Retail disruption: What’s in store for region’s shopping sector?
Signs of a slowdown in the region’s brick-and-mortar retail sector are beginning to show, according to data from Sapience Consultancy.
The past 15 years have seen the retail sector grow exponentially due to high consumer demand and spending power. However, as Sapience Consultancy’s latest “Mall Tracker” study shows, this is not the case any more.
The “Mall Tracker” study is based on 600 interviews of residents per quarter in the cities of Dubai, Abu Dhabi, Riyadh, and Jeddah. The methodology of the study is just as important – and interesting – as its findings. “While most reports would give you rankings by awareness or level of visitations, “Mall Tracker” clusters malls according to three relevant and very dynamic variables: past three-month visitation, frequency of visit and levels of preference,” explains consultant Nadine Touma. “The result is four groups; each displaying a particular characteristic in the way consumers view them and shop in them [malls].”
These are the malls that are most frequently visited by the majority of the population and are the preferred choice with an average preference of 10 to 20 percent. “In this group we see super favorites registering over 20 percent preference (Dubai Mall, Abu Dhabi Marina Mall, Riyadh Gallery, Andalus, Red Sea) and others that navigate between 10 and 15 percent, which is a level that is not sustainable in the long run as we will see in the movements recorded throughout the year,” explains Touma.
This group consists of malls that are frequently visited by a high percentage of the population. However, unlike the ‘Favourites’, these malls are not the preferred choice with an average preference of three to eight percent.
While these malls currently enjoy footfall, they are at the highest risk of a drop should a new – or more preferable – mall open up close by. For instance, Ibn Battuta Mall dropped from a ‘Regular’ in 2016 to a ‘Occassional’ in Q1 2017 and then to a ‘Community’ mall in Q3 2017.
These malls are visited frequently but only by a specific group of the population, which makes up between 25 and 30 percent of the population. This group is defined by its geographical proximity to the mall or belongs to a particular socio-demographic that fosters a sense of community.
While the malls belonging to this cluster witness footfall of approximately 30 percent of the population, the frequency of these visits is rather low, ranging between once every month to once every three months.
Trends in Dubai’s mall sector
Interestingly, while the visit frequency has dropped across all clusters in Q2 and Q3 2017, ‘Community’ and ‘Occasionals’ have been more resilient.
“Among the most noticeable movements, we find Mall of the Emirates recovering its place among ‘Favourites’ in Q3 thanks to a steady increase across all indicators from Q2,” notes Touma.
Conversely, Mirdif City Center – a Favourite –started the year very strong, but has been gradually dropping across Q2 and Q3 especially across the all important parameters of preference as well as the intention to visit.
Similarly, Dubai Festival City – a Regular – has shown signs of weakness particularly in Q2, but it has managed to stay in the cluster of Regulars.
Among ‘Occasionals’, it’s worth mentioning City Walk, which is on its way up. From a Secondary mall in 2016, to ‘Occasionals’ in Q1 2017 and a further increase in frequency in Q2 could see it become part of the largest ‘Occasionals’ as the weather gets better.
Lastly, Dubai Outlet Mall has seen a considerable increase in visitation and frequency during Q2 2017 – presumably due to the sales season.
Trends in Abu Dhabi’s mall sector
Abu Dhabi also saw a drop in frequency of mall visitation in Q2 2017 except for ‘Community’ and ‘Occasionals’. However, Q3 saw an overall improvement and some noticeable variances.
Among ‘Favourites’, Abu Dhabi Marina mall widened the gap with competition across Q2 and Q3 with preference levels rising above 25 percent.
Yas Mall, which joined the group of ‘Favourites’ in the first quarter registered a boost in the frequency of visitation in Q3 and attracted a significant number of visitors from Dubai.
Similar to Dubai’s City Walk, Galleria in Abu Dhabi went from a Secondary mall in 2016 to ‘Occasionals’ in Q1 2017 to ‘Community’ in Q3 thanks to an increase in the visitation doubled by a boost in the percentage of people visiting it once a month or more (compared to once every one to three months in the previous quarter).
However profiling will have to be fine-tuned, Touma adds, as, in terms of volume it seems to be firmly positioned with females, over 40 years old, with a notable skew among the mid-income, which is not the intended targeted audience.
Saudi Arabia trends
Trends in Riyadh’s mall sector
In Riyadh, malls enjoyed a good Q2 but recorded an overall drop in frequency of visitation in Q3 due to the summer period. However, ‘Community’ and ‘Occasionals’ held their position quite firmly throughout the year.
Worth noting, among ‘Favourites’ is the gradual decline of Granada throughout the year including the drop in levels of preference to approximately 10 percent.
This continuing trend could well be the reason for Granada to become a ‘Regular’ alongside Hayat (higher levels of frequentation and preference levels rising).
However, Kingdom, Faisaliyah, Olaya, part of the ‘Occasionals/Destination’ malls, registered a strong second quarter with a notable increase in people visiting it once a month or more and continued to hold strong in Q3 despite the summer period, notes the report.
Trends in Jeddah’s mall sector
In Jeddah, malls across the board held their position firmly in Q2 while Q3 saw a drop in frequency of visitation due to the summer period. However, top malls resisted well.
‘Super Favourites’, Red Sea, Andalus widened the gap with competition in Q3 with preference levels reaching 20 percent.
Among the ‘Favourites’, Salam, Mall of Arabia, Aziz, after a strong Q2 witnessed a drop in frequency of visitation in Q3.
On the other hand, Star Avenues grew from a Secondary mall in 2016 to ‘Community’ in Q1, registering a strong Q2. However, it did suffer a drop in visitation and frequency in Q3, alongside other ‘Community’ and ‘Occasional’ malls.
Touma concludes, “We are in a region where things change quickly. Malls open, renovate, [and] get bigger. People are versatile and love to be enticed by novelty, particularly in the F&B category, which is one of the biggest drivers of mall choice after shopping. The business climate has been difficult this year  and consumer confidence low. It is in those moments that it is all the more crucial to understand data, how they [malls] evolve and how they will potentially project in the future. In the report we will be publishing for the whole year of 2017, all quarterly variances will be unveiled alongside profiling of malls in terms of socio-demographics. In an ever-changing environment, it is the understanding of who you are attracting and the alignment or lack thereof compared to your initial targeting strategy that will make all the difference for 2018”.