The posh Boutique 1 is known for its multi-brand store located in the scintillating Jumeirah Emirates Towers mall. Its large space is decorated in sleek lines and neutral colors, boasting a flurry of brand names. Executive interviewed Ziad Matta, the CEO of Boutique 1’s mother company Sifico.

E The luxury fashion retail industry seems to really have grown in recent years…

The market has been really booming! Our sales have been increasing by about 40-50% a year in the last couple of years and men’s fashion is a segment that has been growing in line with the rest.

E What is your current structure?

Sifico Fashion owns and operates Boutique 1’s multi-brand stores as well as a series of mono-brand stores. We own a Boutique 1 store at Boulevard in the Jumeirah Emirates Towers in Dubai and we will be opening two additional stores during 2008, a second store at The Walk in the JBR (Jumeirah Beach Residence) in Dubai as of July 2008 as well as a store in Beirut later in the year. Our Boutique 1 store currently carries more than 200 brands. Our next store is built around a new concept including a spa, an art gallery, a furniture and home accessories area, a cafe, another area dedicated to books in addition to fashion, accessories and beauty that remain at the core of our activity. The company also owns and operates two Furla accessories stores in Dubai under franchise from the Italian company as well as a franchised Tabbah store, the famous Lebanese high-end jeweler. The company is also launching  five more stores at the Dubai Mall in September, which consist of Chloe, Missoni, and Mulberry as well as additional stores for Furla and Tabbah.

E How much money are men spending on fashion and do you think it can be tied to the emergence of the culture of the metro-sexual man?

Although they exhibit different shopping behavior than women, men are certainly spending more money on fashion items including both casual and formal wear. Another noticeable trend is the increase in men’s spending on skincare and grooming products. More specifically, Middle Eastern men are very particular about their looks and overall appearance.

E How are luxury fashion brands further engaging their clients?

Many luxury fashion brands are expanding into new industries by offering a complete lifestyle experience. Hotels are one of such ventures. Two of the brand names we currently hold, Missoni and Elie Saab, have entered the hotel business by designing luxurious palaces in the Middle East, Missioni in Kuwait and Elie Saab in Dubai. Stores are thus no longer the only place where customers can experience luxury brands. This presents an opportunity for retailers and further increases the brands’ equity although it also exposes retailers to another business over which they have no control.

E How much support do you get from the luxury brands?

It varies from one brand to another. Most brands, with the exception of a few, are usually very supportive of retailers and are backed by the necessary infrastructure and resources.

E What are the current trends shaping the retail luxury fashion market?

Value added services such as personal stylists have become the norm and there is a growing emphasis on the actual shopping experience of customers, whereby stores have become comparable to theatres. This is in fact the DNA of our Boutique 1 store. We bring the highest standards of service to customers who expect nothing short of the best — this sets us apart from the rest of the retailers. 

E Who are the most sought after brands?

All the brands we carry are highly coveted by customers. The brands that are performing extremely well are Elie Saab, Missoni and Chloe, among many others. This has prompted us to open mono-brand stores for Missoni and Chloe in the Dubai Mall and we are also considering a joint venture with Elie Saab for a mono-brand store in Dubai.

E Are there any newcomers? Who are the most popular?

We actually add about 20 brands every season to our collections. For the Autumn Winter 08/09 seasons we are particularly excited about bringing new names such as Halston and Ossie Clark onto the market.  Both designers were extremely popular in the 70s and are now making a great comeback.

E Who are your clients and what type of experience are they looking for?

Our clients are an extremely diverse set of people. They are a combination of UAE residents as well as tourists. Among the UAE residents are Emiratis, followed by Arab and European expatriates. Tourists consist of two main groups, which are mainly GCC Nationals and Russians. Irrespective of their nationality and country of residence, our customers are seeking the best brands and the latest fashion must-have items, a personalized service and a fun and inspiring in-store experience.

E How much do they spend on average?

Clients mostly spend on prêt-à-porter items such as denim and casual and evening gowns, shoes, bags, and beachwear as well as beauty products. Customers are increasingly willing to spend more on brands that are not necessarily well-known, if they buy them in stores they trust such as ours as they feel they can rely on our buyers’ know-how. In such a context the quality of the product constitutes a key element and when customers fall in love with certain pieces, price and the notoriety of the brand are not an issue anymore.

E What are type of products on which brands rely to float their sales?

