If a picture tells a thousand words, then the image of the Crown Prince of Dubai (Sheikh Hamdan) waving a UAE flag atop of the Burj Khalifa just a few hours after Dubai was awarded the right to host the 2020 Expo in late 2013 must surely represent something approaching a good long read rather than that of a short story. This image was published across the region and acts as a fitting statement of intent as to how Dubai has been aggressively trying to reposition itself (as well as its debt) since it was caught a bit short during 2008.

During the period of economic recovery and poker-faced asset shuffling since then, the retail markets have to all intents and purposes remained rather buoyant. Rents stabalised (plateaued might be a better if slightly less kind word) for a few years, but footfall to the malls was no less positive and vacancy rates within these world-class bricks and mortar destinations never really dropped below 95%. It’s also worth remembering that alongside this market stagnation there was some serious belt-tightening and downward pressure on household income. Notwithstanding during this time the largest mall of the world was also unveiled (Dubai Mall), which at the last count was pulling in upwards of 70m visitors a year.

So what’s all this good news and tub-thumping got to do with the story we’re trying to tell at IORMA Middle East? Well in a market that is rife with renewed optimism, as well as huge malls and countless global brands, a rather vacuous hole has existed here for some time within the e-commerce segment. As you’ll well know, e-commerce has more than taken a foothold in many global retail markets, often to the point that it has positively re-energised them – one only needs to see what is being published from our other global offices to see that. However to say that it is a nascent part of the industry in the Middle East would be a gross over-estimation, even if we have had the odd success story.

The reasons for such a slow take-up both here in Dubai as well as across the MENA region are many, whether it be an ‘if it ain’t broke don’t fix’ mentality towards building more and more retail real estate. More simply there is also a lack of appetite for investing in a relative unknown quantity – in this instance a digital focus for old legacy retail groups – it’s probably worth remembering too that Facebook was banned here until 2007 and Skype has only recently been unblocked by Dubai’s Telecoms Regulation Authority (TRA). It could also be a fundamental issue around trust, or the lack thereof – credit card penetration here is still very low compared to global comparisons something that has positioned Cash-on-Delivery as the preferred method of paying for internet-driven purchases.

Whatever the local issues are, they haven’t stopped the global e-commerce giants such as Net-a-Porter, Amazon, Asos, Farfetch, eBay and Matches wanting a very definite piece of the action. Knowing that they can gain quick marketshare while the local operators sit on their hands, the interest in these markets from global operators has escalated beyond recognition in the past 24-36 months. There has been talks of local fulfillment centres, collection boxes in the malls and click and collect partnerships, alongside the Government’s rapid take-up of drone deliveries. All of which means that the local retail groups have to very quickly shift their focus towards a consumer-centric digital model. From what has previously been a ‘must-do’ afterthought at the bottom of a 5 year business plan has now become a huge unforeseen (and unaddressed) problem that will very soon need be front and centre of their plans going forward.

The upshot of this shifting of the sands (if you’ll excuse the locale pun) is that Omni-Commerce is still very much buzzword territory in the region, with very few retailers truly understanding how a multi-channel strategy will impact their business in the long term, let alone where omni will take them.

Neil Tunbridge – Director, IORMA (Middle East)

See also: IORMA enters into a Strategic Partnership for the Middle East region with Dubai based Tejuri.com … more