IBD BLOG – TEAM MAJID AL FUTTAIM
Written by: Jorge Tellez, Ryan King, Jennifer Rokosa, Daniel Clayton and Kelly Gillfillan
Entry 1: May 17, 2018
The five of us (Jenny, Daniel, Kelly, Ryan, and Jorge) touched down in Dubai five days ago and were greeted by 105-degree heat and a 4-day long sandstorm. Dubai has a giant desert in its backyard, and if the wind is blowing strong enough in the right direction, the entire city gets hit with a wall of sand. From the street, a sandstorm just looks like a foggy day (not quite San Francisco level fogginess, but close), but if you run your fingers across any outdoor surface, you can immediately see the layer of sand blanketing everything.
The jetlag is finally starting to wear off for most of us. Dubai is 11 hours ahead of Berkeley, meaning we’ve been hitting the coffee pretty hard. However, starting today, we’ll be drinking those coffees in a large closet at Majid Al Futtaim’s (our host company) headquarters. Let me explain…
Today is the first day of Ramadan in the UAE, meaning most Muslims are fasting for the whole month. Between the hours of 4am and 7pm, it’s is not permitted (whether Muslim or not) to eat or drink in public, including in the office. So while we’re on-site, we’ve been instructed to keep any eating or drinking restricted to a small pantry area on the fourth floor—don’t worry, they have an espresso machine in there.
We head to the UAE cultural center later today where we’ll learn a little bit more about the history of the country, the traditional dress, food and customs. This weekend, we’re heading out to the desert on a guided tour, and then to Abu Dhabi to check out the sights there. Pictures to follow!
Entry 2: May 24, 2018
Somewhere between hanging out with two dozen penguins at the foot of an indoor ski slope and watching tourists scuba dive with sharks inside a three story aquarium, you realize the words “shopping mall” in Dubai mean something very different than they do back in the states.
For us, five millennial Americans dropped into the Middle East for the first time, the word “mall” evokes imagery of angsty loitering teens, sticky movie theater floors, and CDs with the parental advisory warning peeled halfway off (I don’t know about you, but that’s the only way my parents would let me listen to Eminem). Conversely, malls in Dubai have less to do with shopping and more to do with mind-blowing art installations, architecture, five-star restaurants and hotels, movie theaters where you’re served three-course meals, and did I mention, PENGUINS!
This is all to say that while malls in the US have been dead for nearly two decades (thanks, Bezos), they’re thriving here in Dubai. Why? A couple reasons:
- E-commerce hasn’t had nearly the same impact here as it has had in the states. Online sales penetration stands at just 2% of total retail sales in the Middle East and Africa, compared to over 10% worldwide.
- It hot. Really, really hot. Six months out of the year its too hot to go outside, so heavily airconditioned malls are absolutely the place to be.
- The folks at Majid Al Futtaim (our host company) and Emaar (their primary regional competitor) realized a long time ago that experiences would be the way forward for brick and mortar retail. Hence why malls here are built around incredible, experiential attractions.
That last point, which doesn’t really sink in until you’re watching a fountain show at the base of the tallest building in the world, left the five of us asking “How are we going to add value here when this company is so far ahead of mall operators in the US?”
Sitting in Silicon Valley, its sometimes easy to think the US is at the forefront of virtually every industry, but our ignorance was made abundantly clear with just one lap around the Mall of the Emirates. Our recommendation to Majid Al Futtaim was not going to be as simple as relaying what mall operators in the US are doing. Instead, we’d have to figure out how a company that is performing quite well can continue to innovate in the retail space, and how they can even better prepare to defend against e-commerce, which we’d be naïve to think Dubai is immune from.
More next time from Team Majid Al Futtaim!
Entry 3: May 31, 2018
We presented our final project today! The last week and a half was filled with almost a complete overhaul of our presentation, as we homed in on some key recommendations for the company and what we envision the mall of the future will look like. If you had asked me a month ago, my vision of the mall of the future would have been precisely the malls we saw on this trip, but there are some really interesting regional dynamics that lead us to believe a lot may change behind the scenes for malls in the Middle East.
A good example is everything happening in Saudi Arabia today, where the crown prince is loosening up a lot of restrictions, allowing women to drive for the first time and allowing movie theaters to reopen after a more than 30-year ban. Majid Al Futtaim, who manages Vox Cinemas, has plans to open 300+ screens in Saudi Arabia in the next year.
From the dozens of conversations we had with Majid Al Futtaim employees over the last three weeks (including the CEO), it seems absolutely key for malls to position themselves as “experience centers” going forward, as opposed to shopping-only centers. This means more movie theaters, gourmet restaurants, and leisure activities—like an indoor ski resort, for example, or a giant aquarium full of sharks! (Those last two already exist.)
We also believe that the relationship between mall operator and tenant (retail stores) will change in the coming years. We’ve seen a ton of direct-to-consumer brands realize that their e-commerce presence isn’t quite enough, and that they actually need a brick and mortar presence to round out an “omnichannel” offering (e.g. Warby Parker, Everlane, Casper, and dozens more). We think this will be one of the primary retail models going forward, meaning that there will be a host of online-only retailers looking to move into the brick and mortar space through pop-up shops and showroom-style stores.
Mall operators can take advantage of this trend by pioneering what we’re calling a “store-as-a-service” model, whereby the mall operator provides everything required to build and run a store, making it very easy for brands that do not have a physical retail presence to create one quickly. This would also have the benefit of attracting fresh, new retailers to the UAE by offering a de-risked and less capital-intensive entry to the country.
We’ve also been really impressed with Majid Al Futtaim’s commitment to sustainability. Most of their buildings and hotels are LEED gold or platinum certified, which is no small feat. Further, they have a goal to be “net positive” in carbon and water by 2040. Jenny absolutely nailed her piece of the presentation, which focused on how the company can make progress towards achieving that goal by partnering with clean building technologies (at Berkeley, for instance) and helping them through the commercialization phase, which is often known as the “valley of death” for cleantech given the number of companies that fail at that stage.
Our presentation was very well received, and we’re thrilled to hear they’re interested in many of our suggestions. We look forward to being in touch with the team in the future and we’re incredibly thankful for the opportunity to work with them all.
We went out on the town to celebrate the end of our project and this journey last night. We shared highlights over pizza and drinks and then packed up for the 15 hour flight I’m currently on now. I think we’re all excited to get back stateside and start our internships, but sad at the same time that this amazing journey has come to an end.
That’s it from us (Jenny, Dan, Kelly, Ryan and Jorge)! Thanks for reading!