Most brands are delving into new lines of products. Brands that historically focused on prêt-à-porter items are adding bags and shoes to their collections while other companies, whose core activity is built around leather goods, are designing prêt-à-porter collections. Many brands have created their own fragrance while others have developed complete beauty lines. Many brands are seeking to provide customers with an all-encompassing experience. As mentioned earlier, hotel projects designed by Missoni in Edinburgh and Kuwait and by Elie Saab in Dubai in collaboration with Dubai Holding’s Tatweer are reflective of such trends.

E Are prices of luxury products increasing?

Prices have definitely been increasing which can essentially be attributed to higher exchange rates of the euro to the dollar.

E How does the current world recession affect your sales in term of tourists spending?

Luxury fashion is relatively immune to the economic situation and our customers’ spending does not seem to be affected.

E But what about the oil riches witnessed in the region? Has this affected the spending of locals?

The oil price factor is certainly of more relevance to us retailers. The high oil prices work to our advantage, since our main customer base is comprised essentially of GCC Nationals and Russians who are benefiting from the oil boom.

E Are more luxury brands customizing products for the Arab consumer?

Boutique 1 is working closely with designers, such as Temperely, Luella, Me & Ro, and producing exclusive pieces including evening wear, leather goods, and accessories. In addition, many brands are happy to adapt some of their designs to suit our customer requirements especially when it comes to dress or sleeve length.

In a polarized world dominated by extremes, luxury fashion has witnessed soaring sales with the wealthy seeking the ever elusive chic item that they can proudly feature in their wardrobe. Benefiting from oil the riches, the Middle East capitals are home to luxurious stores showcasing brands such as Gucci, Dior or Chanel.

In the last twenty years, the MENA’s wealthy customer behavior has morphed dramatically. Rich Arabs who used to flock to the eternal temples of fashion in London, Milan and Paris are now swiftly driven in their chauffeured limos to the nearest mall. Not only are they spending more at home, whether in Dubai, Qatar or Jeddah, but the Gulf’s gigantic malls are attracting shoppers from around the world. “Retailers interviewed by Nielsen have confirmed double digit growth levels unlike any other markets,” said Himanshu Vashishtha, managing director at leading research firm Nielsen Company in the UAE. “Consumer confidence levels are very high in the region, which can be attributed to the positive economic environment linked to unprecedented oil wealth,” he added.

Dubai is the leading shopping destination for Arab Gulf tourists and Russians. With higher percentages of people coming from cold countries, stores have been stocking more varied winter collections to better adapt to consumer preferences. In malls, stores such as Saks Fifth Avenue, Bugatti, Dior and Chanel punctuate the marble alleys, where customers fleeing the extreme conditions are exposed to brand names on a daily basis.

Chic customers

According Nielsen’s global designer brands survey, released this year “the world’s biggest designer fans hail from Greece, followed by UAE customers.” While some 15% of the EEMEA (Eastern Europe, the Middle East and Africa) consumers claim to buy designer brands, almost one-third (29%) claim to know a designer label buyer. In the UAE alone, 31% of respondents declared they purchased designer labels.

The booming UAE is crammed with nouveaux riches locals as well as a high percentage of expatriate consumers with a significant disposable income who are ready to splurge on luxury items despite high inflation rates. “The Middle East is witnessing unforeseen inflation levels and price of luxury goods is certainly following the trend as operating costs of retailers increase,” said Vashishtha.

In spite of elevated prices, designer outlets dominate Emirati shopping centers, where most premier brands are featured in more than one location. The Dubai Mall’s Fashion Avenue — in one of the world’s largest shopping and entertainment destinations developed by Emaar Malls Group — spreading over 440,000 sq ft with its own VIP entrance, is bound to further boost the retail luxury market.

According to Nielsen, today’s fashion world is all about brand and values and the “image” the label conveys. The overwhelming majority of consumers (75%) in EEMEA countries believe that designer brands are overpriced for what they are, but about a third (30%) judge that designer brands are of significantly higher quality than standard brands. In contrast, in the oil-rich UAE, which in recent years has become one of the biggest designer shopping centers in the world, 43% of consumers consider designer products to be of higher quality than their standard counterparts.

Emerging fashion markets

With prosperity witnessed by regions such as Asia and the Middle East, where consumers are experiencing unprecedented levels of wealth, rigid class boundaries are fading away. “In the Middle East, people spend about 30% to 33% of their disposable income on fashion,” Vashishtha pointed out. Luxury brands are responding to the trend by targeting this class of newly-minted wealthy individuals. “More than half (52%) of online consumers believe that people buy designer brands in a bid to project their social status. This association between designer brands and social status has made newly monied emerging markets such as UAE, China and India the new fashion Meccas for luxury design houses,” said the Nielsen report.

