Aug 20, 2009
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World's top mall woo Gulf

Aug 20, 2009

By Tamara Walid

DUBAI (Reuters) - Sales picked up sharply at the world's largest mall in Dubai in the last two months as tourists from emerging markets seized on bargains, though turnover remains below expectations, retailers say.

The Dubai Mall opened in November as the financial crisis swept the globe, sending consumer confidence into freefall as the Gulf stood on the cusp of an economic recession. It is part of a $20 billion development by Emaar Properties EMAR.DU and houses some 600 stores as well as an ice rink and aquarium.

Retailers had braced for a slow summer after a dismal first half of the year which saw sales plunge around 30 percent.

"We are seeing a pick up in sales and more foot-fall," said Rahul Jadhav, system store manager at luxury brand Cartier, adding sales were up "20-30 percent since March."

Jadhav said tourists mainly from the Gulf Arab region and China have made up most of the customers at the branch.

Expensive tastes for designer clothes and luxury items accompanied the Dubai boom and attracted more brand name shops than in many Western shopping capitals.

The emirate, which built itself as a regional fashion hub, has more than 40 malls and attracts more tourists per year than any Arab country outside of Egypt. It hosts an annual shopping festival that brings in two million visitors. The retail sector contributes about a third of economic output.


The slump has kept regional tourists closer to home this year, opting for inter-Gulf travel as opposed to further afield, while an uptick in visitors from China has underpinned spending at the mall.

Chinese guests staying at Dubai hotels were up 14 percent in the first quarter of 2009 compared with a year earlier, according to latest data from Dubai's tourism department.

Hunter International Tourism, one of China's largest travel agencies which has a Dubai office, estimates a 30 percent increase in Chinese tourists to the UAE in May and June compared to the two previous months.

The number of attractions at the Dubai Mall -- as well as high leasing costs -- has prompted some retailers to complain the mall is more a sightseeing destination than a shopping one.

"Tourism has dropped, the resident population is shopping less and times are difficult," said Nilesh Khalkho, chief executive of electronics retailer Sharaf DG. "The mall needs to be more aggressive in differentiating itself.

Operating costs are high and sales are not "performing up to the mark," said Khalkho, adding that foot-fall still needed to increase to stimulate buying.

Jacky's Electronics, another regional retailer, said although sales picked up 25-28 percent in the last two months, they were 60 percent below expectations prior to the opening.


Retailers at Dubai Mall must also cope with rental contracts signed at the peak of Dubai's property boom, before the meltdown last fall.

Retail analyst Laurent-Patrick Gally at Shuaa Capital said there might be adjustments to rents at the emirate's malls as new retail space comes on stream next year.

He also said there may be a flipside to the increase in spending during the summer, as it might mean less spending toward the end of the year.

"We expect a pick up on a year-to-year basis in the first quarter of 2010 versus the first quarter of 2009, instead of our previous assumption of a pick up in the fourth quarter this year versus the same period last year," said Gally.

(Editing by John Stonestreet)

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