DIGITAL MOMENTUM

Dubai 2018 | TOURISM | INTERVIEW

TBY talks to Patrick Chalhoub, CEO of Chalhoub Group, on e-commerce, new consumer behaviors, and signs of optimism in retail despite VAT implementation.

Patrick Chalhoub
BIOGRAPHY
For nearly 30 years, Patrick Chalhoub has been fully involved in the strategic development of the business to guarantee its long-term success. As such, he continues to expand the group’s distribution, retail business, marketing, and communication activities and is also eager to strengthen the group’s support services in terms of offer and skills. He is a founding member of the Rotary and Capital Club and an active member of the Young Presidents’ Organization (YPO). He also co-chairs the board of directors of Endeavor’s UAE affiliate.

How is e-commerce changing consumer behavior in the Middle East?

The entire digital cycle is changing consumer behavior, and our customers are becoming more and more digitalized. We have to determine how to connect with our customers in the best and most relevant way. E-commerce is moving with momentum, but seeing our customers choose between purchasing online over offline is driving our strategy. E-commerce in the luxury segment grew exponentially in 2016 and accelerated significantly in 2017. We see that acceleration continuing for the next few years. A lot of the issues we are facing online are also being solved online, such as the payments, logistics, and engaging with the customer. By getting over these hurdles, and with the arrival of larger players on the market, there will be greater momentum created in the e-commerce space. We reached 3-4% of the market in 2017, and we hope to go up to 12% of the market in 2020.

In what way do you expect the consumer profile to evolve in 2018?

Dubai is a fantastic hub formed by local residents as well as regional and international tourists. In 2017, we saw enormous change on the tourist front. The numbers are growing by 7-8%; however, we see less people from the GCC. Instead, we are seeing more people from India with a different consumption pattern; also, there are more Russians and Chinese, who are not buying a lot of luxury items. Another growing source market is Africa. For us, tourists are our key customers in our brick-and-mortar stores. Still, we have to adapt to the changing profile of tourists. Fashion, too, is changing constantly. On the local front, we have witnessed purchasing power being affected by new norms. No matter what the age, consumers are shifting toward a more playful shopping style; shopping for themselves instead of others and inspired by different types of people, not only by the way the brand talks to them, but also how they talk to each other via social media. Part of our job is to adapt to this new mindset.

To what extent has Dubai's retail sector reached saturation?

There are a few cities in the world that will eventually grab a larger share of the world retail market, and Dubai will continue to be one of them. These cities will be labeled “retail cities" that offer a certain vibrancy or experience. It is our duty as retailers to ensure we remain in the right position and that we provide vibrancy and differentiation. The point of differentiation is especially key because having too much of the same thing can be problematic. Developers, too, need to innovate and offer a different experience. If we can offer something different that makes people genuinely excited about Dubai as a retail city, making it interesting to move and browse around, then it will be a huge plus in making the city even more relevant. We truly need to make sure we offer something special.

What are your expectations for the retail sector in 2018?

I expect it will be tough and challenging. The arrival of VAT and its psychological effect will impact us. Costs will still be rising while we do not expect a major increase in business. Having said that, when we see the budget of the UAE, and Dubai in particular, we feel that the government is injecting money into the system that will help. We will probably see the effect of it at a later stage during the year. We feel that it is a sensible move because, in order to make the economy dynamic, one has to spend more to turn more revenue. This is what we believe is happening today. I am more optimistic about 2H2018.