UAE retail able to weather Covid-19 storm

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The UAE's e-commerce sector has emerged as a strong presence in recent months, with many retailers moving and expanding their offerings online.
The UAE's e-commerce sector has emerged as a strong presence in recent months, with many retailers moving and expanding their offerings online.

Dubai - Online sales surge to offset store closures as global retail stares at $2.1T loss

by

Rohma Sadaqat

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Published: Wed 6 May 2020, 9:39 PM

The UAE's retail sector has faced a series of challenges as a result of the ongoing Covid-19 pandemic severely impacting economic activity, but the sector has managed to weather some of the storm, with online retail recording a surge in activity.
Experts noted that the country's e-commerce sector has emerged as a strong presence in recent months, with many retailers moving and expanding their offerings online, which is in line with the social distancing initiatives launched by authorities.
"The first quarter of the year has been unexpected for all, quickly going from business-as-usual to social distancing measures and restrictions which have impacted economic activity," said Aditi Gouri, associate partner for strategic consulting and research at Cavendish Maxwell.
In its most recent report, the company noted that with the temporary closure of entertainment centres, cinemas, indoor parks, and food courts, malls can expect revenue to trickle in from groceries, pharmacies, food delivery, and online sales from certain stores. Retail giants have acknowledged these challenges, with several players offering waivers in some form to tenants.

The report also noted that the surge in demand for e-commerce, coupled with a potentially permanent change in shopping behaviour post the Covid-19 situation to favour online retail, will likely spur demand for warehouses, fulfillment centres, and other logistics facilities. In first quarter, warehouse enquiries at free zones comprised 25 per cent of the pie versus zero per cent in the previous quarter, whilst logistics and distribution enquiries climbed to take a 29 per cent share versus 17 per cent earlier.

E-commerce set to grow

E-commerce has become more prevalent globally, and with quarantine impacting an increasing number of people worldwide, the sector is set to grow and diversify even more rapidly. Studies predict that e-commerce is expected to surge to 16 per cent with over $26 trillion by 2020. According to a recent report by the Dubai Future Foundation, the UAE is already ahead in terms of e-commerce, with the industry set to reach $63.8 billion by 2023.

In addition, the report also noted that the UAE's digital economy contributes 4.3 per cent to GDP and Dubai's e-commerce industry is set to account for Dh12 billion of the local GDP by 2023.

Vikrant Rohatgi, head of global strategy Group at KPMG Lower Gulf, said that the current crisis has accelerated the shift towards online retailing. Some retailers, however, are facing challenges in establishing and enhancing their online presence. In particular, grocery retailers that were slow in developing their online presence, had to resort to third party apps and platforms to cater to significant surge in online demand, he said.

"One of the key lessons that retailers have learned during this time is to be agile and flexible to adopt to rapidly changing market dynamics and consumer buying behavior," he said.

"One of the major challenges faced by the retail sector in the UAE at the moment is liquidity and managing cashflow. To address this, retailers are renegotiating with the landlords to seek rent relief, as well as revised rental terms, as sales are likely to be impacted for the rest of the year. They are also looking to rationalise their staff costs in different ways, while minimising job losses," he said.

He said most retailers are also working with banks to defer payments, roll over lines of credit and activate additional ones, as required. Furthermore, they are renegotiating business terms with suppliers where possible, while deferring new store openings and looking to rationalise their portfolio and retail footprint.

Retail sector proactive

Philippe Peguilhan, country manager of Carrefour UAE at Majid Al Futtaim Retail, said that the retail industry as a whole, with the support of the UAE government, has been proactive in finding efficient ways to meet a sharp increase in demand for online orders while ensuring timely delivery.

"For Carrefour, the pandemic presented a range of challenges that required agility, sensitivity, and precision in execution," he said.

"Our efforts have largely been focused on maintaining supply through working with our local and international suppliers, as one of our pressing priorities was to ensure customer needs were fully met while safeguarding their well-being.

"Our stores have remained open to a regular schedule and fully stocked with products. During these testing times we've been mindful of encouraging our valued customers to shop responsibly based on their needs, as there is enough supply for everyone."

"We have seen a sharp increase in demand for our online shopping platforms with transactions rising by 400 per cent. We've also noticed a 59 per cent increase in new customers on our platforms when compared to the standard weekly average," he added.

To meet this demand, he said the company has launched several initiatives including a strategic alliance that the Department of Economic Development Dubai has coordinated between Dubai Taxi Corporation, Aramex and Carrefour.

- rohma@khaleejtimes.com


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