While eCommerce booms, Middle East malls are proving their pulling power

Homegrown success stories and international players abound in the Middle East’s fast-growing eCommerce industry – but thanks to the region’s innovative vision of the shopping experience, footfall remains high in its huge shopping malls.

Across the world, eCommerce is a rising trade. Its growth is particularly fast in the Middle East where internet and smartphone penetration is high.

In fact, online shopping is proving so popular that it has led to a spate of predictions about the death of brick-and-mortar industries.

But that demise has been greatly exaggerated. Real-world shopping has to adapt to a new competitive landscape and in the Middle East retailers are showcasing some of the best innovations for attracting footfall.

The rise of eCommerce

Alongside their impressive brick-and-mortar offerings, countries in the Middle East are also embracing eCommerce – both homegrown and international. Despite some trepidation about the security of online payments and the need for innovative solutions such as smartphone apps that help locate customers for delivery in areas where addresses are not yet standardised, eCommerce is achieving impressive growth rates.

According to Research and Markets, the combined eCommerce sales of the Gulf states are expected to more than double between 2017 and 2020. The main drivers of growth include high rates of internet connectivity – above 90% in countries such as Bahrain, Qatar and the UAE – and high smartphone penetration.

In the UAE, the top market in the region, eCommerce sales doubled between 2015 and 2017 with a projection for further growth at annual rates of above 20% through 2021. The Kingdom of Saudi Arabia is expected to see even higher growth rates and is projected to overtake the UAE as the largest online retail market in the Gulf by the turn of this decade.

Even in countries where eCommerce is currently a fledgling operation, expectations are high. In Iran, less than 1% of total retail sales are online but this could triple over the next two years as a higher share of the relatively large population gains internet access and embraces the benefits of online shopping.

The key players in Middle East eCommerce

Both international and regional players are keen to take advantage of this growing industry.

The first and most successful local business, Souq.com, began trading in 2005 and quickly became one of the region’s fastest growing businesses, operating across seven countries for more than 135 million people. That roaring success attracted the eye of the world’s largest online retailer Amazon, which snapped up Souq.com in 2017 for $586 million.

No doubt, that success also helped inspire Dubai to launch its own eCommerce platform, Noon.com, last year. Backed by Emaar Properties and Saudi Arabia’s Public Investment Fund, Noon.com has already secured a deal with eBay to sell through the site from the second half of this year.

And it’s not just about the big players – the startup scene is also seeing healthy interest from investors. In September 2017, Kuwaiti online fashion marketplace Nalbes raised an impressive $1.5 million in Series A funding, having been founded just nine months previously.

Meanwhile, Dubai-based startup GlamBox Middle East, an online subscription service for beauty products, was acquired by a consortium of Saudi Arabian investors. No price tag was disclosed, but the business had previously secured more than $4 million in funding from regional investors.

Feet on the ground

All this excitement around eCommerce might lead some to buy into the notion that the brick-and-mortar retail industry is on its last legs. But the Middle East is also the leading light in the transformation of the mall.

To compete with the convenience and choice of online shopping, retailers have to provide more to attract footfall. That’s why modern malls are pitched as much for dining and entertainment as they are for shopping. But if you think that means an attached multiplex cinema and a food court, think again. Try aquariums with walk-through tunnels, indoor ski slopes with live penguins or hourly music and water fountain shows.

Take Dubai for example. According to analysts Frost and Sullivan, the eCommerce industry in the UAE is expected to hit $10 billion this year compared with the 2014 figures of $2.5 billion – a staggering 400% growth.

But the Dubai Chamber of Commerce and Industry is also expecting the value of retail sales in the emirate alone to reach $43.8 billion by 2021, with an average growth of 5.6% between 2018 and 2021. Dubai boasts high occupancy levels at its major retail centres at a time when many malls in other regions – the US, for example – are closing their doors.

There are a number of local contributing factors that can’t be replicated, such as the rising number of tourists to the city and the large percentage of high-net-worth individuals in the population. But Dubai has also blazed the trail for innovative retail spaces that people visit as much for the experience as the shopping.

In November 2005, the Majid Al Futtaim Group opened one of the largest shopping malls in the world, Mall of the Emirates, which boasts a 22,500 square metre indoor ski resort. As well as being able to see the winter wonderland through a massive glass wall while you shop, visitors can also interact with live penguins on the slopes.

The Dubai Mall features the Dubai Aquarium and Underwater Zoo, where you can walk through a glass-lined tunnel to observe sharks and rays swimming all around you.

And the property developer Nakheel recently announced plans for the Deira Mall in Dubai – complete with a state-of-the-art, retractable glass roof to bring natural light into the complex and allow for open-air shopping during the cooler months.

Future innovation

Visitor attractions, entertainment and state-of-the-art dining facilities are important attractions for footfall but there are also plenty of creative ideas around to revamp the shops themselves.

Future visions include more personalised shopping experiences triggered by apps on smartphones that identify customers to the shop as they enter.

And ironically, pop-ups are growing as a way to showcase the products of exclusively online stores whose business models don’t allow for hiring retail space. Advances in mixed-reality technology such as AR and VR could make the idea of the pop-up even more flexible, with retailers able to showcase their products to targeted individuals. Those people could research the items they like online and then go in-store to a virtual pop-up destination to “see” them.

Homegrown success stories and international players abound in the Middle East’s fast-growing eCommerce industry – but thanks to the region’s innovative vision of the shopping experience, footfall remains high in its huge shopping malls

Across the world, eCommerce is a rising trade. Its growth is particularly fast in the Middle East where internet and smartphone penetration is high.

In fact, online shopping is proving so popular that it has led to a spate of predictions about the death of brick-and-mortar industries.

But that demise has been greatly exaggerated. Real-world shopping has to adapt to a new competitive landscape and in the Middle East retailers are showcasing some of the best innovations for attracting footfall.

Conclusion

eCommerce is radically changing the retail landscape while growing at a phenomenal rate.

Although some brick-and-mortar shops will find life difficult, the Middle East’s innovative malls are highlighting a key trend with their investment in visitor attractions. The future of shopping looks increasingly like an innovative landscape where technology marries online and real-world shopping for the perfect customer experience.