Published — Monday 31 December 2012
Last update 31 December 2012 12:19 am
The city of Jeddah has dozens of big and small malls. And many more are mushrooming. A striking feature of the malls is the presence of major international and local retailers with their new or established brands. There are many global brands like H&M, Danube Supermarket, Adolfo Dominguez, Burberry, Ferrari, Paris Gallery that can all be found under one roof, according to Mohammad I.B. Alawi, CEO, Red Sea Markets Company, which operates Jeddah's prestigious Red Sea Mall.
"The Red Sea Mall, which boasts a number of such global and local brands, also comprises of cafes and other high-end facilities that can accommodate hundreds of cars with an immensely big parking area and witness the organization of many sporting as well as social events and promotions, all taking place simultaneously," Alawi told Khalil Hanware of Arab News in an exclusive interview.
Following is the text of the interview:
Red Sea Mall is one of the largest in Saudi Arabia. Please give some information about this mall?
Red Sea Mall is a mixed use property, which is different from Jeddah shopping malls. It is a retail property with a five-star hotel and a high-end offices' tower. Internationally it is not easy to run a mixed use property because it has different users and different approach in their service, and to combine them together in one unit is a costly affair. In Saudi Arabia, there are only three mixed use properties — Kingdom Tower and Faisaliah Tower, both in Riyadh, and Red Sea Mall in Jeddah. This usually needs a lot of international experience in design and in the alignment between retail and other services.
In 2011, the mall was acknowledged with many prestigious awards locally, regionally and also globally. It received the Red Sea Mall 13 million visitors' award. Other accolades include the Award of Excellence in Tourism from the Tourism and Antiquities of Arabia for the best marketing experience in the Kingdom, the award for Excellence in Retailing at the level of Asia Asian retail trade body, the Gold Award for Best marketing Campaign to stimulate sales in the Middle East and North Africa, and the nomination of the International Council of Shopping Centers for the VIVA Golden Award at the level of shopping malls in the world.
Who are the shareholders of the Red Sea Mall?
In 2004, the shareholders agreed together to go into this investment. It is a long-term investment and not a short- or medium-term one. Because if you are building a shopping mall, the usual average return on your investment is seven years but when you do a good mixed use property you could get back your returns in 10 years. The shareholders conducted a feasibility study and they contracted an international design firm from South Africa and with local consultants together they developed the whole master plan of the project. The work on the Red Sea Mall project started in early 2005 and we opened the mall in March 2008. It is 110,000 GLA (gross leasable area), GBA 250,000 plus Elaf, a five-star hotel, with 180 rooms and tower with seven floors.
What is the occupancy rate? Is the mall fully occupied?
In 2008, when we opened the mall, there was a big challenge for us because of the global financial crisis. A lot of global and regional retailers, who committed to open stores, put on hold their expansion plans because they were not sure about the impact of the world financial crisis on Saudi Arabia. What we ended up doing is that we held one to one talks with retailers and succeeded in opening 75 percent of the mall in 2008. Since then, we are growing year after year and there is now 98 percent of occupancy in the mall.
The mall is a little bit away from the city. Does it affect its popularity?
Let us go with international practice. The Red Sea Mall is considered, according to the International Council of Shopping Centers (ICSC), a super regional mall because of its size. Super regional malls anywhere in the world never built inside a city.
Jeddah's growth is toward the north. We are in the growth corridor and actually the quality of the corridor is good. So in early stages when you do planning, you do it on the basis of population growth. This mall is for 30, 40, 50 years and I think this mall is on the right corridor of population growth. The mall is in the northern suburb of Jeddah and it became part of the city with the expansion of Jeddah toward the north. With the strong anchor we have, it is like a magnet. Last year about 13 million visitors visited the mall and this year we expect the number to reach 15 million.
Is the Red Sea food court popular among visitors?
It is true. We believe F&B (food and beverage) is an important component in mixed use property. Food Court is the place where visitors spend their time more. One of the dilemmas in shopping malls is to expand the average stay per visit. In the US, it (the average stay per visit) is 1.9 hours and in Dubai 2.6 hours. In this mall it is over 3.2 hours per visit. Shopping is one of the only social windows in this country where people sit, relax and enjoy their time. So food court is an important component of the mall. We are strong in the F&B concept in the country and we are expanding.
Are you planning similar malls in the rest of the cities in Saudi Arabia?
Our shareholders have lots of lands. Yes. We are studying plans but we have not taken any decision yet. You know building projects as big as Red Sea Mall are not easy. There are some restrictions also. To get financing for such big projects is also not easy. Ten years ago, if you had gone to the bank with such a project plan, you would have got financing, but now it is not easy. So building this size of project is not easy anymore. The Red Sea Mall project proved its name among the properties not only in Saudi Arabia but in the region. We have today a waiting list of retailers for 75,000 sq m space who want to be part of the mall. The waiting list is long, so if we want to build a new mall we can do that. At present the Red Sea Mall is the largest mall in Jeddah and with our future expansion we could be the largest mall in Saudi Arabia.
