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News
Our ninth market report April 2010
For those of you who read our news items; please accept our apologies for the current delay to print. The biggest story in our world over the last few months has been in-house. Now we want to share with you that milestone in our 45 year old history.
Our CEO and Master of Retail Planning and Design for Foreman & Company, John B. Foreman, has finally completed stage one of a lifetime desire to write a Biography of this industry through his eyes. This is not an auto biography but a biography on the industry and the sciences that drive it. For many years he was taught in day to day experiences by the very best in European retailing and has in turn taught many of us, the arts of this exciting industry.
The first stage of this Biography to be completed, has been a series of addendums that contain the essence of how retailing works, what motivates and drives and what does not motivate or drive a shopper to fully immerse in retail therapy. These addendums are currently six booklets containing between 13 and 19 thousand words that explain how the sciences of RBP that are involved in the industry, impact upon a shopper. As many of you know, the letters RBP represent Retail Behavioural Psychology which was coined by John many years ago to describe those human behaviours. The full Biography is still a year away mainly due he says to the many new items to divulge from setting up our Dubai Branch office and the Middle Eastern experiences in retail planning and design when studied from a different cultural premise.
Not being able to wait longer for new and experienced Retail Designers to appreciate his knowledge, we convinced him to develop a personal website www.retailplan.info and place those addendums as fair priced e-books for sale to share his experiences with the World. We also managed to have him insert a Blog for those who need other experiences from the industry, we know that you will check out the site, and John would enjoy your responses. This new site for John, together with a full upgrade of this site has kept the administration team busy.
In the retail marketplace, we are still moving ahead with the new Branch Office in Dubai albeit slowly as the market has not yet developed into recovery mode. Most of the major Mall Owners are marking step and the best dressed retailers have slowed down their expansion plans.
What we see as paramount today is the need to understand how specific retail biased “Change Management” strategies are required to re-position the retail market to suit the levelling effect that has occurred by the market dropping of un-real highs, and an even greater need to understand how to use those strategies to provide both sustainability then to carefully grow the market exponentially. This applies to both Mall Owners and one off Retailers if they want to be in the market in two years time.
There is no question in our minds that UAE retailing seriously needs to change to succeed, or be content to die back to single point growth. This return to normality is not only a Dubai issue, it is prevalent throughout the MENA region in all developing economies and the sooner the Mall Owners understand that future growth comes from contented shoppers returning for more good experiences and not from increasing rentals without reason, the sooner the retailers will learn to concentrate on good old fashioned CRM with fair prices to grow their customer bases exponentially.
Our market visit to Dubai – September / October 2009
Believe me when I say “it was great to be back in Dubai again”. The air temperature was just right day and night and the business temperature was beginning to warm up for a new beginning, although the offshore press was quoting earthquake sized upheavals, all I felt was negative vibrations.
Certainly the debts of Dubai World and Nakheel seem gigantic but so are the commercial notes on other large corporations with assets of their dimensions which have been assumed sound as long as the cash flow remains in tact. Wait and see would be good advice here, as is often proved elsewhere, we can all be too quick to throw stones and hope that others forget our comments afterwards. There is a caveat to that statement, a statement from a wise mentor many years ago, never invest in any organisation that is based upon capital growth, at any time.
Those investors who still expect continuance of the extraordinary capital value lifts that have occurred over the last four years are now realizing that the real value of Dubai can not be based upon such volatile mechanisms, but must be based upon sustainability of the asset.
Dubai’s future as an international commercial centre for the Middle East and in some instances the World, combined with that of a uniquely planned tourist haven, is well cemented into the fabric of this ‘A’ class city. So much so that we believe it will not take too long to correct the current attitudes that prevail with some negative people, all they need is faith in the city to succeed as a total entity, which we believe it will.
