INTERVIEW: Alandalus CEO sees no e-commerce threat to evolving malls in Saudi Arabia

INTERVIEW: Alandalus CEO sees no e-commerce threat to evolving malls in Saudi Arabia
Illustration by Luis Grañena
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Updated 07 March 2020

INTERVIEW: Alandalus CEO sees no e-commerce threat to evolving malls in Saudi Arabia

INTERVIEW: Alandalus CEO sees no e-commerce threat to evolving malls in Saudi Arabia
  • Hathal Al-Utaibi, Alandalus Property CEO, says he is a committed advocate of the view that physical shopping centers can be the dynamo of growth in the sector

DUBAI:  Top of the agenda at a recent gathering of the Retail Leaders Circle, in Riyadh, was one issue: How to take advantage of the booming prospects offered by e-commerce in Saudi Arabia’s consumer industries.

According to one industry estimate, non-store retailing — goods and services bought by shoppers online — will grow by 93 percent in the five years to 2023. That could be presented as a huge opportunity for retailers to expand sales in a new market of consumers that rarely sets foot inside a mall.

Hathal Al-Utaibi sees it differently. As chief executive of the Alandalus chain of malls, he is a committed advocate of the view that physical shopping centers can be the dynamo of growth in the sector — as long as the operators take advantage of the huge transformation under way in the Kingdom’s leisure, entertainment and cultural sectors.

“Now is the right time to differentiate yourself. It is not about the quantity you are offering any more, but the quality. We are shifting our malls away from being a platform for retailing brands and becoming instead a destination with a high level of engagement with the public. It is not just about retailers, it is about engagement,” he told Arab News.

Engagement will take a number of forms: Designing space for maximum appeal, co-ordinating mall openings and operating hours, orchestrating the tenant mix inside the properties with the catchment areas in which they operate, and matching the product offering to the spending power and taste of the local community, for example.




Yarmouk Center, developed by Alandalus Property on rented land on Dammam road, Riyadh city, has a high occupancy rate reaching as high as 91 percent in 2018. (Courtesy Alandalus.com)

“If you do these calculations right, you will mitigate the risk that you face as a destination creator from the emerging e-commerce and other challenges. The idea is shifting from being a platform for retailers to being a creator of multiple ‘third places’,” he said.

The concept of the “third place” is gaining ground in the Saudi retail scene. The idea is to create an attractive proposition outside the first two places — home and work — that consumers experience in their daily lives.

Al-Utaibi sees the malls as a place for shopping, of course, but also as centers for day care, fitness and yoga studios, food and beverage and cinema, and even government services outlets.

He is not just acting on a hunch, even though his intuitions about the retail industry reflect many years of experience at Alandalus and before that at the food group Almarai. The company commissioned a study of the Saudi Arabian retail and malls sector by international consulting firm AT Kearney to develop a corporate strategy, which Al-Utaibi is now in the process of implementing.

Traditionally mall operators believed that if you got the right mix of tenant retailers, the customers would naturally follow. In the new dynamic of the retail business, with more sophisticated shoppers who have a greater degree of choice than ever before, that is simply not enough.

“Now it is about multiple benefits and offerings for the shoppers. For example, if you have a Mothercare store, you do not have to put another children’s store next to it. You can put a well-designed and modern day-care center there,” said Al-Utaibi.

As a mall owner and operator, Alandalus has a different set of priorities to the big retail brands. “I’m not a retailer. I’m a landlord. E-commerce is competing with me to offer retailers solutions,  to open an e-commerce arm rather than open a store in my malls. That is the risk for me — it will replace me as a distribution channel. To mitigate that risk, I need to differentiate myself.

“E-commerce is building their business model on efficiency and price sensitivity. I am building my model on experience and having a good time and engagement. For me it is not about e-commerce versus bricks and mortar. It is about how to engage online and on social media with experiences,” Al-Utaibi said.

“Our shoppers will not come just to buy stuff. They will come to have a good time,” he added.


