How is UAE’s renewed ties with Israel and Qatar impacting retail?

The region has witnessed a few massive breakthroughs in the last year. Apart from the announcement of the Covid-19 vaccines, it was the historic Abraham Accords and the lifting of the Qatar blockade that reinstalled a sense of optimism and hope for the business community. The markets that remained untapped for so many years are now open and the possibilities are beaming down at all the entities that were planning on expanding operations, setting up shop, collaborating, or just exchanging resources to better the community to enhance offerings.

Despite a half-century boycott of Israel among the Arab world, the Abraham Accords last September was seen as a positive move by most in the business community. The Abraham Funds set up at the back of the accords will mobilise more than $3 billion in private sector-led investment and development initiatives to promote regional economic cooperation and prosperity in the Middle East and beyond. This paves way for more people-focused investments, regional trade, and bolsters strategic infrastructure projects.

There are many more ups to the normalization of relations including Emirati investments in Israel’s thriving start-up ecosystem, Israeli travelers visiting the UAE for tourism and business purposes, and the Gulf proving to be a new market for Israeli talent. Now, how can all of this benefit the retail sector of the two countries? 

First, it’s important to understand the nature of retail in both countries. While the UAE and Gulf countries have legacy retailers with inspiring rags to riches stories where the empires were set up with the help of personal relations, mutual trust, and understanding, Israeli businesses are all about numbers and results. The Gulf population is religious and that reflects in the way of conducting business, and (many) Israelis are non-religious. However, they are all Middle Eastern with more similarities than differences in cultures, and the interesting contrasts, as well as similitudes, can go a long way in ensuring a prosperous business environment for years to come, according to Fleur Hassan-Nahoum, deputy mayor of Jerusalem.

“In the Gulf, business is about relationship and trust building. Israelis are much more transactional and bottom-line oriented. We’ve seen a gradual bridging of the cultural gap where both parties are getting to know each other’s style of business,” she said.

Some of the biggest retail conglomerates such as Castro and Fox are keeping an eye out and exploring potential opportunities. “Retail chains like Castro, which is like a cheaper Zara, or Fox, which is like a cheaper Gap, could work really well in the UAE. I am a fiscally conservative politician who believes in breaking monopolies and opening up distribution channels, so I would be thrilled to have retail outlets of Emirati or Gulf products in Israel,” she added.

However, another major market that the peace treaty has helped revive is the Kosher traveler’s market i.e. the Jewish travelers from not just Israel, but around the world. Currently, there are half a dozen kosher eateries in the UAE, which speaks to the openness for Israelis to travel and live in the country. However, this wouldn’t just attract Israeli Jews, but also Jews from all over the world, who would now consider the Gulf as a potential travel destination.

“At the moment there is a huge rush to get kosher products in the UAE and have kosher kitchens in different hotels. We are not just talking about the market of Israelis, but also American Jews and diaspora Jews, many of whom come in hundreds of thousands every year (to Israel). What we are going to see is that they are going to be triangulating their trips to Israel with a stop in Bahrain and the UAE,” she explained.

Recently, there were talks of Amazon looking to ship to Israel from its warehouses in Dubai. While Amazon has its own offices in Israel, it isn’t massively popular yet because of limited products and poor delivery and logistics. “While Israel has the technology, UAE has the logistical infrastructure for Israelis to get the products quickly and in bigger varieties. When Amazon opened up in Israel, nobody really liked ordering from them as their product lines are very limited. The fact that Amazon in the UAE is the logistical hub for the entire region might be much more economic for everybody involved. So this a perfect example of how Israel and the UAE can be perfect partners for advancing retail,” she added.

While Israel isn’t rich in natural resources, what it does have an abundance of is access to high technology, a skilled workforce, and an unprecedented innovation capacity. UAE, on the other hand, is a retail hub for the world, which has already established itself as a leading shopping destination but is ready for the industry’s next revolution. So it wouldn’t be surprising to see more Israeli companies wanting to set up in the UAE in the coming years to take advantage of its strategic location proposition while UAE retail giants would want to use Israel’s tech capabilities to up their retail game.

Scoop Shoes, for example, announced that it would be opening five stores in the UAE after the announcement in September last year. At least a dozen other retailers of all scales are testing waters and waiting for the dust to settle before opening stores and launching e-commerce operations, and the owner of modest clothing and swimwear brand Amanda K, Michou Kremer is one of them.