Luxury brands have expanded in the Middle East thanks to names such as Chalhoub and Sheikh Majed al-Sabah. The Chalhoub Group was created by Syrian brothers Michel and Walid Chalhoub in 1955. Venturing in the Gulf region in 1968, the group slowly evolved into a luxury empire as it gained the exclusivity for brands such as Dior, Chanel, Fendi, Saks Fifth Avenue and Louis Vuitton. Another regional fashion mogul, Sheikh Majed al-Sabah, a member of the Kuwaiti royal family is the founder of Villa Moda. The “sheikh of chic” has introduced to the Arab world iconic brands such as Etro, Yves Saint Laurent and Bottega Venetta among many others.

These retailers have helped push their brands, with luxury fashion becoming a staple in the life of local populations. According to the Nielsen survey, the biggest brand names in the world are American designer Calvin Klein’s products, which are the most frequently bought, with 21% of global consumers claiming to buy this label. “Ralph Lauren, another popular American design brand, comes in a reasonably distant second at 4 percent, followed by Italian urban label Diesel (11%) and French giant Chanel (11%),” the report continues. In the UAE however, the trend is somewhat reversed: 39% of respondents buy Calvin Klein, which was followed by Christian Dior with 37% and Gucci with 31%.

“Calvin Klein is going from strength to strength by creating successful diffusion lines which extend and support, rather than compromise, the equity of the parent brand,” commented Karen Watson, Chief Communications officer at Nielsen.

Most fancied of the fancy

However when it came down to the most coveted luxury branch, if money was no object, ranking differed greatly. The centenary saddler shop founded by Guccio Gucci came in first, the Gucci brand having become a synonym for luxury the world over. “In the past two years, Gucci has managed to maintain and even increase its brand equity in a very competitive and fickle industry. They have achieved this by consistently embedding their core brand values in all their branded products, which range from perfume and sunglasses to accessories, jewelry, handbags and ready-to-wear fashion,” Watson noted. Chanel tied with Calvin Klein in second place. Louis Vuitton occupies the fourth place with its monogrammed bags that for most Arab women represent the epitome of luxury. The following rankings were taken by Christian Dior, Versace, Giorgio Armani, Ralph Lauren, Prada and Yves Saint Laurent. In the UAE alone however, Dior tied on top with Gucci at 37%, followed by Chanel at 30%.

Watson explained how luxury is going through a boom, saying “In the last few years, the luxury sector has really opened up. We have seen many design houses beginning to diversify their offerings to ensure they are catering to consumers of all ages — from baby wear to pet accessories. It’s not unusual for designer brands to offer two or three diffusion lines to cater to different consumer segments as well as expanding into accessories, luggage, jewelry, home wares and interiors and even the technology sector with branded mobile phones — and consumers are responding positively.”

On the luxury horizon

New trends are also shaping the luxury sector the world over, including the Arab regions. According to the Nielsen survey, 35% of global consumers said they would buy a mobile phone if it was cobranded with a luxury brand. Fashion savvies all know about the merits of owning a sleek phone designed by the Armani and Prada of this world.

29% of global consumers said they would buy a co-branded luxury designer laptop, and one in four said they would buy a “designer” flat screen TV. In the UAE, 57% of respondents declared they would buy a luxury cobranded phone, 46% a laptop and 33% a flat screen TV. “There seems to be huge market potential for luxury brands to invade every corner of the home and office,” said Watson. One in six global consumers even said they would buy designer branded MP3 players and kitchen appliances.

Other new opportunities that remain for luxury brands are in the realm of men’s fashion. The taste for luxury items is growing in the segment of high-net-worth men. According to UBS Luxury sector analyst Yasuhiro Yamaguchi, the market for men’s items, including Swiss watches, luxury sports cars, tailor made suits, handmade shoes and men’s cosmetics, will profit from demographic and social changes. As more luxury players cater to men’s growing needs, brand names are becoming increasingly aware of this potentially fruitful market. Tom Ford is one of such designers, and recently announced plans to take his brand across the globe and has chosen Villa Moda as his partner in the Middle East.

Rumors that the designer is creating a dishdasha for men are circulating, underlining awareness of luxury brands to cultural differences. For luxury retailers having stores in the Middle East pose potential challenges as they may be required to customize products to conform to religious and cultural traditions. Some designers hence offer longer styles that cover the body to conform to such traditions while others are focusing on accessories as, for the significant number of Arab women who dress in black abayas, shoes and handbags have become particularly important items.

