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Jun 16 2009

New shopping malls boost brands amid market slowdown

Dubai: The UAE has long been famed as a regional and global shopping hub, so the economic slowdown has drawn much attention to how the retail sector will fare, particularly as the Dubai Summer Surprises shopping event has begun.

Govind Bharwani, President and Director of Apparel Group, which retails close to 50 brands including Aldo, Tommy Hilfiger, Dunne and Nine West, says the development of new malls has a bigger impact on the retail market than the economic slump.

While the tough econ-omic conditions have had an impact on the luxury end of the clothing market, mid-level brands have held their ground well, Bharwani told Gulf News.

"Luxury sales are down by around 20 to 25 per cent," he adds. "Mid-level, we have been successful in maintaining the sale numbers."

The developing network of malls is having a greater impact on the nature and geography of sales.

"Some of the malls have been greatly impacted. I feel mainly if you look at the Dubai market, the impact has more been on cannibalising, cannibalising in the sense that more malls have been opened," said Bharwani. Older malls are to a certain extent losing out to the new developments in terms of footfall.

"We have experienced the Arabian Centre opening, Dubai Mall opened, the Oasis Centre has opened. Whenever a new mall opens there has been definitely an impact on the sales of the other malls, the traffic flow of the other malls," he said.

Bharwani added that the size of the mall is less a deciding factor than the luxury style of the centre, with luxury malls proving more attractive to customers.

"In Dubai, if you compare what we were doing last year to this year the numbers would be [definitely] the same," he said. "There has been a shift of customers from one place to another. There have been layoffs from other companies and that has impacted to a certain degree but if maybe you hear that X number of people are going then Y number of people are also coming to the UAE. So we are not scared at all. If any new development comes along we will definitely open there."

Indeed, Bharwani believes strong brands must move to establish their presence in retail spaces that are seen globally as winners.

This group has opened 45 stores globally this year, of which 36 were in the UAE, and have added five new brands to their portfolio.

There are competitive opportunities during economic slowdowns that should be taken up, said Bharwani. Apparel have opened two outlets this year in Deira City Centre Mall, a location that is tough to secure space in.

"So at times these sorts of downturns are good for the established retailers," he said.

Even within the luxury brands, despite their recent downturn in sales, Bharwani says they won't hesitate to open new outlets.

"If we get an opportunity today in key malls definitely we are immediately grabbing those," he said.

However, it is not a case of moving into every new mall that opens its doors, Bharwani pointed out. The careful selection of retail space is crucial to a brand, and this often comes down to the developer and the location.

"We have, despite paying the deposit, walked out from the properties," he said. "At times we see a lot of new developers who come in and start a mall but they don't have any idea what should be service charges and what should be the rental for a kiosk. If they have a good track record we definitely go ahead with them."

Malls located in the GCC states, and the UAE particularly, are viewed back at Western brand headquarters as essential targets. Bharwani said feedback from the brands see the region's shopping centres as some of the best performing in the world.

Asked whether new malls opening in Dubai could saturate the market, he said that maintaining a successful clothing retail trade in the UAE would come down to good town planning.

More commonly a Western practice, planning where malls are permitted to open, and maintaining an appropriate space between them, would ensure a sufficient and even spread of shoppers, he said.

"In some countries if a mall has opened they don't allow any other mall in the next three to four kilometres of the vicinity. So if something like that prevails it will definitely help the economy and it will help the developers too," said Bharwani, adding that in the GCC it is not uncommon to find three to four malls within a three-to-four kilometre radius.

He also pointed out the need to maintain standards that keep Dubai's malls competitively priced.

"I feel that we should not try to make this place a second Singapore," he said. "Singapore rentals are anywhere between 25 to 30 per cent of the sales, and if you go to Singapore for shopping the prices would be 15 to 20 per cent higher than the US markets, or Dubai markets."

"The pricing in Dubai is much more competitive rather than ... in Singapore," he said, adding the high rentals are also a factor pushing up prices in Moscow.

This is key to attracting shoppers from neighbouring countries, said Bharwani, who will flock to a competitively priced shopping hub.

"People from neighbouring countries like Iran, India, Pakistan, Sri Lanka and all the GCC countries would definitely come to Dubai and the Middle East for shopping only for one reason: if the prices are competitive. If tomorrow the rentals are high definitely it's going to impact overall tourism and it will impact the retail sales."

By Jane Ferguson

© Gulf News 2009


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