By adapting international brands to Middle East markets, Al Futtaim has helped put the region, and particularly Dubai, on the retail map.
With retail franchise operations in the GCC including Marks & Spencer, Toys-R-Us and Ace Hardware, and its own luxury goods brands, Al Futtaim is one of the leading players in the Middle East's retail sector. Jim McCallum, retail director at Al Futtaim, tells
Retail News Middle East
about the challenges and rewards of bringing international brands to the Middle East.
What percentage of Al Futtaim's retail business is in the UAE?
It's about half. We're not just a UAE business although it is a significant part of it. It's probably over 40% or 50% of our turnover and of course as a retail market it is one of the more significant in the Gulf. But that is not to say that some of the other markets are not growing very strongly. Qatar, Kuwait, Bahrain - these are markets in which we are having great success and wish to expand.
Which markets are growing most quickly?
If you look at the last two or three years Qatar has grown faster than the UAE in percentage terms, but in size it's still relatively small. The growth that you see there has been outstripping the UAE where the retail sector is more mature. We're seeing growth in Bahrain as well, and Kuwait certainly in the last two years is also up there. I can only tell from the businesses we're in but I strongly suspect that Qatar has been the big growth story in the past couple of years.
Al Futtaim has brought some high-profile names to the Middle East. How do you find adapting these brands to the region?
Let's take M&S for a start, because we just opened a big flagship store in Festival City in March, which is 64,000 sq ft. It's the biggest M&S store in the world, outside the UK. If you are opening 64,000 sq ft you don't have to adapt that much; we tend to have big stores so the amount of adaptation is less, but it does exist.
It's a fashion business and fashion is global. What appears as fashion is in magazines worldwide, and it's inspired by Bollywood as much as Hollywood theses days. It's inspired by Rome as much as Paris, so you can find very similar things for sale all around the world. It's about how successful a brand is at being where the customer expects it to be.
But do tastes differ in the Middle East? The offering must be a bit different?
The things that can make a difference here are colour. We can sell richer, darker shades of colour in our garments than M&S does in its domestic market. We're dealing here with a different range of skin tones and pigments and different fashions and styles often suit different skin colours.
Culturally in the Middle East there are some garments that people would not feel happy wearing. Some of it is too transparent. We sell longer length skirts, and when we order a skirt we might ask M&S to provide it in longer lengths because of cultural demand and modesty.
Longer sleeves and these sorts of things do matter and can mean the difference between a purchase or not. Thankfully we edit, we do not adapt, because I think it would be very dangerous if we were trying to second guess what the public are going to want and what we at M&S should sell.
The M&S food range is popular in the UK. Will you be be introducing it to the Middle East?
We just can't do the food offering for a number of logistical reasons: All of our food comes from M&S in the UK, and M&S in the UK is not a specifically halal business so it is very difficult to do the M&S range of food. We are selling frozen food and we will sell an increased range of frozen foods in the new store. We are a niche food player, while M&S in the UK is a significant convenience food player that has grown its market share quite successfully in the last couple of years.
We're selling true M&S food so it's a limited offer and people are always disappointed that we don't sell more, but we sell as much as we can and we would like to sell more one day. One thing we're doing new at the Festival City store is we are bringing over the M&S bakery concept, so we'll be selling M&S muffins and scones - all fresh and to their existing recipes from the UK, so that's an exciting new venture for us.
In terms of the rest of the mix, home items are a smaller percentage of contribution than in the UK. We don't tend to sell bedding items but we do sell home accessories and home adornment items. From the gift angle, this does very well at certain times of the year.
This [Festival City] store will feature the widest offering we've ever provided. This store is twice the size of anything else we've got in the region. It is similar size to a decent store in the UK as far as general merchandise is concerned because if you look at the size of a store in a big city in the UK you can take the food section away and what you would be left with is probably something quite similar to what we have here, which is very exciting.
How do you see Festival City developing?
Festival City is going to be one of the landmark, iconic centres that Dubai is developing, not only for us, but also for visitors. It is a unique resort environment which when finished is going to be a major attraction for local tourists. 30% of the gross leasable area is in food and beverage so it is going to be a meeting place as well as a shopping and working place. It is going to be a true community.
Is M&S targeted at all ethnic groups?
We serve all of the communities here, whether it's Ikea, Toys R Us, M&S or Ace Hardware, we are not pitched at expats. We are pitched at everyone and our customer base is truly right through the spectrum. I'm delighted with that and I think it would be dangerous if we were investing in a business that had narrow appeal. We seem to have a genuine appeal to everyone in this society.
What involvement does M&S in the UK have in terms of Al Futtaim's M&S stores in the region?
Our operation is a franchise, which means they are selling us products. They have minimum standards that we have to meet in our operation - we have to be ‘on brand'.
So as long as we are adhering to the brand guidelines and as long as we are only buying from them, then we have also got the rights to the name and it should be a genuine M&S experience.
I think the total turnover internationally last year was in excess of half a billion UK pounds so it's quite a sizeable business. They have to support us with products and they have to approve our plans for new stores. It's a relationship that's been very strong for nearly 10 years now.
How has M&S been received overall in the region?
The M&S brand has been a great success from day one. It has great brand equity in the Middle East. Even in the UK it used to enjoy significant patronage from people from the Middle East, such as Gulf Arabs in London.
When the brand came here, people were familiar with it, and it's been a great success. All the markets we're now in, Kuwait, Bahrain, Abu Dhabi, Dubai, Sharjah, Oman, Qatar, are doing very well even though the markets vary in size.