Retail industry witnesses transformational shift towards e-commerce globally

A report by Dubai Future Foundation foresees the future of retail post COVID-19

  

Dubai - Dubai Future Foundation (DFF) has launched its latest report titled ‘Life After COVID-19: Retail’. It showcases online retailers and e-commerce platforms experiencing drastic growth as consumers avoid shopping malls in response to COVID-19.

The report, launched within the Foundation’s ‘Life after COVID-19’ series and includes eight reports to date, tackles the different challenges and opportunities that the UAE and the Arab world will face in the aftermath of the global health crisis.

The report acknowledges the need for shutting down malls in the UAE from March 25 to April 25 amid the global health challenges to protect the general public’s health and safety, and to lessen the spread of the virus. Similar measures have been taken throughout the MENA region, as per the Middle East Economic Digest (MEED). Due to the digital infrastructure that Dubai and the UAE offer, an abundance of online retailers delivered throughout the country to a digitally enabled population, most of which, uses the internet, according to the jointly issued report by Visa Middle East and The Department of Economic Development (DED).  

The report highlighted examples where online sales are on the rise. Dubai-based Majid Al Futtaim (MAF), which operates 24 shopping malls, such as Mall of the Emirates, has seen a surge in online sales, with a 59 percent year-on-year increase in online customers in March 2020. Saudi Arabian retailer BinDawood Holding has seen a 200 percent increase in its online sales since the escalation of the COVID-19 crisis.

Report findings reveal that shifting businesses online requires significant investment from brick-and-mortar retailers facing a cash crunch. However, retailers can be spared such expenditures should existing and new e-commerce platforms provide access to their platforms for their products. Dubai-based real estate company Emaar, for example, has set-up a simulated Dubai Mall on noon.com for customers to shop virtually at many of the mall’s well-known stores.

The report continues to discuss the forced closure of brick-and-mortar retailers globally, as a result of COVID19, with consumers switching to online shopping. Moreover, it addresses the effects that the pandemic has had in the United States. To date, nearly 630,000 outlets have been forced to close and it is unclear how many of them will reopen. According to The Financial Times, UK clothing retailers – Debenhams and Oasis – have entered administration in recent weeks, and many in the industry are expected to experience more financial distress after lockdown than during it.

On the other hand, some e-commerce retailers are on a hiring spree. According to a recent article by Thomson Reuters, Amazon, the American multinational conglomerate technology company, has hired 175,000 employees to cope with the demand. Instacart, a North American grocery delivery and pick-up service, announced hiring 300,000 full-service shoppers in March, and a month later it announced plans to hire an additional 250,000 to meet increasing customer demand for online grocery delivery and pickup in the USA and Canada.

The shift to online shopping has created tremendous opportunities for e-commerce retailers and the logistics and delivery services that cater to them. However, it is not yet at a level playing field, and a significant number of retailers remain offline. In turn, this creates an opportunity for governments to ensure that smaller retailers with limited online presence are not left behind by providing an e-commerce platform for them.

In the short-term, the report indicates banks should restructure maturing loans in the retail sector, providing a lifeline to an industry suffering with low revenues. Waived rents to retail tenants could be offered during lockdown, provided by shopping mall landlords. Employees can be reshuffled and reskilled, allowing growing sectors to manage the surge in demand, and preparing employees for new roles.

In the long-term, it is estimated that shoppers will return to the malls, though not at the same levels as before, with online habits having become more routine. The report suggests introducing tax-free shopping at malls to encourage shoppers to return. Shopping malls could also benefit from being certified as ‘COVID19-Free’ by relevant authorities and can further be maintained by testing every visitor prior to entering. Lastly, the increased popularity of touchless shopping experiences can be catered to with self-checkouts, and the avoidance of touchscreens.

Dubai Future Research, an initiative by the Dubai Future Foundation, issued a series of comprehensive and forward-looking reports and studies that tackles challenges arising from the emergence of the novel COVID-19. The series aims at introducing modern technologies to support key sectors in Dubai and the UAE to better navigate and anticipate the future in light of the current global health pandemic, through highlighting current opportunities and providing recommendations for the short- and long-term period.

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