The UAE might bring to an end the monopolies of the major family-owned corporations' in the country on the sale of foreign goods. While there has been no formal communication on the subject, we have begun to consider how modifications to the Commercial Agencies Law would affect the many stakeholders involved if they are released soon.

Retailers

When a large number of brands are handled by a single franchise operator, there is a risk that all of the brands in the portfolio may not receive the personalised treatment they require. As many of the staples aren't currently focused on a specific market segment, such as electronics, luxury fashion, or beauty, all of the brands in the portfolio may be treated equally, which isn't necessarily the best strategy.

The ability to influence how their brand is displayed and perceived by customers, thereby increasing total brand visibility, is likely the most significant benefit for retailers. They can better understand their consumers' needs and wants by connecting with them on a more basic level. They can observe how their brand is being received up close and personal, allowing them to pivot and modify their strategy as needed. The risk of diluting a brand's character is mitigated, if not removed altogether, by customising the treatment for each brand after careful consideration.

Landlords

Landlords in other parts of the world typically can influence the zoning of their mall's brands, resulting in the grouping of retailers with comparable products in dedicated sections or ‘zones’. Customers visiting the mall will have a sense of 'flow' as a result of this. However, in the Middle East, we tend to see a more dispersed mix of brands, regardless of the mall areas they're in.

Family businesses who are franchise operators generally have many brands under their umbrella, with interests spanning from food and beverage to fashion and electronics. Even if the products may not be related, we frequently see many of these companies located in the same cluster or zone in the mall's coveted prime retail areas - something we rarely see in other retail markets in Europe or Asia. Franchise operators that own brands but are also mall developers will likely have a stronger tenant mix and zoning because they have control over both the brands and the mall’s real estate.

Dealing directly with the brand principals might help landlords acquire more influence over the brand mix they select, and agree on their preferred location within the mall.

Customers

Customers who have been exposed to a different retail paradigm in other places throughout the world may note the differences here. If the law is changed and more brands choose to go independent, the model will likely become more aligned with retail markets worldwide, with the consumer experience and journey changing significantly.

Principal-operated stores are more immersive, allowing customers to build a bond with a brand. Retailers feel that by having greater autonomy and control, they would be able to successfully express the brand ethos to their customers and give a consistent and uniform experience across all markets.

Finally, consumers can expect a wider range of offerings that are in tune with global trends and tailored to the needs and wants of the local market.

Conclusion

This decoupling trend is already being seen in other parts of the world: in China, retailers have terminated their partnerships with local partners and acquired complete ownership and control of brands. Here in the UAE, Tesla, Apple and, most recently, New Balance, all have independent stores.

It's critical to assess the benefits and drawbacks of each option. On the bright side, the staples have reliable contacts, transactions, and market data, as well as a thorough understanding of cultural sensitivities and market nuances, which can be beneficial to brands that are new to a country or region. On the other hand, franchise operator families with several brands may agree on specific suitable terms from landlords relating to rent payments, fit-out costs, and capex, among others. We frequently see landlords agree to some of these demands because they want to keep their malls full and avoid losing numerous brands and tenants, but they may or may not pass these expenses on to retailers.

Another problem is that when only a few franchisors dominate most retail, it is difficult for brands to receive an unbiased view of the market. Third-party real estate advisors, on the other hand, may be able to tackle this by leveraging connections with their global teams, other landlords and brands.

Time will tell if brands will enter the market and operate independently or by partnering with a local. New market entry can be daunting, with considerations ranging from HR to back-office operations and even tuning in to the local culture, and brands may prefer that these duties remain with the local partners.