The departure of poorly leveraged companies that usually develop in false economies and the merging or division of Corporations and even including major Bank mergers has begun, but this should not concern those with actual local knowledge and business acumen. No doubt the press will make hay with this, not I, as the sage said “we have greater fish to fry”
The fish I refer to are those Retail Malls which were created as iconic beacons for tourists to shop in and for the local Emirati to be proud of, to now trade in a marketplace that until now is unknown territory to them. This is our territory and one that we have traded successfully in for a number of years. Their catch phrase now must be “it is time for change management” which is our call sign to act. In our business we say “it is time to evoke RBP (Retail Behavioral Psychology)” which changes shopping into sustainable profits.
Yes, as one of the great shopping destinations in the World, Dubai is about to evolve yet again, to keep up with today’s retail revolution. The retail market is in change management mode, one that we know very well as it has been with us at least five times in our forty years of consulting.
The time has now arrived in Dubai to understand the psychological drivers that are the real tools of sales generation, tools that we apply to all we do for our clients worldwide. Unlike some retail developers who believe that Retail Theatre is defined as “Mixing Shopping with spectacle” and offering circus events as evidence, we believe it is created with knowledge of the market forces and how to use them. As retail specialists we know that retail theatre has to relate to more than just a transient or temporary event, it is an essential element of retailing.
Some say there are too many Malls; in fact there are no more per capita than other cities of similar geographical spread and where a new sub-city within this mega-city is planned, then another regional or district mall will be required. Where there is a surplus, is in expectation; such as assuming that the off-shore tourists will continue to call, and that the local demographic will visit all the extravaganzas every week. The advent of Aswaaq Supermarket Centres with support specialty stores is a sound solution and all that is needed to fulfill the weekly shopping expedition. We understand there are many more to follow, we trust the format will be sustainable.
This leaves the larger Malls to continue to become extended homes to the captive audience in each catchment area and at the same time, provide the transient tourist with a holiday destination to visit on their trip, when they come.
As retailers know, to secure retail sustainability and be open to exponential growth, it does not come from tourism but from a developing catchment area where the local families desire to return to the place where they last enjoyed either the value or the experience. This causes us to return to “Retail Theatre” being the term for how we express our retailer’s offering, and to ensure we make full use of “Retail Behavioral Psychology” a psychological platform for retailers and shoppers to exist in that our Principle, John Foreman designed many years ago, and still practices to this day.
We are very confident that his skills in the creation of retail environments that provide great returns no matter what the financial markets say will enable us to lead the charge in Retail Change Management in this Emirate and for the whole UAE. This recent visit as a marketing exercise was most rewarding for us and we promise to tell all, when the time for our new clients is right.
The business contacts, friends and mentors that we have been fortunate to meet over the last eighteen, months are very special to us. The contacts are developing into business alliances, the friends we have made are ours for life and without the mentors who we personally deeply respect, and we would be unaware of the way to do business in this alternate culture.
If you are a return visitor to these articles, then you may be following the story of our task in setting up a branch Office in Dubai. We can now say that we have finally secured the Initial Approval Certificate from the Government and are currently seeking office accommodation. In that respect the choices are wide and many. We are open to offers!
The seventh market visit to Dubai – June 2009
Is the real estate market is changing?
Abu Dhabi has not stopped it’s momentous commercial growth pattern that began just a few years ago but it has slowed down to a more balanced approach and in reality from my observations not one worker has vacated any development site either, unlike Dubai where empty half finished buildings are still mourning the departure of workers and funding. One has to wonder on who will pick up the over mortgaged incomplete structures and for what value? There is an opportunity here for a commercial margin, but not this time by “investors” in zero value.
However Dubai still has to shave off false values to both residential and commercial space before it reaches stability in either, with the gap between an affordable rental and a fair return on investment still having a 15 - 12% differential respectively. From my view although my own country of New Zealand has bottomed out, it is still bouncing on the bottom as stray balls are uncovered, this in my opinion will be the same for Dubai; although here we still have further to fall over the next six month, when it does stop it will be hard to recognise due also to stray balls still bouncing but as the saying goes “watch this space” because it will rise again. Our research shows that to be no more than 70% of the 2006 values unless there is a substantial increase in labour rates which will drive rent rates up from the bottom.