BIO

BORN: Al-Dawadmi, Riyadh Province, 1977

EDUCATION

  • BSc in marketing, King Fahd University of Petroleum and Minerals, Dhahran
  • Postgraduate Diploma in Marketing, University of Leicester, UK
  • MBA King Saud University, Riyadh

CAREER

  • Marketing executive, Alwatania, KSA
  • Personal banking officer, Bank AlJazira, KSA
  • Brand manager Almarai, KSA and Gulf
  • Chief executive officer, Alandalus

Alandalus operates seven malls in the Kingdom, ranging from what it calls “super regional” malls in Jeddah and Riyadh — more than 80,000 square meters in size — to a smaller “regional” mall in Dammam and four “community” malls in those cities. It also has business in hospitality and healthcare attached to the original Alandalus mall in Jeddah and interests in real estate investment trusts (Reits), as well as commercial property interests. In 2015, it became the first mall operator to list on Riyadh’s Tadawul exchange. 




Telal Center, developed by Alandalus Property on a leasehold land in Almalqa district in Riyadh, is located on Anas bin Malek Road, in the northern part of Riyadh City. (Courtesy Alandalus.com)

The listing was well timed to catch the wave of transformation of the Kingdom’s economic, social and cultural life under the Vision 2030 strategy to diversify the economy away from oil dependency. Many of the measures introduced — such as allowing women to drive and loosening restrictions on public entertainment — talk directly to the “engagement” strategy of Alandalus.

“Globally e-commerce does not represent a big portion of the entire retail business at the moment. The issue for retailers is that they are not evolving and updating their offer to match the lifestyle of current shoppers and the millennial generation. These people have higher standards. They do not want to go and shop in a department store. They want to shop in a unique store that will differentiate them from others.

“The current problem for retailers is not just e-commerce, it is that they have become disconnected from what the current generation of shoppers wants and needs. As a landlord, I’m trying to attract retailers who understand you have to have an offer that will appeal to the current generation,” he said.

One of the things this generation wants is the cinema experience. “Cinema is one of the high engagement aspects, and that’s why we want it in our properties,” he said.

There will be an Empire cinema in Alandalus mall in Jeddah from the second quarter this year, as well as a planned AMC film venue in the Dareen Mall in Dammam later on. 

Al-Utaibi is also in negotiations with several operators, including the Vox Cinema chain, to open in the Hayat Mall in Riyadh. 

“We have received a number of offers and are currently running our competitive analysis,” he said.




Al-Marwah Center, located on Prince Majed Road in Marwah District, Jeddah, occupies an area of 17,030 square meters. (Courtesy Alandalus.com)

The Kingdom’s retail sector suffered for a number of years after the oil price began to fall in 2014, which affected government spending and salary levels in the public sector. At the same time, the withdrawal and reduction of certain government subsidies affected consumers’ spending capacity. Al-Utaibi believes the climate has improved recently.

“Customers and shoppers are willing to spend. However, they demand the right quality and services. They are being more selective and insisting on quality. We did not notice any significant drop in footfall, and we have detected an upturn in recent quarters,” he said.

Alandalus has just published financial results for the 2019 financial year, showing a 7 percent rise in revenues to SR176 million ($47 million) and a 12.6 percent jump in operating profit to SR104 million, boosted by revenue from the Al-Salama officer tower in Jeddah as well as the West Jeddah hospital, a joint venture with the Dr Sulaiman Al-Habib Medical Group, which just pulled off a multi-billion riyal listing on the Tadawul.

Al-Utaibi said that the experience of Alandalus on the Saudi stock market had been a good one, leading to an improvement in governance and financial efficiency. A possible further capital-raising exercise was an option that was under consideration by the board. “All options are there,” Al-Utaibi said.

He admitted to one frustration in his daily work as CEO: The amount of time he spends dealing with the planning applications, utilities provision, licensing and other forms of bureaucracy inherent in property development and retail growth.

He expressed his hope that the recent cabinet changes in some business and investment positions would lead to an improvement in the bureaucratic process within the Kingdom. 

“Time matters in the retail industry, and we have to deal with a lot of ministries at the moment,” he added.


Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
Updated 15 min 41 sec ago

Saudi shoppers helping high-end sector rebound to new peaks

Saudi shoppers helping high-end sector rebound to new peaks
  • GCC retail giant aiming to double revenues in the Kingdom, become dominant player by 2022

DUBAI: The Gulf Cooperation Council (GCC) luxury retail sector has recovered to pre-pandemic levels, with high-end brands performing particularly well, as shoppers splash the cash they saved by not spending on entertainment or travel during the last year, according to one of the region’s biggest retailers.

Consultancy firm Bains & Company in April reported that the GCC luxury goods market declined 16.6 percent year on year to $7.4 billion in 2020, with Saudi Arabia down 8 percent and the tourist-dependent UAE declining 25 percent.

However, Michael Chalhoub, president of strategy, growth, innovation and investment and vice-president joint ventures at the Chalhoub Group, which has 559 stores across the GCC and manages brands such as Diro, Swarovski, Fendi and Louis Vuitton, told Arab News that the market has bounced back.

“I think the luxury market, and fashion in particular, has recovered in 2021, at levels even higher than in 2019,” he said.

“Local consumers are traveling less. And so, consumption has been repatriated. And we estimate that, in normal time, between one-third to 50 percent of the luxury consumption of GCC nationals happens abroad in London, Paris and Geneva. But now, because of the pandemic, they’ve had to stay, in particular in Saudi Arabia, where the borders were blocked for most of the first half of the year,” he added.

With gyms, restaurants, entertainment venues and travel off limits for a long period, Chalhoub said that shoppers now had more disposable income and were feeling free to spend their savings.

“I would say that average income has gone higher because of a lack of entertainment expenses. What people aren’t spending in restaurants and travel, they are probably spending it on taking care of themselves,” he said.

Michael Chalhoub

However, Chalhoub said that the rebound differed across retail segments. Very high-end luxury brands are performing much better than premium or affordable brands. Jewelry, fragrances and beauty brands are seeing strong growth, but he observed that makeup was still down, mainly due to consumers wearing masks and not leaving the house as often.

“With fashion, I think that we’re up by 5 to 7 percent in the region versus 2019, mainly with luxury fashion and even more so with high-end luxury,” he said, looking at the industry as a whole.

Many retailers have seen triple-digit growth in their online sales during 2020, and the Chalhoub Group accelerated its digitalization strategy in line with the wider industry. “If we were to compare 2021 numbers to 2019, we’re probably talking about 100 percent growth for the industry. And this is incredible. I think the numbers I had were plus 96 percent in the GCC as a whole and even 138 percent just in the UAE,” he said.

However, while online sales might be popular for grocery or food outlets, high-end fashion consumers still like to feel, touch and try on clothing before buying.

For this reason, Chalhoub said that the company expects a higher percentage of returns when it comes to online high-end fashion. “We’re inviting our customer to say try it on and then send it back if you need to,” he said.

With Saudi Arabia less dependent on international tourists for retail sales, the Kingdom largely avoided the slump in sales last year. Chalhoub Group has operated in the Kingdom since 1975, where it has six offices, 215 stores and about 3,600 employees.

It now controls 38 percent of the Saudi market, 48 percent of fashion and 55 percent of beauty, but it is aiming to become the largest player in the sector by the end of next year.

“We’ve made Saudi Arabia a main focus for ourselves; we want to make sure that we cater for the new Saudi customers as much as possible. We have a population there that is young and really enthusiastic about some of the transformation that is happening there,” Chalhoub said.

“We’re investing a lot into Saudi Arabia. The objective that we had set ourselves about six months ago was to double our revenues there in eighteen months. And that means investing more and catering to those customers spending more locally rather than internationally,” he added.

One of the ways the group is aiming to capture more of the Saudi market is by tapping into the Kingdom’s local fashion talent. In early July, the company launched Fashion Lab, a first-of-its-kind initiative in the Kingdom, offering local entrepreneurs the chance to win $15,000 in funding to help establish their fashion brands.

Successful participants will get to take part in a two-week “boot camp,” which will help them navigate through the different elements of developing their brand, including marketing, supply chain management, content creation and media exposure.

Looking forward, the Bain & Company report said: “With about 40 percent of the population aged under 25, Saudi Arabia will likely remain the biggest engine of growth for the regional luxury industry in coming years.”


