More and more Russian brands are entering the UAE market
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Russian retailers and restaurateurs, having lost access to many countries and a significant part of solvent clients after the start of Russian military operations in Ukraine, are increasingly exploring the UAE market. In less than two years, the number of brands from the Russian Federation in Dubai has grown almost 4.5 times, to 31, and may soon reach 55. When entering the country, companies face difficulties with financial checks and finding space, the rental of which costs almost three times more than in Moscow. But high margins cover these costs.
From the beginning of 2022 to September 2023, 24 Russian brands from the sphere of non-food retail and public catering entered the Dubai market, another 24 brands planned to open in the next two years, Nikoliers calculated. Until 2022, only seven companies from the Russian Federation were represented in Dubai, now there are 31.
“Almost every week at least one of the Russian chains opens establishments in this emirate,” confirms Managing Director of Parus Real Estate Marina Shalaeva. Co-founder of Poison Drop (an online jewelry store) Andrei Migunov explains that his company’s entry into the UAE was spurred by the start of Russian military operations in Ukraine: “After February 2022, we quickly began looking abroad for a place for a headquarters and warehouse.” Kommersant spoke about the first wave of Russian business entering Dubai on January 27.
Nikoliers partner Andrey Kosarev attributes the surge in brands’ interest in Dubai to the growing flow of tourists and relocators from Russia. According to the FSB Border Service, in the first half of 2023, Russians made 882.7 thousand trips to the UAE, which is an increase of 89% year on year. Mrs. Shalaeva notes that the flow of tourists and solvent expats from other countries is growing in this emirate.
Dubai attracts a wealthy audience, notes Eterna CEO Dmitry Tomilin, adding that “a check of $500 in a restaurant for a family of four is the norm.” At the same time, he clarifies, the level of service is lower than in Moscow.
This makes restaurant concepts developed in Russia viable in Dubai, confirms Infoline-Analytics CEO Mikhail Burmistrov. At the same time, according to him, the profitability of establishments in Dubai is higher than that of the most successful restaurants in Moscow.
Henrik Winter, co-owner of the Tigrus restaurant holding, is pleased with the results of his three projects in Dubai. According to him, the company plans to open 25 more establishments in the UAE in the coming years, despite high rental rates and more stringent contracts with property owners.
The costs of opening a store or restaurant in Dubai, according to Mr. Burmistrov, are on average two to three times higher than in Moscow. Marina Shalaeva adds that Russian companies entering the UAE market also face more thorough scrutiny from the country’s financial regulators.
Poison Drop has already spent about $1 million on renting a warehouse and hiring employees in Dubai, and about $2 million more will be needed to open a store in Dubai Hills Mall, says Andrey Migunov. He confirms that it was difficult to negotiate the lease of space in the shopping center: “Dubai malls are experiencing a surge in demand from retailers.”
The founder of Zemskiy Group, Vladislav Zemsky, says that he did not plan to open a food hall in Dubai, but received an offer from the operator of a local shopping center. Mr. Burmistrov believes that the opening of sales points in Dubai could be a start for Russian companies to enter other countries in the Middle East, including Qatar, Bahrain, Kuwait and Oman.
At the same time, the managing partner of Vanchugov and Partners, Alexey Vanchugov, admits that some Russian retailers do not have a special task to make a store in Dubai profitable: “Entering the UAE allows them to increase the value of the brand in the home market and position their business as international.”
Dmitry Tomilin, however, is convinced that Russian companies offering a good standardized product can be in demand in Dubai.
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