10 Problems with Dubai

1. Birds of a Feather. Many of the development companies in Dubai were managed by self-serving groups who were good at covering everyone’s back. As an example, some firms consisted primarily of Australians, and another all British. Their reaction to outside of the family managers was “it’s our tea party and you are not going to crash it.” In this regard, one would get a sense that the players knew they were building a house of cards and wanted to get as much as they could until the party was over.

2. How many times could you slice the same pie? Too many related development companies chased the same market with the same product.

3. Lack of Experience. There were not enough managers on the ground that had significant experience with multi-tenant retail development and even fewer with mixed-use property management experience. In their place were former academics, PHDs, engineers, graduates of the London School of Economics and more. But what was missing was conviction in knowing how to get things done.

4. Flawed Research. Market research was viewed as icing on the cake and not a reality check. People who did the research were well educated but had spent little time in doing real research on the performance of actual operating properties.

5. Wrong starting point. Market researchers bought the notion of 35,000,000 annual visitors to Dubai by 2012 and most projections flowed from that initial flawed estimation.

6. Lack of real people. Many new developments failed because the required density of buyers, tenants, shoppers and guest could not be generated fast enough to support the enormous infrastructure costs of highways, bridges, monorail system, airports, water and sewer and more.

7. Alice sighed wearily. `I think you might do something better with the time,’ she said, `than waste it in asking riddles that have no answers.’ Timetables for new developments and justification for projects were unrealistic and when questioned about the underlying reasoning I would often be told, “Everything is possible in Dubai”.

8. Lack of Transparency. Information and communication regarding all aspects of a project were often hidden within their own development teams. There was little transparency in top to bottom directives. In brief, there were too many levels of management and when asked the hard questions one would often be told a lie and the other would swear to it. In this example, almost every project in Dubai was going to be bigger, grander, and more creative than the next. A decision maker would communicate a vision of the world’s tallest building, the world’s largest mall, and so on. An architect would then translate the vision into wonderful computer generated images of the vision which would become the plan. Yet, there was limited central planning that was charged to connect all of the individual projects. As a result simple issues of capacity, parking, sidewalks, crosswalks, and more were thrown to the side.

9. Multi-brand tenants. Through licensing agreements, joint ventures, partnerships and franchises, single entities operated numerous storefronts with different brands. In some cases the full product line and the brand experience was appropriately transferred to a Dubai mall, but more often than not, one could see significant differences between company owned and operated shops as opposed to the Dubai presentations. As an example, Kitson in Wafi Mall just does not compare to the full experience on Robertson Street in LA.

10. Master Plans. Most projects in Dubai were driven with a vision communicated by excellent illustrations, models, and elaborate brochures but there was limited master planning of the entire city/state. As a result, the edges of projects, the zones between projects, and connection with adjacent properties were just short of horrible.

Now that I have vented, there is a lot of hope for Dubai. Hope that the vision is filtered and modified to allow it to grow at a sustainable rate. There is a hope that thecity/state regains its momentum and that new leadership finds its way to the top of the best development firms.

I believe Legoland sees an opportunity in the recession because consumers are looking for free or affordable cost entertainment in their malls. This trend also corresponds to a consumer who expects their news to be free on the web. Consequently, we see malls across the globe add entertainment and amusement venues to draw consumers who have relegated shopping to obligatory time, which is something close to work. These consumers are bored with the same stores in every mall and with higher gas prices, lost home values and depressed 401K accounts they do not have the funds for a shopping spree.

Yet, Legoland charges on with a strategy to open in Grapevine Mills mall in Dallas, TX and are they are looking for a location near the Georgia Aquarium in Atlanta. Additionally, the city of Dallas will give Merlin Entertainment, the operator of Legoland, a $1 million TIF (Tax Incremental Financing) incentive package to open in the mall. The facility is projected to open in March 2011 in 40,000 square feet.

Glenn Earlam, a managing director with Merlin, said in a statement that “the inclusion of a quality leisure attraction like the Legoland Discovery Centre will . . . deliver significant incremental business to both the mall, to the Dallas-Fort Worth Metroplex and the greater region as a whole.”

Likewise, Disney earlier this month announced that they are turning 340 of their Disney Stores into “entertainment hubs” and renaming them Imagination Park with the help of Apple’s Steve Jobs. The goal is to make children clamor to visit the stores and stay longer, perhaps bolstering sales as a result. Over the next five years, analysts estimate that Disney will spend about $1 million a store to redecorate, reorganize and install interactive technology. Some Disney board members fretted though that the concept was so lavish that parents would try to use the stores as day care centers. Others worried that people would come for the entertainment but not buy anything. Disney is pitting landlords against each other to try and get the best deals in top-tier locations.

The Middle East seems to be leading the trend with the biggest entertainment venues as attractions in malls. Examples include the 15,000 square foot Wahooo! Waterpark which just opened in Bahrain City Centre mall, and the now infamous Ski Dubai at the Mall of Emirates.

Ski Dubai located in Mall of EmiratesBut will these large financial investments hold up in the long-run? Or are they a 21st Century repeat of the previously failed versions of entertainment in malls, such as Warner Brothers, Gameworks, FAO Schwarz and Niketown? The 1990s saw the end of roller rinks in malls and affordable home video game systems killed the mall arcade.

With all the focus on entertainment will the new shops fail like many others in the past, especially when Target and Wal-Mart offer the lowest priced toys in a warehouse envirnoment?

Disney claims sales at its original stores, which opened in 1987 and sold to Children’s Place in 2004, plummeted because they oversaturated the market. However, many analysts believe that the stores’ visitation was high due to the entertainment but not enough people bought to sustain the rents and overhead.

