Robust Retail; Online and In-Store; Tapping the Online Pool
DEFTERIOS: Welcome back to MARKETPLACE MIDDLE EAST during this holiday season. From Birkenstock to Burberry, Prada to Primark, the retail sector is a terrific barometer for economic growth no matter where you are in the world. Sometimes it's a simple case of consumers looking for the best bargain, or a preferential luxury brand. It's not hard to spot the affluence here in the Middle East, especially in Dubai. Last year, annual sales in the UAE hit $66 billion. In a special series, we're going to take an in-depth look at an industry that impacts all types of budgets. The world of retail is in a constant state of change. As more and more consumers click, bricks-and-mortar stores have to remain nimble. It's a fast-growing market online, worth $1.5 trillion per year, and it's growing rapidly, as Samuel Burke reports.</s>SAMUEL BURKE, CNN BUSINESS CORRESPONDENT (voice-over): A typical scene in early December. The lights, the sights, the sounds --</s>BURKE: The treats, the smells --</s>UNIDENTIFIED MALE: We made a nice little stuffing.</s>BURKE: The bells. All of this is part of the grand shopping experience.</s>ALLYSEN STEWART-ALLEN, FOUNDER, INTERNATIONAL MARKETING PARTNERS: Bricks- and-mortar stores know that if they're going to attract people, they need to be doing something better or differently than competing with your home environment, your coffee machine, your pajamas. Retailers definitely are looking at ways to bring people in. And that theater and drama and social aspect is increasingly being played up.</s>BURKE: Competition for your attention is fierce, while smartphones and tablets are changing the way we shop. Retail analytic firm ShopperTrak analyzes consumer behavior in brick-and-mortar stores. Their 2014 holiday trends report says consumers are researching online, then heading to the store ready to make that purchase.</s>BILL MARTIN, FOUNDER, SHOPPERTRAK: Our data would suggest that the same number of people are traveling to the mall as they were back in 2007 and 08, but they're very focused on what stores they're going to head to. And this is a result of their ability to do early online research so they know what products they want, where they can get them, and what price they can expect to get them at.</s>BURKE: Some chains, like Macy's, are embracing this upward trend of online shopping with a new feature allowing consumers to buy online then pick up their items in the physical stores. This can be good for both sides, reducing delivery costs and allowing customers to make an efficient trip to the store when it fits their schedule.</s>MARTINE REARDON, CHIEF MARKETING OFFICER, MACY'S: As long as the consumer is engaging with the Macy's brand, if they choose to do it online, if they choose to do it in the store, it's the same for us. Because the holidays are just incredibly special, people want to come into the physical place.</s>BURKE: One advantage brick-and-mortar shops will always have over online, the ability to satisfy the five senses.</s>UNIDENTIFIED MALE: When I come into the store, I get that personalized touch. The feeling about being able to try the clothes on. You don't get the same experience online as you do when you -- as you come into the store.</s>BURKE: Samuel Burke, CNN.</s>DEFTERIOS: This time of year, of course, consumers want to have the mall experience, and the trend of shopping online in the Middle East is still in its infancy. But the wariness is starting to drop, and retailers want to tap this ever-expanding pool. Jon Jensen has that story.</s>JON JENSEN, CNN PRODUCER (voice-over): In the United Arab Emirates, shopping malls are not just for shopping. They're places where thousands of visitors come each day to grab a bite, escape the heat, and to be entertained. But if you're a businessman in a hurry, like Emirati Yousef al Hashimi, shopping with the crowds can be overwhelming.</s>YOUSEF AL HASHIMI, BUSINESSMAN: It just takes too much time, and you just get bogged down. By the time you're done, you're exhausted.</s>JENSEN: That's where 30-year-old Mahmoud Gao comes in.</s>MAHMOUD GAO, FOUNDER, MR. DRAPER: Maybe you lost weight, because this isn't 2011.</s>JENSEN: He runs a company that helps men buy clothes from the comfort of home. It's called Mr. Draper.</s>GAO: Mr. Draper is just a service that helps men shop as conveniently as possible.</s>JENSEN: Customers log onto their site, enter preferences on size, style, and price. Then, a few days later, a box of clothes arrives. What you like, you pay for and keep. Everything else, you can return at no cost. And if you don't know what you're looking for, well, they can help there too.</s>JENSEN (on camera): Now, what sets this company apart from traditional online shopping is the service they provide: a stylist. This is Melissa. She is here to tell men what they're doing right and what they're doing wrong. I'm going to take this one to start.</s>JENSEN (voice-over): Gao is hoping this free, personalized makeover will give him an edge over traditional brick-and-mortar stores.</s>MELISSA, STYLIST: Not bad. Let's try another.</s>JENSEN (on camera): Yes?</s>MELISSA: Yes.</s>JENSEN: OK. I don't know about this.</s>MELISSA: Yes.</s>JENSEN: I think it's good.</s>MELISSA: Yes.</s>JENSEN: What do you think?</s>MELISSA: That's very nice. That's the one.</s>GAO: We're a new styling service for men.</s>JENSEN (voice-over): It's not exactly a unique concept. Similar companies have been around in the US for years. But shopping online here is relatively new and growing. E-commerce in the UAE is now worth $2.5 billion, and online payment company PayPal expects it to double next year. Still, there are challenges in the region. Not all houses are correctly labeled, and the extreme heat can affect supplies. Plus, with 80 percent of online purchases still paid for in cash here, returns are common.</s>NADA ZAGALLAI, MANAGING DIRECTOR, GLAMBOX: It's filtered into brands that we've taken off and brands that we've kept.</s>JENSEN: Nada Zagallai runs an online startup called GlamBox. They mail cosmetic samples to subscribers, helping customers try new brands and sort through the clutter, she says. In the past year, she says, their revenue has tripled. But logistics is still an issue.</s>ZAGALLAI: I don't think the market is challenging. Having the entire experience go very smoothly from packing point to delivery point, that's really the core of our challenge.</s>JENSEN (on camera): What about blue?</s>UNIDENTIFIED FEMALE: He has a lot of blue. He does all blue.</s>JENSEN (voice-over): Gao is hopeful Mr. Draper can overcome these hurdles.</s>GAO: We've been very surprised for what we've done so far. When we looked at the numbers, we were ecstatic, obviously. But we were also really surprised about our potential.</s>JENSEN: He is, after all, turning a profit, and buying wholesale, selling for retail, and avoiding the type of rent stores normally pay in shopping malls.</s>DEFTERIOS: Jon Jensen getting styled up for us here in the field. And that's all for this edition of CNN MARKETPLACE MIDDLE EAST, this week from Dubai. I'm John Defterios, thanks for watching. We'll see you next week.