Nike has decided to allow two operators to develop Nike-only concept stores in the United Arab Emirates in order to accelerate its expansion in the fast-growing region of the Gulf Cooperation Council (GCC), where the sporting goods sector is expanding while becoming also more competitive.

The company had previously made an exclusive store franchising deal a few months ago with Nakheel Retailcorp of Dubai, which is also the franchisee of Go Sport and Sports Direct in the UAE and Egypt. More recently, however, Nike signed a new three-year cooperation agreement with Gulf Marketing Group (GMG) of Dubai, following a series of strategic meetings with its new management just before last Christmas.

GMG has been Nike’s exclusive partner in the region since 1985 through Sun and Sand Sports, which now claims to be the largest sporting goods wholesaler and retailer in the Middle East. This company, which already operates eight Nike single-brand stores in the UAE, will continue to act as the brand’s exclusive wholesale partner in all the seven states of the GCC, with the exception of Saudi Arabia.

In addition, it will have rights of first refusal for the opening of Nike stores on any of the sites previously targeted by Nakheel that the latter might decide not to occupy. This may allow Sun and Sand to enter new markets in the region.

Abdul Aziz Hassan, chairman and controlling shareholder of the GMG group, has clearly signaled his commitment to the sporting goods sector by turning down some lucrative offers to purchase his business and by appointing Marvin B. Shaire group chief executive.

Shaire’s appointment is both critical and strategic as he is a highly experienced retail professional who recently resigned as CEO of Nakheel Retailcorp. He had been instrumental in negotiating Nakheel’s previous agreements with Nike EMEA in the Netherlands. An English native, Shaire has worked in senior roles in the U.K. with Marks and Spencer, the Burton chain (Arcadia Group) and the Virgin Group. A former retail consultant with KPMG, he acted for six years in Kuwait as joint buying and merchandising director of M.H. Alshaya, the biggest retail franchisor in the Middle East, and then spent three years in Dubai with Nakheel Retailcorp.

A few days ago, Nakheel opened its first and only Nike store in its own Dubai Marina Mall, and company officials were unable to tell how many more will be opened in the next months. They also could not tell when they would open any other sporting goods stores. For the moment, Nakheel is only operating a large Go Sport store near the Dubai Ski Dome of the Mall of the Emirates and a Sports Direct store opened last August in the Khalidiya Mall of Abu Dhabi.

Instead, officials of Sun and Sand say they are prepared to open up to 12 new Nike stores over the next 12 months at any sites that Nakheel may decide to drop. Besides carrying the brand in its own multi-brand sports stores, Sun and Sand already has 15 stand-alone Nike concept shops in operation. In reinforcing its cooperation with Sun and Sand, Nike evidently took into consideration statements by Nakheel last November that it was planning to delay the implementation of some of its numerous retail projects and to lay off about 15 percent of its staff. Nakheel is the UAE’s biggest real estate developer by project value, but its sporting goods retail business remains relatively marginal.

Sport is instead the core business of GMG, which is also involved in real estate and pharmaceuticals, and Nike represents more than half of the turnover of Sun and Sand, which has been growing rapidly in the last few years, reaching more than 500 billion dirhams (€102.7b-$136.2b) in 2008.

Representing nearly two-thirds of the total turnover, the retail part has been boosted considerably in the last few years, in tune with the rapid development of the retail sector and of the shopping malls in Dubai and in other UAE states. Sun and Sand has more than 80 stores and shop-in-shops, of which 72 are in the UAE. They vary in size from 130 to 2,900 square meters and occupy some 30,000 m2 of retail space. In addition to 23 multi-brand Sun and Sand stores, it has about 39 free-standing stores and 18 shop-in-shops for brands such as Nike, Columbia Sportswear and Timberland.

In addition Sun and Sand, which is about to move to larger premises, supplies as a wholesaler about 150 other sporting goods stores and 150 shops that sell daypacks and other types of products on behalf of a dozen different sports brands. Besides Nike, the brands distributed by Sun and Sand include Arena, Columbia, Dunlop, Icon, Kettler, Nautilus and Vans. Some of the merchandise apparently ends up in the hands of retailers in some other countries not covered by its distribution agreements, mainly in the Middle East and the former Soviet Union, as they come to buy sporting goods and other types of products in Dubai because of the city’s role as a major international trading post.

Sun and Sand started off in Dubai 28 years ago with a couple of stores under its own name on the Jumeirah beach of Dubai, selling mostly beachwear and Ascot shoes. Five years later, the deal with Nike catapulted Sun and Sand into the sporting goods business. Sun and Sand invested heavily in sponsorships to support the Nike brand in the market, earning a special mention as best distributor in 1986. Sun and Sand added other complementary brands, but it did not make any major moves into retailing until around 2002, when it had only six stores. The company was one of the first to seize the opportunities offered by the development of the shopping malls in the region, and was thus able to negotiate relatively reasonable store rents before their recent strong inflation.

Under its new management, Sun and Sand is actively pursuing new strategic alliances in the sporting goods sector, involving new wholesale and retail distribution deals, in addition to opportunities for joint ventures and competitive acquisitions, notably in Kuwait and Qatar. It has struck a new agreement with Adidas, calling for the establishment of some shop-in-shops in its own stores. Prior to Nike’s initial agreement with Nakheel, the Sun and Sand stores were not carrying Adidas’ products, but they are doing so now.

Adidas, which took over the distribution in the region more than 10 years ago from the Kuwait-based Gulf General Trading, seriously went into retailing only three years ago. With its emerging markets division strategically sited in Dubai, Adidas currently has a network of about 30 own and franchised stores throughout the Middle East, half of them in the UAE, and they already represent about 40 percent of its sales in the Gulf states. As in Russia, it aims to generate more than 50 percent of sales from single-brand stores there.

Having cleaned up the distribution in the last few years, Adidas works with fewer than 150 clients in the region, yet it claims a share of about 30 percent in a market for branded sporting goods estimated at around €300 million a year in the GCC. It has been growing there by more than 20 percent annually, a few percentage points faster than the market itself, and there are indications that it has continued to grow on a same-store basis even in the last few months, despite the international economic crisis and the price of crude oil.

While they have been diversifying into tourism, transport and many other businesses, Dubai and the other emirates have been deriving most of their financial resources from oil. They still have huge financial reserves, although their total value had dropped massively because of investments in public stocks.