How do you gauge the performance of tenants?
From time to time, we are assessing and reassessing the performance of our tenants, and those with good names we retain and we don't renew the contracts of non-performing retailers, and we keep adding new international brands. New retail is dynamic, everyday there is a new retailer with a new brand with a new trend, some of them with proven record stay in the market while those who cannot sustain disappear. So this is our job. We have to follow up their performance all the time. We have implemented a contract sales report. We get quarterly sales report from our tenants to judge their performance. We put their reports in our data base and we evaluate their performance at the end of every year. If any tenant is not doing well then we say goodbye to them because it hurts our performance.
What was the total cost of building Red Sea Mall?
To build the mall, it cost the shareholders about SR 800 million without the land price. SEDCO Holding is the major shareholder and there are other Saudi businessmen involved in the Red Sea Mall project.
Do you maintain any customer profile, especially about their spending habit?
We do keep a customer profile during both high and low seasons. So we know sex-wise and income-wise, and we also know where they come from, which parts of Jeddah and which parts out of Jeddah. Last year, according to our study, families spent an average of SR 680 per visit. During high seasons like Ramadan and Eid Al-Fitr the average exceeds SR 900. We keep doing. We have a very dedicated team and international consultants who conduct a lot of market studies. We also get sales reports from tenants, their average transactions and value.
How do malls such as Red Sea Mall contribute to Saudi economy?
Our total sales of the projects are almost between SR 1.5 billion to SR 1.8 billion a year. By improving our tenant numbers every year, we are heading between SR 2 billion and SR 2.5 billion in the next two to three years. So it is a large chunk of money in the market. We are the only shopping mall in the country with a busy calendar of marketing events all through the year, not only sales promotion but also social and community activities. This year, we are going to close with 70 events. We have to engage ourselves with the community so that whatever they spend they also must get some returns. In health matters, we are a favorite of the Ministry of Health in Jeddah.
Divisions of the Ministry of Education, the Ministry of Youth, the Ministry of Interior, the Governorate of Makkah and Jeddah, and the Municipality of Jeddah hold their major events in the mall regularly.
What is the role of Red Sea Mall in CSR?
Three things we are doing in corporate social responsibility (CSR). First of all, one of our commitments is to the issue related to men and women in the society. There are certain times we keep the boys out because they tend to create problems. We are always focused on sorting out such problems. For the last 5 years, and especially in the last three years we have conducted a lot of programs to engage youths and make them come to the mall as is normal anywhere. Number two is charity. We do a lot of activities in charitable work sponsoring events every year, such as the Jeddah Marathon. Now we are demonstrating our responsibility by trying to engage female workers.
Today in our mall there are 60 stores run totally by women only. We think we will have 100 to 150 stores out of 400 stores by the end of 2014 run by Saudi females only. This is another responsibility of ours to the society. Women come, find jobs and are happy to earn their salaries and even spend some money in the mall or in the city. A lot of people are against this, and that is the challenge. But I think we are proving them wrong. Women are doing great. The kind of feedback we are getting from retailers is positive. I believe women are the best for retail jobs. They work with commitment. They have patience and they have their sacred touch. Now working women are a success story all over the country. Our company's commitment is to hire more women staff in customer service. By 2015, our huge customer service department will be handled entirely by women.
How many shops are there in the mall?
There are a total 450 stores in the mall plus we have 6 major anchors, the hotel and offices. We are working on expansion of the mall. We are studying to add 30,000 GLA. After the feasibility study we will obtain approval and then go ahead. There is a big demand. We have a 70,000 GLA waiting list. So we want to capitalize on this by expanding the mall.
Are Saudi males and females working in the mall?
Total employees in the mall are nearly 2,500, some 50 percent being Saudis. At least 300 female employees are working in the mall and the number is growing day by day.
You were elected for the vice presidency post for the Middle East Council of Shopping Centers in 2004 and you are also a member of the International Council of Shopping Centers. What role do these councils play in the Middle East and internationally?
The Middle East Council of Shopping Centers is affiliated to the International Council of Shopping Centers in New York. They have about 12 regional offices around the world where their job is to improve the shopping industry's ethics and practice. I am a member of the board since 2000 in Dubai. In 2004, I was elected as the third president. In 2007, I was the first from the GCC elected as the president of the Dubai office. We try to promote and educate, and do a lot of training programs in Dubai and elsewhere in the region. We do a lot of events and conferences, seminars to promote ethics and best practices in shopping malls according to the international standards.
If you travel in the region, you would see no big difference between this region and Europe. Moreover, the market here is open to all retailers around the world. If you go to a shopping mall in Italy, you would find 60 percent of the brands are Italian and maybe 40 percent from other parts of the world. But if you come to Saudi Arabia, or in Dubai or in Bahrain, you will see brands from all over the world from East to West.