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Monday, September 28, 2009

Retailers target GCC to set up home

28 September 2009
Home furnishings and accessories retailers are targeting the GCC in their expansion plans, attracted by the region's untapped potential and increased bargaining power for massive rental spaces.

The American home furnishings chain, Ethan Allen, is the latest retailer to announce plans to open about 15 stores across the GCC over the next five years.

It follows the Swedish retail giant IKEA, which earlier this month said it would open its largest store in the Middle East on Abu Dhabi's Yas Island by the end of this year. Siddarth Bhide, the operations and project manager for IKEA in the UAE, said the company was now eyeing new stores in Oman and Qatar.

"Everybody is aware of the Qatar economy in terms of potential and we want to get into that market as soon as we can," he said.

While IKEA sales in the UAE are on par with last year, a slowdown from the double-digit growth rate most retailers saw last year, the region still has untapped potential, Mr Bhide said.

"We look at the market with a long-term view," he added.

"I think there is still a lot of investment in these markets, in real estate and infrastructure in Qatar and Abu Dhabi and Dubai also."

Ethan Allen recently opened its flagship 1,170-square-metres design centre in Dubai Mall and was setting its sights on Abu Dhabi, Damascus and Doha, said Farooq Kathwari, its chairman and president."We're looking at every major city in the Middle East," he said, adding that Ethan Allen had 290 stores, 40 of which were outside North America. Mr Kathwari said the company's interior design service, free with purchase, would give it an edge over the competition.

"The most important part of our offering is our interior design service," he said. "Coming to Dubai without that service would not have been the right thing to do. We would then be basically offering a great programme, but still competing as a commodity.

"Dubai is important because it is in the crossroads between many different places, from South Asia to Europe, to all of the Middle East. Positioning us here gives us an opportunity to expand the projection of our brand."

Consumers in the UAE have cut back on discretionary purchases this year and retailers have seen sales dip by as much as 30 to 40 per cent compared with last year. Despite a slowdown in the local property sector, a number of other home retailers are expanding within or entering the GCC market in the coming months.

The high-end home retailer Williams-Sonoma will open four stores in Dubai and Kuwait by next year in partnership with MH Alshaya Group, the Middle East's largest retail group.

Index Living Mall opened a 50,000 sq ft outlet in Dubai last month, its first outside Thailand, and has plans for stores in Abu Dhabi, Bahrain and Qatar over the next three to five years, said Pisith Patamasatayasonthi, the retailer's president and chief executive.

He acknowledged these were tough economic times but believed this worked in favour of new entrants to the market in terms of availability and the price of new retail space.

"Right now, it is easy to choose the best locations," he said. "Bargaining power is at its best.

"Since Index Living Mall needs a big space, a good location is not easy to find." Robert Ziegler, the vice president of the management consultancy AT Kearney in Dubai, said opportunities for retail still existed in Abu Dhabi, but less so in Dubai.

"There is a slowdown in the market," he said. "I'm not sure it makes sense to reserve capacities unless you're a latecomer and you haven't been in the market before."

However, Laurent-Patrick Gally, a retail analyst with Shuaa Capital in Dubai, said some people were holding on to their properties and might be inclined to renovate their homes.

"You may still have some areas where there is some opportunity for interior decoration," he said.

"In a globally slowing environment, maybe pricing is more acceptable now than a few months back."

By Armina Ligaya

© The National 2009

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