UAE Superbrands Council’s Niranjan Gidwani on the latest trends shaping the retail sector

Brick and mortar is here to stay

In 2021, in a bow to the new decade, and an evolving post pandemic world, many retailers in the US announced expansion into brick-and-mortar stores. This trend is continuing this year even in the UAE: we’ve seen new malls in Dubai Hills, Jumeirah Village Circle and other areas bringing additional prime retail space into the market.

What retail brands have done to justify this expansion is to deliver meaningful and personalised store experiences that help them stand out. Experiential setups that incorporate physical and digital elements are a common theme among retailers today and will continue to be popular.  The pandemic has made stores more than just a place to shop – they now serve as distribution hubs and last-mile delivery options for brands. Consumers today want fast, reliable shipping options. When retailers use their own stores as distribution centers, they can guarantee faster shipping times.

Is the digital-only customer acquisition enough?

No, a digital only strategy will be grossly inadequate. Digital acquisitions costs are on the rise and have been for the past couple of years. These costs are expected to rise further as moves to restrict the use of cookies becomes more prevalent. Several large retail advertisers have already reacted to these changes and made cuts in their digital budgets. More brands are following suit, as they realise physical stores are could be an equally cost-effective solution.

Stores have become their very own ads – billboards that sell. Considerable ad spend will likely be directed towards experimentation for brick-and-mortar locations.

While technology plays an important role in retail today, the most successful brands understand the true power of human connections and interactions. Frontline store members can be trained to become ‘influencers’ and create meaningful and empowering relationships with consumers who enter their stores. Take, for example, any Apple store in the world. We should look at what they do differently to remain a hit in the brick-and-mortar segment as well. These kinds of lessons should be imbibed across the sector.

 E-commerce in the UAE

With a market potential of $8bn in 2025, it is no wonder that most companies in the pandemic time pivoted to an e-commerce driven ‘digital-only’ strategy. This growth is being further fuelled by the government’s visionary approach to digital transformation and excellence. From golden visas for coders, encouraging fintech entrepreneurs and strengthening the online last-mile logistics through the creation of dedicated free zones, the UAE is at the forefront of the e-commerce revolution in the Middle East.

But while this does push the bar higher, challenges still remain down the line. High international shipping costs, cash on delivery, high return costs, high customer acquisition costs are all barriers to surmount as inflation pushes costs up.

Another mistake that many small, medium and large enterprises should avoid is that, while trying to emulate the likes of the big players, they may end up spending disproportionate amounts on a minuscule portion of their growing yet small portion of online business. The strategy and end game would need to be clear.

Metaverse and brands

Being at the crossroads of many things from social and gaming to crypto and virtual reality (VR), the metaverse has blurred the lines and created a reality that’s perceived and used differently by everybody. So what does this really mean for your brand?

While brands such as H&M (Animal Crossing), NASCAR (Roblox – Jailbreak) are advertising, Warner Bros, Hyundai and Gucci have created their own virtual worlds. Coca Cola, Anhueser-Busch and Crockpot are tiptoeing the space with NFTs (non-fungible tokens) while Sephora, Nike and HBO are leaning towards augmented reality and VR experiences. Even though the metaverse is still an evolving space, brands are increasingly looking to create their own metaverse strategy to stay relevant and connected.

As of now, the metaverse is still very nascent and comes with some learning lessons for marketers. It is important to note that while earlier technology used to work its way from US to the world rather slowly, a more globally connected world is ensuring these changes are visible in the UAE and other countries a lot sooner.

However, investments in this new buzzword area are likely to be expensive in the formative years. In the last one year, use of the word ‘metaverse’ has increased by 100 times, according to Bloomberg. No matter what, we need to realise that the physical world will always remain more important than the metaverse.

Trends in 2022

Brands, distributors and retailers have had to introspect and review data from not only 2020 and 2021 but also 2018 and 2019 to get a more real picture to define what can be a successful blended strategy in 2022 and beyond – a strategy that gives space for brick and mortar to synergise with e-commerce, as the metaverse and other innovations evolve.

Several successful examples come to mind. In the hypermarket segment, an extremely relevant example is of Carrefour. The company teamed up with AiFi, a maker of machine-vision powered checkout tech, to launch a cashierless convenience store called Carrefour Flash.

In the same hyper segment, local grown brand Lulu is catching up, with a well-thought-out backward integration strategy. In the online e-commerce retail segment, home-grown brand noon has clearly revitalised itself, and is willing to fight it out with global giants.

At the mall owner level, Aldar has made a substantial investment to enhance the customer journey by re-imagining Yas Mall’s spaces and introducing new innovative retail concepts. The redevelopment is enabling Aldar Investment to deliver a unique and diversified offering to tenants and customers by repurposing 40 per cent of its gross leasable area to high impact experiential retail, food and beverage and co-working office spaces.

At the service level, the best example that comes to mind is the Dubai government. In all the successful instances, what a phenomenal and efficient use of strategic thinking, vision and investment in technology, coupled with sustained implementation.