I remember stopping in The Disney Store on every mall visit but only purchasing merchandise a handful of times. Is my experience the norm or a rarity?

Additionally, FAO Schwartz which was a New York destination failed when it tried to bring their concept to malls proving that high entertainment value does not always translate into high sales figures. So I ask the question, are these high investment entertainment venues going to last or are they a trend that will be a lecture in business school ten years from now?

Versace
Recently announced it was closing all thirty (30) of its stores in Japan.

New World
A new world is likely to emerge in which designers rebel against long lead times and where they take their collections directly to the consumer through their own boutiques, trunk shows, and over the web.

Web Sales
Web sales are projected to reach $156 billion in 2009, representing 6% of the total U.S. retail pie

The Web Fashion Consumer
Consumers have come to expect new merchandise more frequently, thanks to the web and fast fashion retailers such as H & M. Many cannot understand why they have to wait 6 months to see the fashions seen on the runways. Buyers at department stores generally base their orders on the past, while fashion editors gravitate to the most photogenic and future looking styles, leaving the consumer stuck in the middle. This results in one facet of the fashion industry looking forward and the other looking backwards. The consequence: a consumer on one hand is told what to buy but on the other, not where to buy it.

In response, a new generation of fashion retailers is emerging on the web where news is freely given and fashion is sold. Net-a-porter with average sales of $820.00 per transaction and customers from 170 countries is one example of this new generation of merchants. The company has successfully merged its web retail site with a fashion news site catering to a new consumer who wants credible news over magazine advertisements and the most up to date fashion now.

Entertainment
Families spent 5.1% more on entertainment in 2008 than in 2009, something that has surprised many economists. As consumers tightened their pocket books and wallets one would expect entertainment to be one of the first categories to see significant decreases. But the 5.1% increase in spending equated to 16.5 billion more dollars spent in the category over 2007.

Household debt
The American family is trying to put money into savings and reduce their overall debt, but they are clearly not faring as well as one might expect in this recession. Household debt now amounts to about 125% of after tax income.

High Net Worth Individuals
Luxury retailers are faced with a significant decline in Americans with a high net worth defined as having $1,000,000 of assets available for investment. In 2008 the assets of these individuals dropped by as much as 22%. The result is a major decrease in sales at retailers such as Neiman Marcus where sales have decreased by over 20% in 2009 over 2008.

I think we all have memories of a parent scolding us and stating “why did you do get a D”. As independence seeking teenagers, our responses were generally defensive and short “I studied!” Imagine if our parents had changed a few words and asked “how did this happen”. Perhaps we would have retold the events causing us to not fully understand the material while simultaneously fostering more understanding between ourselves and our parents.

By simply asking what consumers like and why, we are only receiving a small glimpse of the story and possible creating a disconnect, just as our parents only saw one side of the situation. Projects and clients often require us to gather vast amount of information in a short time frame, making the collection of grocery sales based on household income and ZIP code necessary, but far too often we stop there instead of using this knowledge to dig deeper. While this information provides a great deal of information and a starting point it merely tells us what consumers are buying, not why. Discovering the how and why allows us to truly know our customers.

By asking why or what framed questions, people tend to give answers they believe the questioner/interviewer wants. Therefore, we tend to receive answers that sound logical and are even what we expected. This is why polls and surveys have too many variables. With the social media world providing a quick turn about on a large sample size, the holes in polls and surveys are being illuminated as questioners are finding that the time of day the survey is offered drastically changes the results.

So how does market research evolve? As an anthropologist, I am biased towards the anthropological method and therefore suggest we take a lesson from Claude Levi-Strauss and move beyond studying the mere content provided by polls, surveys and classic quantitative demographics to analyzing the structure – or connections accomplished through examining the sub-cultures of our consumers and engaging with them on a deeper level. With the economic meltdown, I believe we are seeing a drastic shift in consumer spending. Brands have to compete more for their consumers. Investing in more in-depth ethnographic research will enable them to build a stronger bond with their customers. For instance, in the wake of many luxury retailers closing shop in Japan I ask is Japan loosing prestige as a luxury retail destination or are the retailers not connecting with a changing mindset of its Japanese clientele. I argue that these luxury retailers are becoming too elusive and exclusive and the up and coming generation connects more and has more loyalty to brands they can relate to through events such as Tokyo Girls Collection.

A model waves to a fan during the Tokyo Girls Collection fashion show

In short, opposition to Thor’s plan have been centered around the firm’s plan for as many as a 1,000 hotel rooms and 500,000 square feet of retail space including some big boxes. Alternative suggestions for Coney Island range from “three or four wind in your face rides” to an “eye-popping” attraction akin to the London Eye – not bad suggestions but clearly the product of observers that lack a real sense of the historic Coney Island, let alone what is requires to make the redevelopment an economic success.

To be sure, Coney Island will obviously have rides and a dramatic center piece, but size and the newest form of exhilaration hardly made Coney Island special in the first place, nor will they return Coney Island to its glory. It is clear that the current alternative visions to Thor’s plans retreat to a gimmicky skyline of twist-and-spin steel thrill rides, favored by a small percentage of the market. What is missing is the essence of the place where one is immersed into a world unlike any other amusement park, be it Disney or Six Flags.

That said, come next spring Andrew Lloyd Webber will present his vision of Coney Island, circa 1907 with Love Never Dies, the sequel to Phantom of the Opera. Let’s hope that Lloyd Weber’s vision changes the discourse to a more intimate Coney Island where one’s imagination is illuminated at a more intimate scale rather than a pile of twisting metal that looks like the junk yard from Cats.

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