Tourism and Retail: Will the Priorities of Tourists Shift from Shopping in

Dubai?

A couple of questions have challenged me for the past couple of years – what is the
sustainability of the tourism driven retail boom? And how does one factor the influence
of tourism while developing retail strategy? Not ordinary ‘tourism,’ where contribution of
tourist purchases is a small percentage of domestic retail business, but the Dubai scale of
tourism, where a city of just over 1.2 million inhabitants attracts over 6 million tourists,
and where shopping by tourists is a significant proportion of total retail sales of most
retailers. This question assumed greater importance for me over the past few weeks based
upon three incidents. One, I chanced upon the Dubai Municipality map of the major city
projects (http://www.gis.gov.ae), and realized that the physical area of the city will nearly
triple over the next ten years whereas Dubai’s resident population to expected to double
over the next five years. Two, the launch of ‘Bawadi,’ the Las Vegas clone (minus the
gambling) in Dubai contiguous with Dubailand, which will, by adding 28,000 hotel
rooms, double the supply of hotel rooms in Dubai in a short 15 kilometer strip, to cater to
the 10-12 million expected tourists beyond 2010. Three, an understanding of the
Dubailand project, gleaned from news reports, which purports to be the largest leisure
and entertainment destination ever created.

In this article I attempt to understand the influence of tourism on different aspects of the
retail business. Table 1 captures the evolution of Dubai and its impact on retail. In
retrospect the Dubai Government has had a major role to play in the growth of Dubai -
first in the form of specific initiatives to first signal change, and usually followed by
appropriate legal changes to stabilize the growth trajectory. The Diera City Center and
Burjuman triggered the conversion of the re-export wholesale industry into retail. The
increase of the tourist inflow was driven by the Dubai Shopping Festival (later by the
Dubai Summer Surprises) which led to the brand oriented retail boom. The creation of
free zone service industry clusters (Internet, Media, Finance, Commodity, etc.) drove the
spread of the city and in the increase in resident population of higher income knowledge
workers, continually fueling the retail boom. The expatriate ownership of real estate and
the social and demographic change amongst UAE nationals (educated, employed, and
living in nuclear families) has also driven the spread of the city, reflected in emergence of
new residential areas and the dispersion of malls away from the city center. The malls
that have come until 2005, and those are currently under implementation, are designed
primarily for shopping with a relatively small (increased space in the newer malls)
portion of their space allocated to leisure and entertainment (e.g. the indoor ski slope, the
largest indoor aquarium in the world, the geographic architecture, nature and type of food
outlets, etc.).

This is going to change going forward. The new destinations, Dubailand and Bawardi,
will be designed primarily for leisure and entertainment. Shopping will be an adjunct.
Are these two projects going to trigger the next transformation of retail business in
Dubai? Will these developments change the type of tourists visiting the city? And what,
if any, will be the impact of tourist expenditure on retail business?
Table 1 Evolution of Dubai
Nature of retail
Year Govt. initiative Legal changes Business response
business
Trading hub –
Jebel Ali Free
Until 1995 The port Re-export retail is primarily
Zone
re-export
Dubai Shopping Festival and
Dubai Summer Surprises,
Re-export declines Brand driven retail
Worldwide marketing of Airport Free
1995-2000 and malls drive based upon the
Dubai (Golf, Tennis, etc.), Zone
retail tourist
Numerous Emirates Airline
initiatives etc.
100 %
Dubai Internet City, Dubai
business The geographic
Media City, Dubai Marina,
ownership at spread of the city Brand driven retail
Burj Al Arab, and the real
2001-2005 many locations and increase in now includes the
estate developments that
and expatriate number of malls to domestic residents
followed including the iconic
real estate nearly 45
Palm developments.
ownership
Huge private
The commodity and stock investments in
2006 - exchanges, the leisure mixed use
Same as above ?
beyond developments and the residential, leisure,
geographic spread of the city entertainment and
retail developments

Role of shopping as a motivation for selecting a tourist destination

Shopping is integral constituent of tourist behavior the world over. Sometimes it is

culturally influenced as in the case of the Japanese (see inset).
We sense shopping as an important activity
for tourists who travel to Dubai. For resident The customs of senbetsu-omiyage, and kinen
influence the shopping behavior of Japanese
consumers of a region of the world, where shopping abroad. When a Japanese traveler is
temperature extremes have created the need going to travel abroad, he/she is given a farewell
for large American style malls, going to a party, where members of the family along with
mall for shopping or browsing is a good close friends and colleagues give money as
presents (senbetsu) and wish him/her a pleasant
‘substitute’ for leisure or entertaining vacation. The tourist is obliged to reciprocate this
‘outdoor’ activities. The mall developments by buying return gifts presents overseas of
are a manifestation of this. But is quality of approximately similar value. This custom is
shopping in Dubai an important consumer known as omiyage. Furthermore, Japanese
motive in selecting Dubai as a destination to travelers also like to purchase souvenirs (kinen) to
commemorate their visit to tourist destinations.
travel to? Cross border tourism is
predominantly driven by four motives – easy accessibility to products and brands not
available in the home country, price arbitrage or difference in prices that makes the trip
pay for itself (implicit tangible value of travel), the leisure, entertainment or cultural
experiences, or socializing. Tourists from different parts of the world prioritize these
motives differently. This is reflected in the difference in the positioning of Dubai as a
destination. In the UK or Europe, Dubai is marketed in as a leisure destination with sun,
sea, and unique cultural experience. In the immediate GCC region it is a place for family
vacation in an Arab cultural milieu. For South Asia (and other countries with high import
duties) it is a shopping destination.

