Middle East - Luxury Fashion & Retail

Dubai is evolving into a fully-fledged fashion capital for the Middle East. With a new fashion council, a revamped fashion week and a growing reputation as a launch pad for big brand events. Dubai is now evolving into a fully-fledged fashion capital for the Middle East and North African market.

The retail industry remains a key pillar of Dubai’s economy, with sales expected to reach $43.5bn, according to real estate consultancy JLL.

Despite suggestions to the contrary, luxury retail spending is still rising in the UAE, albeit at a slower pace.

Dubai, in particular, is leading the way. In a survey carried out the Dubai Chamber said the retail sector in the emirate was expected to grow by 5 percent annually, by which point it was forecast to reach $55bn in value.

The research, based on data from Euromonitor and an AT Kearney Research study, suggests luxury retail still offers multiple opportunities in the UAE.

There is no doubt that Dubai’s fashion and retail scene has undergone several upgrades over the past decade. But one of the most important developments is that industry leaders outside the MENA region have finally begun to get a better grasp of its unique dynamics.

Although there is still a long way to go, international players are now better armed with market intelligence and better prepared for the local business culture. Perhaps this goes some way towards explaining why there has been an upsurge in support from key international figures, such as Karl Lagerfeld and Vogue Italia’s Franca Sozzani.

The Vogue Fashion Dubai Experience, provided a key turning point when it launched a few years ago. Since then, Dubai has become an important showcase for global product launches and marketing events like Chanel’s cruise show, Swarovski's couture exhibition and Marc Jacobs international perfume launch.

Such momentum has been important because an endorsement by the global fashion fraternity lends credibility to Dubai’s reputation beyond pure purchasing power — exactly what the city needs more of if it wants to provide an anchor for the MENA fashion region and get promoted from retail hub to fashion capital.

In the United Arab Emirates, where Dubai is located, only 15 percent of the country’s 9 million inhabitants are native Emiratis and, although expatriates from Asia and Europe feature prominently in the city’s workforce, it is the network of expat Arabs, Turkish and Iranians working there who give Dubai the potential to access many of the 430 million consumers in the wider MENA market.

There is growth of wealthy and ultra-rich consumers, the main potential customers of the luxury segment. All in all, consumption is going up and retailing in the UAE is a major sector, which is supportive of economic growth and offers a lot of business opportunities.

The research is supported by Savills, which ranked Dubai at number four in the world in its Global Retail Destination Index 2016, behind New York, London’s West End and Hong Kong.

The report focused on Dubai Mall, and ranked it higher than London’s Regent Street, New York’s Fifth Avenue and the Champs-Elysees in Paris in terms of the overall quality of its retail facilities and amenities. Further enhancing Dubai Chamber’s findings, the Savills report says, “Dubai is forecast to report the strongest growth in retail sales over the next five years of the seven Global Cities examined, potentially challenging London’s West End’s current global position.”

The growth is supported by a strong tourism sector, with 14.3 million overnight visitors to Dubai last year, according to the Mastercard Global Destination Cities Index, which led to a total spend of $11.7bn, an average of $819 per visitor.

Dubai is now perceived as a top global retail destination but this is only the tip of the iceberg as we now start seeing developers trying to improve the shopping experience not only for tourists as in the past 15 years, but also for residents.

This trend of moving away from the ‘bigger is better’ approach, to more user and resident friendly retail developments, bringing a real city experience and European-style shopping to areas of Dubai similar to those found in London, Paris and Milan, is something that was much awaited by the market and that we see finally happening.

Dubai Chamber estimates the emirate’s retail market reached $35.4bn in 2015, and says it was expected to grow by 7.7 percent in 2016 and an average 8.1 percent annually between 2017 and 2020, when retailing sales turnover are expected to surpass $52bn.

 This predicted growth comes despite the backdrop of uncertainties surrounding economic conditions due to the drop in oil price, and the obvious currency effects of a strong dollar and a weak rouble affecting the number of high-spending visitors coming to the emirate.

That effect was reflected in the Luxury Goods Worldwide Market Monitor, compiled each year by Bain & Co, which said the luxury goods retail market in the Middle East had plateaued, driven by a reduction in tourism spending.

The confidence in the luxury retail market, however, has been fairly evident at the city’s two key shopping malls with other cities keen to develop their luxury retail offerings as well, which have continuously lagged behind Dubai in the luxury segment. 

Within the major malls there is the configuration-extension of the luxury segment offering, both within Mall of the Emirates and Dubai Mall. When you look regionally, there is the provision of quality, prime retail centres such as Mall of Qatar or the forthcoming Majid Al Futtaim centres in Riyadh regarding new luxury space for the market segments which have traditionally been under-served.

There is still a high GDP per capita for locals across the GCC. There is still a lot of personal wealth that can be spent in the luxury segment. Mall developers are looking to position themselves as the focal go-to destination of luxury spend and the access and the add-on amenities in terms of leisure that really make the mall appealing for the whole family will be paramount to obviously increasing the spend per head in these malls and retaining that spend within Dubai, UAE or the region rather than going internationally That confidence is also reflected in the ability of some malls to increase their rent.

The Saudi government estimated that in 2014, tourists travelling outside the kingdom spent at least $20bn on shopping trips abroad every year.

A report by the Travel & Tourism Intelligence Centre, said GCC outbound expenditure would reach $100bn by 2018, up from $65bn in 2013.

Maintaining brand loyalty has been an important facet when it comes to luxury retailers. Luxury brand public displays and activations are a weekly occurrence in Dubai’s malls.

An extension of the brand loyalty is the need for luxury retail brands to implement an omni-channel experience into their customer engagement strategies, which means engaging in e-commerce. While still in its infancy in the region, recent moves by high profile companies based in the Middle East have underlined the need to develop and grow an online presence. A natural extension of that has been social media, in particular Instagram, which has become one of the most influential online tools for luxury brands.

At the heart of brand loyalty online or in the malls is the customer. Customer experience is paramount and it has to transcend everything — online or in-shop. The brand is core to any business, and in the luxury segment it is key. Brands have got to work a little bit hard to make sure they position themselves correctly throughout all platforms.

For opportunities in Luxury Retail within the Middle East please contact me.