to the Dubai Chamber of Commerce and Industry, 10 million tourists visited the city last year, an increase of more than 9 percent from the previous year, and in the last eight years, visitors to Dubai have doubled, driving more consumers through the emirate’s glittering malls.

In a survey last year, real estate consultancy CBRE ranked Dubai the world’s second-most-desirable growth destination for international brands, just after London.

“Dubai is typically the entry point for retailers looking to break into the region,” said Matt Green, head of research for the Middle East at CBRE. “It offers retailers a viable alternative to more mature markets, without some of the risk normally associated with an emerging market. It also offers significant growth potential and a consumer base that likes to spend.”

The government revealed plans to double the number of visitors to 20 million by 2020 and triple revenues generated from tourism. Sheikh Mohammed bin Rashid, ruler of Dubai, gave the green light for Mohammed bin Rashid City, a mammoth project that includes the world’s biggest shopping mall, called Mall of the World (Dubai already boasts the current largest mall in the world); more than 100 hotels; a Universal Studios franchise, and a public park larger than London’s Hyde Park.

For retailers, there is still a lot of opportunity. The Chalhoub Group has been partnering in the Middle East with luxury brands since 1955 in retail, distribution and marketing services, becoming a major player in fashion and beauty. Its portfolio of brands includes Christian Dior, Louis Vuitton, Christian Louboutin, Ralph Lauren and Lacoste. The company opened 37 stores last year in Dubai.

François Schweitzer, general manager of business development at Chalhoub, said the big luxury brands and high-street stores are already well represented, and “there is a strong potential for aspirational bridge brands. In the last few years, good growth has come from opening stand-alone stores in this category, such as Marc by Marc Jacobs and Michael Kors. Customers want much more than just a small selection of what they see in department stores.”

He said customers in Dubai are “very sophisticated and wanting the product now. We are in a phase where we need to attract a different category of brands and show that Dubai is a true fashion capital…[with] trendy things as well as luxury.”

Dubai’s unique geographic location and connectivity to different markets helps sustain the emirate’s position. Schweitzer noted, “With half the world’s population within seven hours’ flight time, there are a lot of potential customers to reach in Dubai.”


DEMOGRAPHICS

Population: 2.1 million
Population change, past year: +5 percent
Population change, past five years: +30 percent
Projected population change, next eight years: +6.1 percent on average
Per-capita income: $49,600
Disposable income: $26,000
Key industries: Mining and quarrying, tourism, retail, finance, construction
Number of malls: 22
Mall developments: 3.8 million square feet of gross leasable area are currently under construction, spread over four malls, including one existing mall in expansion phase.
Major construction projects: A new airport, Al Maktoum International, is slated to be the largest in the world upon expected completion in 2025. Mohammed bin Rashid City, a vast complex of 100 new hotels and the world’s largest shopping mall, will be developed over the next 10 years.

HOT SPOT: THE DUBAI MALL

There is no hotter destination for retailers than the world’s largest mall, The Dubai Mall, at more than 12 million square feet. In 2012 the mall’s visitor traffic reached 65 million, an increase of more than 20 percent from 2011. The world’s most visited mall attracted more visitors last year than New York (52 million) and Los Angeles (41 million).

More than just a shopping destination, The Dubai Mall is a year-round entertainment destination with leisure activities aimed at families including a Sega Republic indoor amusement park and an Olympic-size ice-skating rink. The visitor profile of the mall includes UAE residents, as well as 200 nationalities from all over the world. It is also home to the world’s largest shoe store, Level Shoe District, as well as a traditional gold souk.

With retail sales growing by 24 percent last year, the plush carpeted Fashion Avenue section of the mall, a 440,000- square-foot area dedicated to high fashion, is one of the most coveted spots in the complex, with long waiting lists for brands wanting to get in. Eager to capitalize on the demand, mall developer Emaar unveiled a 1 million-square-foot expansion program to the already gargantuan mall.

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