Saudi Arabia sets new rules for fruit, vegetable imports

Saudi Arabia sets new rules for fruit, vegetable imports
Updated 28 min 11 sec ago

Saudi Arabia sets new rules for fruit, vegetable imports

Saudi Arabia sets new rules for fruit, vegetable imports
  • The ministry has launched a new system for vegetables and fruit imports to support local production

RIYADH: Saudi Arabia’s Ministry of Environment, Water, and Agriculture on Saturday called on fruit and vegetable suppliers to complete all formalities to obtain import licenses before the Aug. 9 deadline.

After Aug. 9, no unlicensed supplier will be allowed to import fruit and vegetables. Those interested can visit the following link to apply for a license: https://eservices.mewa.gov.sa/request/111111.

An import license will be valid for three to 10 years depending on the license category, the ministry said.

Saudi authorities have also issued health guidelines for imports like all shipments should be free of pesticide residues or within the limit allowed by the Kingdom’s laws. 

The ministry has launched a new system for vegetables and fruit imports to support local production, enforce quality control and ensure food security in the Kingdom.


Millions of Americans at risk of losing homes as virus cases spike

Millions of Americans at risk of losing homes as virus cases spike
Updated 34 min 27 sec ago

Millions of Americans at risk of losing homes as virus cases spike

Millions of Americans at risk of losing homes as virus cases spike
  • The wave of evictions would come as the fast-spreading delta variant has taken hold in the country and rental housing is in high demand in the hot real estate market

WASHINGTON: Millions of Americans could find themselves homeless starting Sunday when a nationwide ban on evictions expires, even as billions in government funds meant to help them go untapped.

The wave of evictions would come as the fast-spreading delta variant has taken hold in the country and rental housing is in high demand in the hot real estate market.

US President Joe Biden on Thursday urged Congress to extend the 11-month-old eviction moratorium, after a recent Supreme Court ruling meant the White House could not extend the measure through September as intended.

Democratic leaders in Congress were pushing for an extension, but it was unclear if they had the votes, even among moderates in their own party, to prevent the ban from expiring.

Efforts stalled on Friday in the House after a move to pass the extension was unsuccessful, with House Speaker Nancy Pelosi saying in a statement, that “not a single Republican would support this measure.”

The day before, she had called the extension “a moral imperative.”

She also called on governors and local officials “to take whatever steps are necessary to distribute the rental assistance that Congress already allocated.”

Unlike other pandemic-related aid that was distributed from Washington, such as stimulus checks, it was states, counties and cities that were responsible for building programs from the ground up to dole out assistance earmarked for renters.

The Treasury Department said that as of June, only $3 billion in aid had reached households out of the $25 billion sent to states and localities in early February, less than three weeks after Biden took office.

The Centers for Disease Control and Prevention (CDC) ordered the eviction moratorium in September 2020, as the world’s largest economy lost over 20 million jobs amid the pandemic shutdowns. The CDC feared increasing homelessness would boost coronavirus infections.

Although more than half of those lost jobs were recovered as businesses were able to reopen, many families still have not caught up on missed rent payments.

The Census Bureau’s latest Household Pulse survey through the first week of July showed that of 51 million renters surveyed, 7.4 million were behind on their rent and nearly half of those said they were at risk of being evicted in the next two months.


Gulf stocks buoyed by oil prices as emerging markets hammered on China

Gulf stocks buoyed by oil prices as emerging markets hammered on China
Updated 31 July 2021

Gulf stocks buoyed by oil prices as emerging markets hammered on China

Gulf stocks buoyed by oil prices as emerging markets hammered on China
  • Tadawul All Share Index rose 7.5 percent in July
  • MSCI Emerging Market Index dropped 7 percent in the month

RIYADH: Gulf stocks were a relative oasis for emerging market investors this week as the broader complex posted its worst month since March 2020 amid concern over the breadth of a Chinese regulatory crackdown.

The Tadawul All Share Index climbed 0.7 percent on July 29 to end the week 1.9 percent higher for a 7.5 percent monthly gain. The Abu Dhabi Securities Market General Index climbed 1 percent on Thursday, taking it to a record high on the back of a 2 percent advance for First Abu Dhabi Bank.