“We did our first trip to Dubai immediately after the historic announcement to understand the UAE’s retail market and strengthen our e-commerce presence in the UAE. In the short term, I will try to set up with local retail chains and if that works out well for us, I will consider opening my own stores,” he said.

“We have started initial talks with some chain owners and hope for partnerships in 2021 and probably launch my own shops in a year or two.”

“After the Abraham Accords, we can do direct deliveries (from Israel to Dubai), which didn’t exist so far. So I could either deliver from here (Israel) directly to customers in the UAE or use the logistics of a local warehouse that can cover the whole area. It is a learning process for us as of now,” he added.

Although no major Emirati retailer has spoken about setting up shop in Israel yet, several UAE-based companies are opening offices and their subsidiaries there. Abu Dhabi-based AI and cloud computing company G42 was the first to establish a wholly-owned subsidiary in Israel. Dubai’s DMCC opened a representative office in Tel Aviv a few months back.

Marhaba, Qatar!

But it wasn’t just Israel that the UAE’s door was opened to. An estranged brother was reunited with his family of the GCC this year. Not to sound too dramatic, but the lifting of the Qatar blockade was a massive development for the region and could be a mutually beneficial one as two major events that will go in the history books – Dubai’s Expo 2020 and Qatar World Cup 2022 – are set to take place.

Qatar’s total trade with the UAE stood at $3.5 billion just before the year the embargo was imposed. According to a report released by Standard Chartered, Qatar’s economy will grow three percent as the easing of the boycott will help trade, tourism and logistics up from its previous 2.1 percent growth estimate.

Now that Bahrain, Egypt, Saudi Arabia, and the UAE have restored diplomatic ties with Qatar, the bilateral trade relations are expected to take off. The re-opening of borders means resuming cross-border trade, services and travel. Although for most retailers, business never came to a standstill, but traveling for work, expansion plans, and additional investments had become more cumbersome over the last three years. The lifting of the blockade assures convenience and the ease to do business at a crucial time.

Fashion e-commerce retailer, Namshi, for instance, announced its launch into the Qatar market in February this year, making it the first e-commerce player to launch in the country after the blockade was lifted. Namshi is accepting pre-orders from Qatari customers and is offering rapid delivery to Qatar, just like it does to other GCC countries- KSA, UAE, Kuwait, Bahrain and Oman.

“As the first e-commerce platform to expand into the Qatar market in 2021, it is essential that Namshi continues to provide our savvy customers across the region with the best possible online shopping experience. The trend-conscious GCC shopper is very close to our heart and we will continue to invest in infrastructure and logistics support to maximize our capability to perform as the leading online retailer in the Middle East,” said Hadi Badri of Namshi.

Home furnishings retailer, Pan Emirates had also announced the opening of its second store worth QAR 5 million at Doha Festival City Mall.

“The new store in Qatar comes as part of Pan Emirates’ expansion strategy to strengthen its footprint across the Qatar region. With the new PAN Emirates store located in a notable location like Doha Festival City Mall, we are looking to welcome residents who seek unique furniture and accessories with a diverse budget range,” said Mohammed Katawalla, Group Finance Director, Pan Emirates Furniture.

UAE-based Forever Rose opened its first shop in Al Hazm Mall in Qatar back in 2017, which is the year when the UAE and Saudi Arabia decided to sever ties with Qatar. As a result of the blockade, the company was forced to source new suppliers and redirect partners to ship directly to the Qatar stores. Now that the trade restrictions have been lifted, the team at Forever Rose can go back to doing business more conveniently.

“The direct trading routes now mean we can supply to the Qatar boutiques more timely and efficiently, as well as allowing myself and the team to easily go between the countries frequently,” said Ebraheem Al Samadi, Founder and CEO of Forever Rose.

“The direct flights between the two countries allow for more flexibility as well as opens businesses up for further expansion opportunities. Our Qatar clients are once again able to visit the UAE and our boutiques with ease, with many returning since the lifting of the trade restrictions,” he added.

While Qatar is a smaller market compared to the UAE, the spending power is quite high where customers expect niche product lines and exclusive offerings. Overall these moves are being seen as a welcome relief and that tiny ray of hope that retailers and every business owner were craving after the chaotic year that 2020 had been.