Dubai – The “Retail Magnet” for International Brands

Retail has been one of the fastest growing industries in Dubai for the past few years. Favourable government policy frameworks and active participation of private sector have facilitated one of the world’s most desirable retail environments in terms of investments and revenue generation.

Dubai has a GDP of 105.6billion USD. Although Dubai’s economy was initially built on revenues from the oil industry, revenue from petroleum and natural gas currently account for less than 5% of the emirate’s gross domestic product. With a Population of around 3 million of whom 82% are expatriates, Dubai is building its economy on Tourism, Construction, Retail industry, Shipping, Aviation Industry, service sector for Technology and Finance.

With Emaar building the tallest structure “Burj Khalifa” and “Dubai Mall” being the largest shopping mall by square foot, Dubai sure knows how to entail their tourists with a WOW experience!

Talking about the contribution of retail to the overall GDP, Dubai’s “wholesale and retail” sector contributed around 29% of the emirate’s GDP in 2017, making it a major driver of growth in the domestic economy. Dubai holds nearly 49% of the total retail stock in the UAE. The UAE retail sector is projected to exceed $71 billion by 2021!

Dubai has a presence of 57 per cent of international retailers! Globally, only London (57.9 per cent global retailers present in the city) is ranked above Dubai in terms of international retailer presence. The Majority of the brands in Dubai originate from Europe(62.6 percent) and  US(60.0 percent).

The ever increasing entry of international retailers is backed up by the various types of entry mode options for the facilitation of these International Retailers. Foreign investors can carry out any activities in the Dubai/UAE only after being registered and licensed by the relevant authorities in the UAE. A foreign investor can establish a suitable business presence in either the UAE mainland – known as ‘onshore’ or a ‘offshore’ business presence. An offshore business presence typically refers to a registration in one of the UAE free trade zones.  An onshore is more of a legal entry mode form where UAE company laws provide the regulations governing the operations of the foreign business.

The usual entry mode options for investors include licensing/franchising, joint ventures/LLC and wholly owned subsidiaries. These entry modes differ in their level of commitment to the market, the level of control they offer and the investment required.

The traditional multinationals start with a low commitment entry mode such as franchising and gradually move to greater levels of ownership and control as they develop the requisite local knowledge. This is because ,the local retail operators/franchisers have a tested business model, good ground reputation to obtain bank findings, recognised brand power in a well established market, on going support along with marketing and lead generation.

The retail sector has many such durable partnerships where the foreign retailer provides the brand its product and the retail concept, and the local operator takes care of the mall space, quality staff and the operation of store. Additionally, the franchise company also receives royalty fees from its franchisee from time to time as agreed upon by both parties.

Below listed are some of the large retail operation bodies in Dubai:

AZAEDA: Azadea Group is a premier lifestyle retail company that owns and operates more than 50 leading international franchise concepts across the Middle East and Africa.  The Group has grown a substantial chain of stores representing leading international brand names in fashion and accessories, food and beverage, home furnishings, sporting goods, multimedia and beauty and cosmetics.

AL FUTTAIM and MAJID AL FUTTAIM: The Al-Futtaim Group is a large conglomerate operating in the United Arab Emirates. This group was founded in early 1930s. It was until 2000 that the Al-Futtaim family split its interests with Abdulla AL Futtaim controlling the automotive and retail business, and his cousin Majid controlling the property development business- now known as Majid Al Futtaim Group.

LANDMARK GROUP: Landmark Group is a multinational conglomerate based in Dubai. The group is involved in retailing of apparel, footwear, consumer electronics, cosmetics & beauty products, home improvement and baby products. The group also has interests in hospitality & leisure, healthcare and mall management. The group has several in-house brands and also works with other brands, acting as a retailer.

AL TAYER: Al Tayer group a successful family business, holds a franchise agreement for over 36 luxury brands including Dolce & Gabbana, Alexander McQueen, Stella McCartney, along with exclusive licenses for Harvey Nichols and Bloomingdale’s.

CHALHOUB: The Company has established joint ventures with hundreds of companies to distribute the cream of high-end luxury brands such as Christian Dior, Louis Vuitton, Sephora, Chanel, Fendi, Christian Louboutin, Givenchy, Prada, Chaumet and berluti. The group also manages an extensive portfolio of franchises with brands such as L’Occitane, saks fifth avenue, Caorlina herrera, celine, lacoste, Marc Jacobs, Michel Kors, Torry Burch, Tumi to name a few.

M.H Alshaya Co: is a multinational retail franchise operator that is headquartered in Kuwait, and operates more than 80 consumer retail brands across the Middle East and North Africa, Russia, Turkey and Europe.The company currently operates more than 3,900 stores in seven sectors – Fashion & Footwear, Health & Beauty, Food, Optics, Pharmacy, Home Furnishings and Leisure & Entertainment – and employs more than 53,000 people.

As Dubai continues to attract the international retailers, it also continuously adapts to sustain through the changing customer preferences to introduce new formats into the market. Such retail offerings add value to the residents by upgrading community status without losing the tourist appeal. However, as the climate hinders the economic performance during the summer months, solutions such as temperature control methods will be implemented. A classic example of this is the upcoming “Mall of the world”. This is still in the initial phases and is expected to include temperature controlled walkways for utmost comfort of the customers.

Dubai’s global connectivity and stature as a hub for trade between the East and West has clearly given an impetus in the retail sector. Dubai has made a benchmark in the retail market and has firmly positioned itself as global shopping destination!