(MENAFN- Khaleej Times) In Dubai, many luxury brands are represented by mono-brand stores through local franchises but with the recent change in government policies, Savills is seeing international brands come in directly looking to take back full control of their stores In the Middle East, already there are clear signs of retailer demand, with a shift away from purely franchises to brand-owned stores in key locations, and a strong focus on luxury. In this regard, Dubai is leading the way. — KT photo by Issac John
Published: Mon 25 Jul 2022, 7:21 PM
Dubai is leading the way for some emerging worldwide trends that mark a shift away from purely franchises to brand-owned stores.
Global real estate services provider Savills, which has identified four global trends that will shape the future of key retail destination cities, says that leading retail locations such as the UAE had a head start in the post-Covid period as they could open international borders and lift restrictions relatively quickly on the back of an extensive vaccination programme. Such a move had helped key sectors such as real estate, tourism and retail to swiftly commence their recovery.
“In the Middle East, already there are clear signs of retailer demand, with a shift away from purely franchises to brand-owned stores in key locations, and a strong focus on luxury. In this regard, Dubai is leading the way,” Savills said in its report detailing the key trends that are shaping the future of retail.
“In Dubai, many luxury brands are represented by mono-brand stores through local franchises but with the recent change in government policies, Savills is seeing international brands come in directly looking to take back full control of their stores. Cairo, Saudi Arabia and Bahrain all have relatively affluent domestic populations and also currently represent interesting opportunities for luxury retailers in this region,” said Kenny Lam, associate director of Middle East Retail.
The first trend that is emerging as countries lift restrictions partially or fully with retailers rushing to cover lost ground is that prime global cities will retain their status, Savills report said.
New York, Paris and London have demonstrated that they retain the key fundamentals of a successful retail location and are set to bounce back quicker this year than other destination cities, according to the Savills Retailer Attractiveness City ranking.
Destination cities that benefit from a strong domestic market, such as New York, have already demonstrated far higher levels of resilience in the past 18 months and look set for a quicker bounce back.
In contrast, those cities dependent on a steady stream of inbound tourism have faced sharper declines and are likely to face a longer road to recovery. In Hong Kong, for example, where tourism forms a key pillar of the city's economy, rents fell steeply from Q4 2019 to Q3 2021.
Second, key emerging markets are set to create expansion opportunities for retailers.
“By sparking this mixed recovery among key destination cities, the pandemic has spotlighted numerous emerging markets that present exciting opportunities for retailers in the years ahead. For retailers looking to expand their global footprints, opportunities abound especially across the Middle East and China.”
In the Middle East, already there are clear signs of retailer demand, with a shift away from purely franchises to brand-owned stores in key locations, and a strong focus on luxury. In this regard, Dubai is leading the way, said the report.
Retailers that sustained growth during the pandemic will fuel future demand, according to Savills.
“While several brands struggled to sustain sales throughout the pandemic, there are some sectors that outperformed, namely; athleisure, homeware, wellness, F&B and electric vehicles. These sectors continued to trade well both online and offline over the past 18 months, and will move ahead capitalising on strong revenues and attractive store opportunities in the wake of the pandemic.”
For luxury brands, the dynamics of the current market may make it possible to relocate existing stores to larger units in stronger locations, as well as provide opportunities for new luxury entrants. This has likely transpired in the Middle East—2021 saw a very marked increase in the dominance of ultra-luxury with such brands accounting for 92 per cent of new store openings, said the report.
Fourth, stores will transition from transactional to experiential. In many ways, the pandemic accelerated trends in the sector that were already set in motion in the years preceding it.
In the Middle East where malls are deeply ingrained in the culture and provide respite from extreme summers, retailers and operators have introduced several experiential concepts to appeal and stay relevant to their audience, according to the report.
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