By contrast, the MSCI Emerging Market Index dropped 1.4 percent on Friday, for a 7 percent monthly loss, the most since the fallout from the pandemic hit global markets early last year. Stocks in mainland China and Hong Kong fell to their lowest this year, on investor worries over government regulations dented the education, property and tech sectors.

Brent crude climbed 2.5 percent in the week after a rollercoaster month that saw it swoon from a two-year high of $77.16 on July 5 to $68.62 on July 19 before recovering to end the month at $76.33.

Concerns over the effect a resurgence in coronavirus cases might have on demand for crude were allayed on Wednesday when a report showed a bigger-than-expected drawdown of crude stockpiles the previous week.

“The reduced stockpile has propped crude prices up which gave a boost to the region’s stock markets,” Daniel Takieddine, senior market analyst at FXPrimus, told Reuters.

The Tadawul’s IPO pipeline will advance this month after Saudi burger chain Burgerizzr said it will begin offering shares to the public on Aug. 15 with the intention to list on the parallel stock market Nomu in September.

The company plans to offer 725,000 shares, representing 29 percent of its SR25 million capital, it said in its prospectus on Thursday.

Further signs of the Kingdom’s ambitious investment program were revealed this week as
The Ministry of Communications and Information Technology announced a $15 billion technology fund to advance digital infrastructure in the Kingdom during the Saudi 4th Industrial Revolution conference held in Riyadh this week.

The public-private partnership will develop advanced technology from the Fourth Industrial Revolution (4IR), which is expected to generate around $1 trillion for the Saudi economy in new revenue streams, a senior Saudi official said on Wednesday.

The Kingdom will enjoy economic boosts from robotics, artificial intelligence, and wireless production models as it pushes for more smarter cities and infrastructure.


Gulf capitals dominate world’s fastest 5G cities in 2021

Gulf capitals dominate world’s fastest 5G cities in 2021
Updated 3 min 7 sec ago

Gulf capitals dominate world’s fastest 5G cities in 2021

Gulf capitals dominate world’s fastest 5G cities in 2021
  • Oslo has the fastest media 5G download speed globally
  • Riyadh has the sixth fastest 5G speed in the world

RIYADH: Capital cities in the Gulf made up five of the top 10 fastest globally for 5G connectivity in the first half of 2021, according to a new report.

Oslo had the fastest commercially available 5G speeds with a median download speed of 526.74 megabits per second (Mbps), while Seoul was second at 467.84 Mbps, internet metrics provider Ookla said in a report.

Abu Dhabi was the fastest Gulf capital and the third globally at 421.26 Mbps, followed by Doha at 413.40 Mbps. Riyadh was the sixth fastest globally at 384.66 Mbps, Kuwait City was seventh and Muscat eighth. Manama was 15th with a speed of 249.71 Mbps.

The slowest global capital for 5G speeds was Capetown at 53.33 Mbps. Other notable capitals include London at 167.50 Mbps, Tokyo at 167.02 Mbps and Jerusalem at 145.17 Mbps.

A report from Ookla in April showed Saudi Arabia had the highest adoption of 5G in the Gulf as measured by the ratio of samples from devices connected to 5G to the number of samples from all 5G-capable devices, which the firm said is an indicator of the maturity of a country’s 5G market.

Qatar came second, followed by the UAE. Oman, which only launched 5G early this year, was at the bottom of the list.

In June, the Kingdom’s Communications and Information Technology Commission (CITC) said the coverage of 5G services in the Kingdom has increased during the first quarter of 2021.

The commission said 5G services have been extended to 53 governorates of the Kingdom as compared to 51 in the fourth quarter of 2020.

In its Q1 Meqyas report, the commission said STC and Zain topped the list of broadband services in the Kingdom.

The two companies have deployed 5G services in 43 governorates, while Mobily’s 5G services are available in only 21 governorates. Meqyas, an initiative of the CITC, compares the speeds of service providers in the Kingdom for download, upload, and 5G, ranking the best performing operators in each region and covering the most commonly used applications and video games.