By Hugo Van Der Schaegh, general manager at ODG
With e-commerce poised to hit an all-time high and reach over US$27 trillion by 2020, conventional shopping malls are feeling the heat. Their significant transformation is now important or they stand to face the bleak prospect of ‘abandoned malls’ as witnessed in the US. There is much to learn from the global experience for the UAE. After all, the UAE has witnessed a retail revolution in such a short time span. The pace of growth that marked the shopping malls sector of the country, especially in Dubai, is nothing short of game-changing.
A report by Dubai Chamber says the nation’s retail sector will reach $71bn in the next four years while CBRE estimates that Abu Dhabi and Dubai, together, have over 626,000m2 of retail space under development as of 2016.
Yet, the rules of the game are changing. The rise of e-commerce, set to grow from US$20 billion to over $200bn by 2020 across the MENA region, is challenging the pillars of an industry that no doubt continues to record tremendous growth – both in footfall and tenant sales.
Regional players are evolving with distinctive market strengths, such as www.noon.com, launched by Mr. Mohamed Alabbar, bringing its own dedicated fleet and extensive product portfolio. In a fast-evolving landscape, how long can malls maintain their competitiveness, especially in the face of the e-commerce onslaught? How will the recent acquisition of www.souq.com, the region’s predominant e-commerce retailer, by Amazon, the global giant that has disrupted the retail scene, impact shopping mall operations? And how will the arrival of new players in the online retail space further divide the market?
For now, the answers are anybody’s guess. We could point to the tech-savvy 200 million Arab youth and millennials to be the flag-bearers of MENA’s online retail revolution, and hope that malls would continue to be relevant for the ‘family shopping and outing’ experience.
But hope is small currency in the big world of business – more so today – as the region openly embraces digital transformation with gusto. Adapt or perish is the bottom-line.
Two mall configurations seem to offer the right strategy for the malls sector not only to stay relevant and competitive but also to sustain growth. And both are a good fit for the UAE.
The first are destination malls – the super-regional malls with vast built-up areas and gross leasable space with dramatic architecture, themed interior design and a grand ambience that assures visitors an immersive experience. These offer a diverse mix of retail – high-end and high street – F&B choices and leisure attractions.
The ‘grand lifestyle experience’ promised by destination malls are underpinned by the growth in their F&B and leisure spread – which enable them to demonstrate their resilience to the e-commerce onslaught. They continue to drive traffic, as destinations for families and friends to meet, spend quality time, and also engage in retail of choice. In the US, as malls continue to reinvent themselves to become more relevant to the community and to enhance footfall, their F&B offer has seen considerable growth since 2009.
The sustained footfall of destination malls in Dubai is also highlighted by the popularity of leisure attractions such as aquariums, ski slopes, fountain displays and indoor theme parks, which ensure novelty value and build a loyal clientele.
Destination malls often choose their retail tenants for their brand value, prestige and the unique experiences they offer. There is also an increasing emphasis on the design and digital aspects of stores to complement the overall theme of the mall. This even reflects in the F&B and leisure spread, as is highlighted by the success of destination malls such as Mall of America in Bloomington, Minnesota; Grand Canal Shoppes in Las Vegas, and The Parisian Macao, among others. Typically, destination malls – by virtue of their large format – are not necessarily in the heart of the city, although there are exceptions right here in Dubai. However, with the fast-paced growth of cities, creating destination malls in city centres will be an increasingly daunting task.
Today, the retail landscape of the UAE has mega-destination malls being developed in city suburbs – and their success in attracting and sustaining visitor footfall will depend on the unique lifestyle experiences they offer rather than just the retail choices.
How then do you develop a ‘destination mall?’ As a deisgn consultancy with a strong focus on the retail sector, at ODG, we believe that its fundamental attribute must be ‘visitor appeal’ not necessarily for retail choices but for the non-tenant related spaces. The design of the common areas must be approached with such creative flair and innovation that regardless of the brand offering in the retail environment, people are inclined to visit it for the aesthetic and lifestyle experience.
The Venetian Mall in Las Vegas is an example of how it serves as a ‘destination’ welcoming visitors for its ambience – the Venetian street, gondola tour and feature ceiling. Closer home, The Dubai Mall has successfully transformed as a ‘destination mall’ welcoming vistiors to view attractions such as the huge dinosaur skeleton, the aquarium or The Dubai Fountain show. At Al Seef near the Dubai Creek, a replica of an old city has been created with rusty lamps and reclaimed wooden doors. The driver of traffic is not necessarily the retail outlets but the experience itself.
The design approach to destination malls must be different – starting with the ‘legend’ – the story-telling, the brand attributes, the material selection, creative design. The mission must be to build the mall’s own unique design narrative and niche – and that calls for creativity.
The second mall configuration that has found remarkable success is transit-oriented malls. In essence, transit malls take the mall experience to the city. The dividing line between where the city begins and the mall ends and vice versa is blurred. They are located at urban nodes, where transportation nodes, residences, offices and retail centres merge.
Their location at these ‘transit’ nodes ensure a steady footfall of visitors at all times – as commuters go to work and home, and visitors arrive in their natural course of a city tour than as part of a dedicated trip to a mall. This natural flow of visitors streams through retail precincts, converting them into shoppers.
The mall, thus, becomes not a destination but a seamless environment that is part of the people’s daily routine. The transit mall benefits from a natural clientele, including the footfall of local residents, and the commuters passing through daily within the development.
The Oculus in New York, Elements Hong Kong, and King’s Cross in London are all great examples of the seamless merger of city and malls.
Dubai has a further opportunity in developing Transit-Oriented Developments, thanks to its highly evolved – and still expanding – Metro network. Paris Saint-Lazare Train Station is a great example of the transit mall experience, as are some of the ‘neighbourhood malls’ developed by MTR, one of the world’s leading railway operators, in Hong Kong. MTR has in fact developed a chain of ‘transit malls’ such as the Luk Yeung Galleria, located on a major traffic thoroughfare, while MTR’s The Lane is located right above the Hang Hua MTR Station and Citylink is above the Sha Tin station.
Such Transit-Oriented Developments call for strong coordination between city planners, transport companies and mall developers, which in turn will deliver a value-added urban node that supports not just the transit operator, but also the larger economy.
For urban transport operators, transit malls mean gaining additional footfall for their public modes of transport. For city planners, they offer a convenient mode to address modern urban infrastructure challenges. For developers, transit malls set around public transport helps create thriving ecosystems of commerce.
With the UAE’s focus on sustainable and smart city development – and emphasis on strengthening public transport as well as encouraging a culture of walking – the nation has a tremendous opportunity for Transit Mall developments.
Designing Transit-Oriented Developments call for an even different approach from destination malls with several factors to be weighed in. Typically, TODs see high visitor traffic, and the ratio of commercial space versus visitor arrivals would be considerably low – at least four times lower than a typical mall. This means having a very dense retail environment where a variety of brands are offered, is a key factor to be considered. There must be maximum shop-front exposure and islands of retail spaces must be created around which visitors flow. Retail here is about impulse and the design must regard that as a fundamental consideration. The retail spaces must also be as open as possible to generate seamless footfall while not compromising on fire, safety, security and anti-theft constraints. Integral to the design of TODs is an efficient signage and wayfinding system that works both ways – to the advantage of retailers while not inconveniencing the transit passengers. Too much information can become overwhelming if not carefully coordinated.
With two such high-potential mall models, and especially in response to e-commerce, it is imperative that mall operators and developers have to think out of the ordinary. Only a transformational approach can support malls to thrive in the days ahead.