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As a testament to what is possibly the fasting growing, global retail real estate phenomenon in recent years, Dubai has recently joined the evolution that is the Factory Outlet Centre. Factory Outlets or to give them their more easy to use moniker, FOCs have become very much a way of life in most of the more mature retail markets, with Europe currently having 142 operational (with another 34 planned to open in the next 18 months) throughout 25 countries.
However much like the mall development cycle being witnessed in Dubai and the Middle East, questions are starting to arise concerning the long term validity of the many new FOCs that are being launched throughout the UK and US. Consequently, analysts are quickly seeking to address issues such as how much is too much, and what are necessary comfort levels of market saturation? However, one of the market drivers for FOCs is the fact that the financial markets are happy with the continued performance of the FOC sector, as they tend not to conform to larger financial market fluctuations. As a result, throughout the recent economic downturn in the US, FOCs outperformed all other retail sectors, and appropriately they're becoming known as counter cyclical market performers.
The upshot now is that many multi-channel retailers consider the possibilities that are offered by FOCs as part of their long term growth strategy, as not only do they offer additional and profitable revenue streams, but they're also a means that keeps them on a level playing field with their competitors.
Regional perspective
From a more regional perspective however, the trends in the retail sector are typically dictated, or at least shaped by those that are developed elsewhere and so the issues that are facing markets heavily dominated by FOCs are certainly likely to impact the long term outlook for FOCs in the Middle East. Accordingly, the possibilities that exist for their continued development in these markets generally rely on the adoption of principles from where the concept has widespread success. Trends suggest that the more successful FOC markets are those that practice open market policies, which are buoyed by the availability of high disposable incomes. These combining factors suggest that the Middle Eastern markets offer excellent opportunities for the long term adoption of FOCs. However for their long term success, the Middle East will also need to adopt strategies that are prevalent elsewhere.
Global development practices for FOCs are proving that the union of developers and retailers working together to fully potentialise the development opportunities, is being championed as the best solution for new market entry. However, this union could well be a hurdle regionally as market dynamics often see developers, owners and operators emanating form very different areas of the same company. The implication is that for the development of a new stream of FOCs to happen regionally, the result will mean that companies will have to implement a successful cross-departmental skill-set to extract the revenue potential for the centre.
The opportunities for FOCs in the region would appear to offer mutual benefits for developer and shopper alike. Developers have the ability to maximise brand, product width and availability at low prices, directly to the customer. Consequently as regional consumer spending increases, the revenue income for developers and operators will be buoyed by increasing sales related revenue income.
- The writer is Head of GRMC Retail Services, Dubai
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