The importance of shopping has been researched as a potential influencing factor when
consumers are making holiday choice destinations, and shopping has not usually emerged
as an important criteria in destination choice. On the other hand when tourists are asked
about their activities while on holiday, it is not unusual to find over 55 to 65 % tourists
engage in some type of shopping or another.

Predicting tourist shopping behavior

So what should a retailer do to predict tourist shopping behavior? This is a challenge. Our
knowledge of tourists is limited to their country of origin. Little is known about their
expectations from the holiday, and actual behavior when at the destination, and much less
about what actually influences their preferences and behaviors while on vacation. But we
can safely say that tourist shopping behavior is different from normal day-to-day
shopping. One, vacation is a time when individuals are not working, and therefore not
juggling different priorities like work, family, and home, etc. The focus of the holiday
could be the family, relaxation, a relationship, or just an escape from routine. It is also a
time when the consumer is usually not thrifty. Vacations are usually ‘planned,’ either
formally or informally, with expenditure in mind. Tourists juggle the expenditure during
vacation in three broad categories – travel, board and lodging, and ‘holiday activities.’

The allocation of the ‘holiday activities’ expenditure occurs across a competing set of
activities (Table 2). The priority of tourist expenditure allocation is influenced by the
orientation of the tourist (Table 3) i.e. what is the tourist seeking from the vacation at a
destination? If a tourist is an active outdoor type then it can be expected that the
expenditure will be skewed towards activities like mountain climbing or camping or
fishing in the Gulf. Note that the best predictor of shopping is the urban entertainment
oriented shopper; a tourist who considers spending time in a city shopping area as
entertainment. Whereas the active outdoor oriented tourist stays away from city centers
and predictably spends less on shopping. Take a tourist family that comes and stays in
Table 3 Tourist orientation
Priority of activities /
Tourist orientation Tourist behavior Predictor of shopping
consumption
Escape from routine and
Leisure activities Services Low predictor
people oriented
Shopping as
Urban entertainment Shopping, food Very good
entertainment
Outdoor physical
Active outdoor Outdoor activities Lowest predictor
activities
Visiting museums, Souvenirs, artifacts,
History and culture heritage village, unique dhow cruise, desert Low predictor
cuisine safari
Move around with
Socialize with friends Food and entertainment Good predictor
friends
Different activities for
Rides, Ski slopes, theme
Relax with family different family Average predictor
parks, Wild Wadi
members
Table 2 Activities competing for the tourist budget

Shopping products
Handbags Bab Al Shams to experience the Arab way of life or at a
Designer clothing beach resort to escape from routine. This family is
Watches going to allocate a major part of the holiday budget to
Gold / Jewelry shopping the experience / leisure and may not be inclined to visit
Shoes
Crystal / China
shopping malls.
Home furnishings
Electronics Influence of the leisure and entertainment developments
Cultural products
Arabian artifacts Retail in Dubai has capitalized upon the preponderance
Carpets
of the urban entertainment oriented tourists. Even for
Services
Tours – Into the desert the other categories (e.g. relax with family (when
Tour bus family comes visiting), or socialize with friends or
lf-guided tour history and culture) the tourists have spent time in the
Visiting heritage sites shopping environment, and contributed to the retail
Leisure activities boom. The mall environments in Dubai provide an
Swim / spend time on a beach
Scuba diving environment that is stimulating and different from
Boating / water scoter ordinary shopping settings. Even when a tourists visit a
Parasailing large mall they are consuming the ‘place’ as a leisure
Golf activity. Shopping also occurs because of the settings,
Other sports choice of stores, attractive nature of stores, and overall
Health Spa
Sports event mall ambience.
Hiking and camping
Entertainment In the years ahead as large scale entertainment centric
Dinner dhow cruise options start functioning I believe that they will absorb
Fine dining an increased share of the ‘tourist activities’ budget
Casual dining
Major change – Dubailand / leaving a relatively smaller portion for shopping. Since
Bawardi the entertainment options are a few years away, the
concepts and pricing strategies unclear, it is difficult to
judge the ‘attractiveness’ of the entertainment options and their ‘perceived’ value. It is,
therefore, difficult to hazard a guess about the degree of impact of entertainment on
retailing. Impact it will, by how much, time will tell. Retailers need to gear up for
competition between entertainment and retail.

Retailers will also, over the next few years, need to take forward positions on retail space
in the entertainment developments. This requires a great degree of speculation; most of
the leisure and entertainment facilities are on the outskirts of the present Dubai, both the
developments and developers are new, and retail developments in mixed use projects
may often be secondary.

Conclusions

In the last decade the tourist inflow into Dubai has been driven by the shopping oriented
marketing. This is beginning to show signs of ‘fatigue.’ In the last six months, start of the
Mall of the Emirates has sent a clear signal that retail sales growth will start to slowly
plateau as customers get divided amongst malls. In the next decade of developments
planned for Dubai, the tourist offering is expected to change dramatically because of the
nearly US $ 25 billion of potential investment in entertainment oriented developments. Is
this the re-invention of Dubai for the next stage of its economic growth? It certainly will
be if the variety, positioning, and price of the entertainment offerings are correct. The
difference between a Disney development and the Dubai developments is that Disney is a
single owner who overseas development, product-mix, complementariness, pricing and
marketing. And even they struggled in Paris, Tokyo and are struggling in Hong Kong.
But it is clear that the tourist of the future will evaluate a cluster of attractions, of which
shopping will be just one. Retailers need to base their growth decisions in next few years
taking cognizance of this potential threat.
© Manoj Nakra 2006