In-store and eCommerce Retail: The Emerging Trends in the UAE
Retail & Consumer Focus
We discuss the key trends in in-store and e-commerce shopping in UAE as well as the evolving relationship between the two retail shopping experiences.
Law Update: Issue 357 - Retail & Consumer
Lynsey GrossiSenior Associate,Real Estate
In this article we will discuss the key trends in in-store and e-commerce shopping in the United Arab Emirates (“UAE”) and the evolving relationship between the two retail shopping experiences.
In comparison with many western countries, the UAE saw significant growth in consumer spending in 2022. Recent Majid Al Futtain market data (‘State of the UAE Retail Economy A Perspective Based on Q3 2022 Market Data and Consumer Behaviour') revealed that overall consumer spending was up 20% between January and September 2022 in comparison to 2021 and the retail economy grew 15% over the same period. The UAE’s retail growth is attributable to many factors including, at a macro level, the increase in demand as a result of the increase in population and influx of tourists, which is the net effect of the dynamic policies of the Government of the UAE and, at a micro level, the adoption by retailers of new technologies that meet consumer demands for efficient, modern and sustainable shopping experiences.
One of the key characteristics of today’s UAE retail industry is unsurprisingly the digitalisation of the retail experience. The number of people in KSA and the UAE who are shopping online has doubled in two years according to a recent report by McKinsey & Company (“How to win in the Gulf’s dynamic consumer and retail sectors” dated September 2022). This trend is expected to continue with the e-commerce market in the UAE expected to reach 12.6% of total market sales by 2026 and the value of the e-commerce market expected to reach $9.2 billion by 2026 according to data released by the Dubai Chamber for Commerce in October 2022. This is in line with point-of-sale data released by Majid Al Futtain which revealed that e-commerce spending increased by 34% in the first three quarters of 2022 in comparison with the previous year.
Despite the increase in e-commerce activity in the UAE, there are still a number of challenges. The e-commerce platform, like all retail shopping platforms, is continually evolving with new technology and increased efficiency. To sustain its position as the leading e-commerce hub globally, the UAE must continue to be progressive and dynamic with its technology and retail offerings through increased personalisation, enhanced omnichannel offerings and a continued focus on the use of smartphones.
A significant part of the evolution of the e-commerce industry in the UAE centres around the use of smartphones. A recent global survey conducted by PYMNTS and Visa in 2022 found that retail consumers in the UAE are the most mobile-centric, omnichannel consumers in the world with smartphones forming an integral part of both in-store and e-commerce shopping. This is in line with data released by the Dubai Chamber of Commerce which reports that one third of consumers in the UAE bought a product or service using their smartphone at least one a week. However, smartphones are only one part of e-commerce technology.
Another key trend is the omnichannel experience. Research is showing that consumers are seeking access to products, offers and support services on all channels, platforms and devices. It is no longer enough to simply offer consumers support and profiling on a desktop website or via an app. Consumers expect a retailer to offer support through Facebook messenger, live chat, email, desktop and phone. This gives the retailer greater reach, increased profits and enhanced customer experience. It is reported that in the UAE 7 out of 10 retailers are offering cross-channel digital profiles enabling consumers to access their identification and payment methods both in—store and online.
To sustain e-commerce growth, retailers should also be focusing on data-enabled personalisation systems. Research suggests that personalisation could potentially increase a company’s revenue by 10 to 15 per cent. Personalisation includes targeted consumer marketing, offers and experiences.
Despite the growth of e-commerce, the bricks and mortar retail experience in the UAE continues to hold strong with Majid Al Futtain reporting that mall visitors were up 15% for the first three quarters of 2022 in comparison to the same period in 2021. This is consistent with reports by expert leaders such as CBRE who reported that retail footfall in Abu Dhabi and Dubai increased by 18.6% and 20.4% above their respective pre-covid figures. The strong performance in the bricks and mortar retail stores can be attributed to the extended opening hours of the malls, with many open until midnight, the diversification of offerings in the malls including leisure, wellness, retail, food and entertainment, low taxes and government policies and initiatives which attract both tourists and residents alike.
In recent times, the UAE has also seen an emergence of the phygital shopping experience which offers a clever hybrid between bricks and mortar shopping and e-commerce. Phygital not only includes enhanced digital technology in standard layout stores but e-commerce shopping in a physical environment. A prime example is the most recent addition of online retailer 6thStreet.com into Dubai Hills Mall. Consumers can visit the store, choose items on a range of tablets and simply walk into the changing facilities where their items are ready to be tried on. The changing rooms are high-tech with interactive tablets to exchange items. The store was described by Omar bin Sultan Al Oama, UAE Minister of State as a ‘testament to the UAE’s leadership in future technologies and a reflection of the country’s status as a global shopping and tourism hub.”
The UAE continues to be a global leader in the retail industry, whether that be through the in-store or e-commerce platform, or through its dynamic approach to technology and customer experience. To sustain such growth, retailers in the UAE should continue to look to the future and develop personalised strategies that strategically meet the growing demand for an ominchanelled, hybrid retail experience.
For further information,please contact Lynsey Grossi.
Published in April 2023.