Another market trend shaping luxury fashion is online commerce. “As few as a third of global luxury brands are selling online and half of those who currently do not sell online have no plans to do so,” were the findings put forth by a survey done by Walpole, the trade association for the British luxury industry, and Forrester Research. Among the reasons listed by respondents was that that e-commerce was deemed inappropriate for luxury brands with customers preferring the physical retail experience. This however, does not seem to pose a problem for designers in the region, as Vashishtha explained that the internet was mostly used for browsing product sites and designs, and rarely for purchases, with only 1% of the population resorting to online shopping for luxury goods.

Thus, the 21st century technologies may help luxury customers to see what’s new, what’s trendy and what’s out there, but retailers need not fear the “virtual competition” — anyone wanting to buy a Gucci bag or a Dior dress will likely always  want to feel it first before paying the (substantial) price.

Porsche’s Middle East and North Africa regional office was established ten years ago in Dubai to promote the brand, which has enjoyed significant growth on the back of spectacular liquidity prompted by record high oil prices. Deesch Papke came to the helm in 2005 as managing director after having worked with major car brands in South Africa, Russia and Europe. Executive talked to him about the relationship between Porsche and luxury.

E What, in your opinion, is a luxury vehicle?

Luxury is personal choice. Each person has to choose for himself what “luxury vehicle” means. The customer is the one who determines that. The real strength of Porsche is that it has been truly consistent over time. It’s a brand personified and we have chosen to be a premium sports car. So, it’s a definition. But we are a brand, I’m firmly convinced, that is luxury, premium, and sporty.

E Is every Porsche model a luxury car?

The full range of Porsche cars we offer compete successfully in various premium segments and therefore meet the criteria of luxury.

E What are the best selling models in the Middle East?

For us it’s the Cayenne. Across the region, we sell 65% Cayenne and the rest sports cars. And then, within the Cayenne range, the Cayenne S dominates at 60%, although with the advent of the Cayenne GTS those percentages are beginning to shift. The GTS has become extremely popular, but at the moment the best selling is still the Cayenne S.

E Why is that? Is it the lifestyle in the Middle East that makes the Cayenne so popular?

The car is perfectly suited for the region. It fills all the criteria of the regional lifestyle, the need for sporty cars that can offer off-road ability. The Cayenne does this perfectly.

E What are the models that are selling the least in the region compared to other regions?

If you compare the sales to Europe, it is the Boxster range that is selling less, however if you compare us to other emerging markets the sales breakdown is the same.

E Why did Porsche stop producing the Carrera GT?

Right from the beginning we said that the Carrera GT was to be a limited edition. There were just 1,270 cars produced, of which we sold 100 in the region. We did the same 20 year ago with the 959, it was a “halo” super sports car for the brand and it was extremely successful.

E Will Porsche produce a new super car?

We recently launched the 911 GT2, which meets all the criteria of a super sports car. However, there are no plans for a Carrera GT super sports car replacement in the near future.

E In terms of competition and technological advances, many brands can now compete with Porsche. How are you dealing with this intense pressure from competitors?

Competition is extremely healthy. The more competition, the more we raise our bar. At this stage we are the benchmark in many segments of the market. As a manufacturer we are always looking to improve. The more competition we have, the better it is for everybody, especially the consumer because we will keep producing high end products for the customer. It’s important that we make the quantum leaps in technology.

E What’s next for Porsche in the region? How are you going to adjust to the new trends that you see in luxury cars in the region?

Our challenge is to secure the continued long-term growth of the brand and our importers. This will only be achieved through the continued delivery of excellent products and after sales service. The challenges in the region, as we all know, are the lack of suitably trained personnel and the added problem of soaring costs.

E And how are you dealing with that?

We’ve started an initiative in the Philippines, a vocational training center, where every 6 months 15-20 qualified graduates will be available for the region. The first 18 graduates will be available in October. So we’ve created a source of qualified people and we will employ them in the region on three-year contracts. The long-term challenge locally is that there are no vocational development programs.

E How would you define the Porsche buyer in the Middle East?

We have the traditional 911 customers who are connoisseurs and enthusiast of the highest level. It is the only car they will consider. Many of them aspired to it since they were children. Linked to this is the new entrant customer. A very large segment of graduate expats entering the region are buying into the Boxster segment. They often become the aspirers whose dream it is to drive a 911.

