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Retail Industry Shifting Landscape with Changing Times in UAE

Consumer Goods and Retail | Mar, 2021

Over the past decade, the retail sector has undergone a significant transformation and the industry continues to evolve with the latest developments in digital technology. The shifting customer attitudes and developing business trends has been largely impacting retail shopping scenario. With ever-evolving technology and converging marketplaces, the retail environment is experiencing instrumental changes in terms of price, speed, and connectivity. The sales funnel has broadened substantially from brick-and-mortar stores to digital platforms, which has imposed retailers to stay ahead in the competition. Retailers are realizing the importance of improving their service, convenience, and overall customer experience as the rapidly expanding online marketplaces are becoming a number one shopping destination for consumers. Both online and offline shopping experiences are opening a new door of possibilities for forward-thinking retailers.  Innovative retailers are embracing the new reality of combining classic retailing truths of the past with digital savvy to serve the customers better.

Impact of Coronavirus on the Retail Industry in UAE

Being the home of some of the world’s largest malls, UAE is among the few world cities that are closely associated with retail. Malls are recognized as leisure destinations rather than simple utility stores in UAE where the brands use their state-of-art spaces to showcase products along with brand ethos and values. With the announcement of nationwide closure of malls and markets in the country in March 2020, malls and shopping complexes became devoid of human activity. During pre-corona period, the UAE retail stores were able to draw millions of visitors per year due to which the country has been slow to embrace the ecommerce. Nearly two-thirds of the retailers in Saudi Arabia faced difficulty in managing operational costs with supplies being cut-off as a result of containment measure.

When the stores closed, consumers had to shift towards e-commerce platforms for their necessities, which led to a substantial rise of e-commerce platforms in the country. The wholesalers started leveraging social buying applications to develop direct relationships with shoppers instead of selling products to supermarkets that guaranteed better margins. The retailers tested their resilience to survive the shift from offline to online, launching their digital presence and collaborating with existing marketplaces to push products through online channels. Although online retail channels have shown good growth, retailers expressed concern over additional set up costs and lack of experience and knowledge.

The Middle East has now become a battleground for regional and global e-commerce players who are fighting to stamp their dominance. Also, small businesses are struggling to compete across all these players and losing significant money in doing so. As the lockdown restrictions eased, the brick-and-mortar retailers started deploying influencers and ambassadors to livestream in-store events to generate organic conversation about their brands, which further contribute to the online culture.

According to TechSci research report on “UAE Retail Market By Type (Non-Food Retail and Food Retail), By Type of Market (Organized and Unorganized), By Distribution Channel (Hypermarkets/Supermarkets, Exclusive Stores, Specialty Stores, Department Stores, General Merchandise Store and Online), By Region (Dubai, Abu Dhabi, Sharjah and Rest of UAE), Competition, Forecast & Opportunities, 2025”, UAE retail market is expected to reach a market value of USD75 billion by 2025, owing to factors such as rapid tourism industry expansion, rising expatriate population, and advanced infrastructure development projects.

Trends shaping retail industry

E-commerce and POS integration

Point-of-Sale system collects basic customer sales data related to specific purchase while e-commerce is the master system behind the overall customer experience that performs functions related to inventory management, customer account management, shipping/warehouse information, and more. The integration of two platforms can take the customer experience to a new dimension with more tools and more information at the disposal of retailers. Combining eCommerce and POS can result in accurate product data which eliminates the need to manually update product details at brick-and-mortar stores, and the store associates can accurately answer product related questions, create orders in-person and place online orders for products not in stock at the store.

Linking eCommerce and POS systems helps store employees find information in real time on inventory status and product accessibility across various retailers’ locations. When eCommerce platform joins POS, orders can be processed and sent to ship immediately, which enhances the customer’s shopping experience.