What is exciting and should give the Dubai locals a perk and the international investor confidence is the very apparent continuation of the transportation infrastructure. September is still slated as the inaugural month for metro travel to commence and it will be interesting to see how the RTA has determined how and where the users will get to the transit stations, we have all heard of the purchase of busses but for those who are not on a bus route where will they leave their personal vehicles? No doubt they have that covered too. Dubai is well known for parking meters throughout its domain so all day parking close to metro terminals is a given, that will no doubt cause financial discomfort to many if that is the solution.
The impact on the retail sector has been very interesting for all of us; we have seen the fall of the two Goliaths in Dubai from inconceivable growth patterns to realistic expectations and even consolidation and company separatism tactics readying for sale no doubt, and we have indications of improved foot counts in some Malls but we doubt if the sales match that upward swing. The hotels are strong indicators of less tourists and the shortage of overpaid expats has no doubt impacted upon the Malls focussed only upon Brands and non-essential bling.
As all our clients know, we are focussed on sustainability first with exponential growth in second place because they know from experience that this works every time and in every market worldwide. Our long history of creating retail environments that primarily suit the Psychographics of the catchment area while still retaining the retail theatre that suits the Brand and value hunting transient visitor, is proving to be the formula that our clients expect, such that we can honestly say we have never received this many enquiries for our services.
Having now mastered an understanding of the processes involved with setting up a full time Branch office we can report that we are now reviewing accommodation opportunities. That footprint in the sand is closer now than ever before; some ask why not sooner, we say because we are still learning how, if so then courtesy of Nakheel LLC. Having finally resolved with the Dubai Department of Economy the actual activity to trade under our path is now set to finalise with the Government within the next three weeks.
We have received an enormous amount of guidance from our new friends in the UAE who all say the first step should always be a virtual office until you have a focus on which area actually fits your industry as the commercial area of Dubai is a very long strip that has a history of becoming traffic jammed and this without considerate parking for your clients will cause you to later regret the “office in Sheikh Zayed Road” where all aspire to. This next month will provide invaluable information in that regard, watch this space for our first office location.
Finally, also watch this column for real Retail news.
The second market visit to Dubai this year – April 2009
Setting up a branch office anywhere in any market takes time and we are pleased it does, because the occasional stalling which can be caused by matters outside one’s immediate radar provides windows of opportunity to refine the way one presents the companies modus operandi to suit the new market.
In our opinion it would be unwise to believe that branch offices can be replicated in the perfect image of the home office. Unlike a franchised retail outlet that is usually governed only by the site specific layout, a branch office is often required to change the way it does business to suit its new market. This does not mean that any of the basic attributes need to alter, but it does mean that the way you present yourself and do the business does. Our new marketplace in Dubai UAE will be a good example of how a branch office needs to change to suit its market.
Currently we are successfully using the fly-in / fly-out method to service projects that are being undertaken fully by the home office, while spending dedicated time to develop a strong contact base and traverse the local Governmental path to establish the office in a manner that will suit this new and different market.
Once one has mastered an understanding of the whys and wherefores the process becomes relatively easy, it just takes time, and that is the way it is. For any new company entering this market, our advice is; first understand where you are and secondly be considerate of who you are working with, it will be the Arabic way, and so it should be.
Although the first contracts are beginning to flow through, our next stage in setting up the branch office will be the first real footprint in the sand for Foreman & Company; as we complete the regulatory paperwork and set up the initial virtual office. For our permanent office there are a number of opportunities on the table, all governed by our first consideration, that of our visitors, as car parking may be easier now with the economic revaluation but within the year we estimate this will change.
Yes, we call it an ‘economic revaluation’ simply because it is; although the effects are global the causes are common everywhere, too much, too soon, too fast. Whatever is less value than last year is the result of too much activity in the market with too soon a value lift all undertaken too fast. The result being that property, shares, exchange rates and unemployment all became the victims of an over valued economy.
Those who lost equity now have to acknowledge the loss as a re-valuation of their wealth, for Foreman & Company who have amassed a wealth of knowledge within depressed retail markets in a number of countries over many years; we welcome the opportunity to offer specific consultancy on achieving real wealth from all retail environments that consistently and sustainably work for you.
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