The shuttered malls and shopping centers that dot the GCC's retail landscape were symbolic of the economic blow caused by the COVID-19 pandemic in 2020. Research firm GlobalData estimates the pandemic wiped out AED 13.5 billion in sales in the UAE alone in 2020. However, the recent rising footfall in retail outlets and a continued surge in eCommerce transactions signal that the worst is behind us.
Strong support by landlords during the pandemic was critical in helping retailers overcome the challenges caused by prolonged shutdowns. Emaar, for example, announced waivers on base rent when shops closed doors due to COVID-19. The developer also launched a virtual store to allow Dubai Mall retailers to sell their products online on noon.com, providing a convenient outlet for customers to continue accessing their preferred brands.
The retail sector's revival now heralds a broader recovery of the region's economy. In the UAE, the Dubai Chamber of Commerce forecasts the retail industry will rebound by 13% to reach $58 billion by the end of 2021, supported by pent up consumer demand, COVID-19 vaccination efforts and Expo 2020 Dubai. Research also forecasts that UAE retail sales will maintain a positive 6.6% annual growth in the medium term to reach $70.5 billion by 2025, with store-based retailing growth forecast at a CAGR of 5.7%.
Indeed, shoppers have been quick to return once stores reopened. The huge crowds that thronged this year's Dubai Summer Surprises shopping extravaganza is just one example that underlines the positive trend that began when restrictions started easing nearly a year ago.
While many consumers have welcomed a return to brick-and-mortar retail, the retail business model has fundamentally evolved—both during the pandemic and as industries look to a post-COVID recovery. In particular, the eCommerce trends that we witnessed during the pandemic are unquestionably here to stay.
At GMG, we have certainly noticed a shift in the behavior of returning customers. Combined sales from the retail and online stores within GMG’s sports division grew by 25% in Ramadan 2021 as compared to the same period prior to COVID-19. GMG Sports’ ecommerce platforms also reported a 200% growth in sales during Ramadan as compared to the previous month. External research shows a similar trend. Recent report by online payment services provider Checkout.com notes that approximately 47% of consumers in the region expect to shop online even more frequently in 2021 than they did at the height of the pandemic in 2020.
This is not to say that eCommerce will replace brick-and-mortar stores, far from it. Across much of the Gulf, shopping malls are part of the social fabric. They are utilized not just for shopping but as a preferred setting for social interactions of all kinds. Moreover, the malls here are major tourist attractions. In the UAE, the Dubai Mall alone welcomes over 80 million visitors annually.
What has emerged is a more robust omnichannel model that leverages the digital innovations of the past year and coexists with the social function of in-store shopping.
Often, we see customers utilizing our online portals to research merchandise and then come to the store to see and touch and complete the purchase. This type of customer is often better informed, so their interaction with our salesfloor staff is more engaging and rewarding. Within this retail model, we see the evolution of the click-and-collect model, where consumers purchase goods online and collect them from the store when making their next trip to the mall to drop the kids at the cinema or meet a friend for coffee.
Today there's also a great opportunity in leveraging social media for online shopping. "Social commerce" (abbreviated as sCommerce) uses social media channels such as Facebook and Snapchat as mediums to promote and sell products and services. Social media is near-ubiquitous in Kuwait, Qatar, and the UAE at 99% of the total online population, figures show. Indeed, experts forecast that sCommerce will be one of the region's key eCommerce trends over the next 2-5 years. Already, 14% of consumers surveyed say they most frequently conduct their online shopping specifically within a social media app. A recent report by Snap says the "Snapchat Generation" in the UAE and Saudi Arabia alone is estimated at $425 billion. Aside from traditional eCommerce, this social commerce trend could unlock millions in new revenue.
Ultimately, the last year's events require we reshape the Gulf's retail model in a culturally conscious way. The simple utilization of various shopping channels—whether physical or digital—is not new. And it's not the point. Now that the post-COVID recovery accelerates, what matters most is how retailers devise the ideal combination of these channels for their customers and in what end they deliver authentic customer experiences. Getting that calibration right will enable businesses to reap the benefits of a rebound in consumer spending while also keeping the Gulf an attractive international retail destination.