Business

Why Online Retail Growth In The UAE Is Different Than In The Rest Of The World

In the long run the global formula for online retail success might be notably different from the one that will prevail in the GCC countries-& especially in the UAE.

The growth of e-commerce is not likely to challenge shopping malls in the UAE, but rather complement it, which may be beneficial for consumers and retail operators in the long run.

This is because in the UAE, the rise of shopping malls and outdoor retail destinations still draws in consumers to visit the brick-and-mortar shopping centres to make retail purchases.

In January, a KPMG report said that UAE consumers shop less frequently online than the global average, suggesting further room for growth and adoption in the online space. However, even though UAE shoppers browsed online for less time, they were quick to spend: their average ticket size of US$332 was the highest in the world. Globally there are expectations for more online retail growth from categories that have been traditionally popular in the brick-&-mortar format-including mobile phones and laptops, as well as furniture and home decor. In the UAE, the growth so far has been mainly in mobile phones. In the UAE, online shopping may never replace shopping malls since malls are an intrinsic part of life in the region, especially in the UAE. Malls have evolved into entertainment destinations where people spend time with family while they shop, dine and use entertainment facilities. There could be certain categories where e-commerce will dominate, such as electronics and certain apparel, but as physical stores also offer competitive prices they continue to attract a growing number of consumers. Furthermore, retail events such as the Dubai Shopping Festival - which provide incentives for visiting retail outlets and making physical purchases - continue to drive the popularity of this format.

It is in the interest of mall developers to collaborate with individual retailers and shop owners to attract more visitors to the malls as revenue models are shared - rental income also depends to a large extent on the sales.