The Cayenne segment has a mix of customers. There are people who come in and buy the car because they see so many of them on the street and once they’re in they see how fine the car is and they stay. The customers come from all walks of life, are both male and female and various nationalities and ages, we do not have a clear demographic and this is due to the ever changing and growing population.

Aircraft and boats are, on average, more expensive and presumably more luxurious than automobiles. But it is the car that most of the world’s rich use to flaunt their ostentatious wealth. Nowhere is this truer than in the monied countries of the Gulf, where spectacularly high and sustained oil prices have encouraged the region’s glitterati to go out and flaunt it.

BMW

Germany’s BMW has been a key player in the Middle East luxury car segment for decades, but uniquely the company chooses to use the term premium, rather than luxury. According to BMW’s regional managing director in Dubai, Phil Horton, the adjective more accurately describes the kind of “visceral driving experience” the brand represents. He added that BMW also focuses heavily on “the dynamic performance of the car. Whereas Mercedes, you could say, offers a softer, more comfort-orientated brand in terms of the driving experience.” The question then becomes, what is luxury? Certain drivers may see sinking into acres of plush leather as they slip behind a hardwood steering wheel the ultimate in luxury, while others see power and performance as the defining characteristic.

By any measure the BMW brand appears to be very popular with the region’s wealthy. BMW has shown excellent sales growth in Middle Eastern countries recently, in some places up to double-digit. Some of the most popular models are the X5 sports activity vehicle and the new X6 crossover vehicle. But choosing between the two should not be a problem for the increasing numbers of ultra-wealthy. According to Horton, “particularly in the GCC, the very high net-worth individuals are going to be running a stable of cars. So it’s certainly not unusual at all for a customer in that bracket to be running five, six, 10, or 15 cars.”

One thing to which the ultra-rich do not yet have access is the company’s numerous concept cars. “BMW believes that the premium customer is looking for constant innovation,” said Horton, which begins to explain one of the most radical automotive concepts ever unveiled. The Bavarian company’s GINA (Geometry and Functions in Application) concept car consists of a BMW Z8 chassis encased in a unique silver textile affixed to a flexible, hydraulically controlled mesh framework. The car can morph into a different shape at the push of a button. While it is unlikely the car will go into production anytime soon, the company hopes the vehicle’s overarching concepts will influence future designs in their own luxury car segment.

Porsche

Porsche has also seen significant growth in the region. Although it has only had a regional office in Dubai for ten years, the Middle East has become one of the biggest markets in the world for the German car maker. Strangely enough, the company’s staple sports cars are not what is in demand in the oil and cash rich Gulf. It is the more chunky, Cayenne sport utility vehicles that have received rave reviews. “Across the region, we sell 65% Cayenne and the rest are sports cars. And then within the Cayenne range, Cayenne S dominates at 60%, although with the advent of the Cayenne GTS those percentages are beginning to shift,” said Porsche’s regional head, Deesch Papke. Apparently, the rough and rugged scenery inspires buyers to seek out the more capable models, even though the vast majority of them will never be used off road. That said, very few luxury automobiles will ever be used off road.

That sentiment is especially true of Porsche’s Carrera GT, perhaps the company’s most prestigious and luxurious model. Only 1,270 GTs were produced between the years of 2004 and 2006, one hundred of which were sold in the Gulf. The 5.7 liter, double overhead cam, V10 engine was specially designed for the car and churns out 612 horsepower. This means that the GT is capable of 0 to 100 km/h in 3.6 seconds and it gets to 160 km/h in 6.8 seconds. And if that kind of performance doesn’t say luxury, then the driver can revel in the soft leather interior, coddled in the carbon fiber monocoque chassis, and admire the beechwood gear shifter knob.

Bugatti

While BMW and Porsche are indeed makers of luxury automobiles, there are other production vehicles that simply blow them out of the water: namely the Bugatti Veyron. If you ever find yourself sitting in your Carrera GT, staring at the speedometer and thinking that 350 km/h just isn’t fast enough, then the Veyron is your car.

This automobile seems to have roared out of a science fiction film. Its retro-real styling and freakish performance figures evoke both fright and delight. The Veyron’s custom-built W16 engine (that’s two V8 engines conjoined), delivers 1,001 horsepower and 922 lb-ft of torque. Throw four turbochargers into the mix and you can hit 100 km/h in less than 2.5 seconds.

The car will happily drive up to 374 km/h without extra driver input. At 220 km/h the car automatically lowers into a more aggressive and aerodynamic posture, while simultaneously raising a rear spoiler. But in order to take full advantage of the Bugatti’s copious amounts of power, the driver has to come to a full stop. Once in park, the driver inserts the ‘top speed’ key into a special ignition slot. The car runs through a checklist for both pilot and driver. If all systems are go, the Veyron goes into launch mode by stowing the rear spoiler and dropping to 2.6 inches of ground clearance.