Augmented Reality and Virtual Reality for Simulated Visualization

Leveraging AR or VR solutions, retailers plan to meet customer service experience requirements, enhancing their understanding of information employing advanced graphical visualization and simulation technologies. As retailers are under pressure to explain the purpose of physical stores, they are shifting towards AR and VR to provide a unified retail experience by personalizing or configuring unique product designs with high scope of customization. If the customers have a positive memory of shopping experience, they are more likely to return at the same store, thus forward-thinking retailers are adopting AR and VR technologies. Using Virtual Reality technology, employees can be safely trained, while reacting to situations by simulating real-life environments, which can also save the time and cost of training and reduces the risk of errors.

Increasing Adoption of Cloud Computing

Cloud computing is revolutionizing retail sector in many ways, enabling real-time access to operational and inventory data, enhancing user experience, and increasing profitability. With cloud computing, big retail companies can manage multiple stores at different locations to check real-time stock availability with predictive and prescriptive forecasting. As the retailers receive continuous flow of data every day, cloud computing helps to manage a huge amount of generated data retrieved from sales, stock, or inventory data and improves data security with advance firewalls, encryption, event logging, etc. Small retailers can use the data collected from connected devices to analyse the buying behaviour and their interaction with brands for creating an edge to decision-making process.

Automated Engagement and Operations with Robotics

The use of robotics in warehouses have been well-documented over the years but now the changing inventory and logistics functions are encouraging both brick-and-mortar companies and e-commerce companies to adapt artificial intelligence and robotics in retail. The new generation of robotics, automation tools and technologies have enabled retailers to achieve sizeable savings with reduced administrative errors, stock-out shortages, and losses. AI-enabled robot offers personalized product recommendations, that are driven by analytical insights from gathered data such as customers’ age, location, purchase history, etc. Increasing presence of helpful robots in stores can lead to a hassle-free, personalized shopping experiences that the retailer can capitalize on to boost profits and improve customer experience. Besides, many e-commerce companies have started utilizing drones and unmanned vehicles to make last-mile deliveries.

Voice-Assisted Shopping

Voice assistants enable customers to make purchases from the online platforms utilizing portable and connected smart devices. Retailers need to craft metadata for search engine optimization to arrange data effectively for voice searches that involve more words than text searches to make their product data fit to Internet search results. As voice-activated devices are becoming more sophisticated, it will come as no surprise when voice assisted shopping will be the “next big thing” after mobile eCommerce. With further improvement in AI and Natural Language Understanding, users can have smooth interactions with speaker and place orders via voice-assisted devices. Voice assistants could also be a solution to avoid long queues outside stores which happens due to low-capacity limits and need to maintain social distancing.

Policy and Regulatory Landscape Driving UAE Retail Market

Local sponsor to set-up business

The United Arab Emirates have enforced foreign investors to develop a local partnership or sponsorship to do business in Dubai. The local partner must hold at least 51% of the share capital of the company as per the directives specified by the UAE Commercial Companies Law. However, foreign investors have a choice to set up their operations in free-trade zones, established by UAE government to encourage direct foreign investment, without sharing equity with local resident. Also, setting up branch of any foreign parent company does not require UAE national to take equity interest in the business.

Documentation and Trade License Application

The Department of Economic Development in Dubai (DED) has listed over 2100 activities to choose the type of business which investor wants to run in UAE, and it grants the permission to run a retail shop in Dubai. As per the business type, the retail owner must prepare and submit documentations to the concerned government authorities for taking special approvals and clearances. The policies and regulations can change from one jurisdiction to another so make sure to know the jurisdiction for setting-up the retail shop.

Permission for setting up retail shop on lease

The retailers must take permissions from Dubai Municipality and other associated bodies if they want to set up a shop on lease or rent. There are more provisions for setting up a retail store on lease, which are not limited to finding right location.

According to TechSci research report on, “Global Retail Sourcing and Procurement Market, By Offering (Service and Solution), By Deployment Type (On-Premises and Cloud), By Organization Size (SMEs and Large Enterprises)), By Company and Geography, Forecast & Opportunities, 2014-2024”, the global retail sourcing and procuring market is projected to surpass USD 5billion due to factors such as growing demand for advancement in centralization system of procurement processes along with development  in innovation and cloud technologies.