Whiplash inducing acceleration is followed by jaw dropping speed. Given space to stretch its legs, this car will reach 407 km/h, precisely one third the speed of sound. At this pace the Bugatti’s specially designed run flat tires will last 15 minutes. This fact is of little concern, however, as the Veyron’s 83 liter gas tank will run dry after only 12 minutes at full throttle. You will be relieved to know that it stops fast, too. The manufacturer claims the car will brake from 400 km/h to 0 in ten seconds with the help of the rear spoiler, which acts as an air brake.

And do not let the Veyron’s $1.3 million price tag scare you away. It certainly did not bother shoppers at the 2005 Dubai automotive show, who purchased all six cars on hand, including the floor models. Reportedly, over 220 cars have been sold worldwide and Bugatti has stepped up production to help meet the demand. It appears that the lure of luxury cars in the region is here to stay.

Representing over 600 leading global brands, Al Tayer Group is undoubtedly a diversified distributor. With its headquarters in Dubai, Al Tayer has firmly secured its position as a luxury leader in the Middle East. Executive speaks with CEO Shireen El Khatib on the insides of the lavish watch industry.

E What is your definition of ‘luxury’? In your opinion, which are the 5 top selling luxury watch brands in the Middle East?

I would like to combine my answers to these two questions. To me, luxury is about craftsmanship of unmatched quality and the utmost attention to detail, and it’s about unique pieces and designs, with a very limited production. The top selling brands are therefore difficult to qualify as it’s not determined by numbers.  

For example, BRM (Bernard Richard Manufacturing) watches are all designed to a unique motor racing concept — each model reflecting a different element of a sports car — and once the limited production of models are sold, they will never be reproduced. Another brand that reflects the true definition of luxury is Backes & Strauss, who specialize in diamond watches — every single diamond is hand-cut and hand-set especially to fit the shape of the watch, thereby making each piece a one-of-a-kind.

E Let’s talk about the most luxurious timepiece you are selling at present. How much is it, what is it comprised of, etc.? What is the most popular luxury watch you have sold?

With a portfolio such as ours, it’s difficult to single out what can be considered ‘the most luxurious timepiece’. However to quote one example among several, we have recently sold one piece by Swiss watchmaker Vulcain, who are presently celebrating their 150th anniversary. They only produced twelve pieces of their award-winning Imperial Gong Tourbillon, and we had number one. A very high profile watch collector travelled to Dubai especially from Europe just to buy this piece.

E From your perspective, what kinds of customers purchase luxury items in the region? Are they a mixture of upper-middle class and high-class or strictly high-class patrons?

The luxury consumer ranges from the avid collector, who may buy several items per year, be it a complicated watch, the new designer ‘It bag’ or even a sports car — to the less frequent customer who is attracted by a certain piece, their heart becomes set on it and they will endeavor to own it.

E Do you have payment plans for those purchasing a luxury item or are customers expected to pay in one shot?

No, in fact payment has never been a factor for the luxury consumer. Allow me to borrow the words of Guccio Gucci, founder of the Gucci group who famously said, “Quality is remembered long after price is forgotten”.

E What are the latest trends in luxury watches in the MENA region? Recently, people have been sporting large, luxurious timepieces. What will be ‘in’ next year?

Currently the trends are for large-sized chronographs and ladies wearing men’s watches and with more complications (e.g. historically they have always been more comfortable with the quartz movement, but now there are more and more ladies choosing automatic watches). Men are wearing more discreet, finer watches than in the past — for example, black gold is very popular right now, with some gems set while remaining understated.

Next year, whilst the large sized models will no doubt remain popular, we may see some people opting for smaller sizes in order to buck the trend. However unique shapes and designs will remain at the forefront — round, square, or anything in between — like the new Odyssey by Clerc, whose original shape and futuristic design is inspired by space exploration.

E What was your total profit last year? Are you expecting an increase this year? Why? How much are the global and Middle East luxury watch markets worth?

It’s Al Tayer Group policy not to reveal sales and financial figures.

E VAT is in the process of implementation in the Gulf, and is already present in the Levant. Also, on top of the current VAT taxes, the GCC reportedly plans on imposing a 100% tax on all luxury goods by 2012. How do taxes on luxury items affect your sales?

The designation of what constitutes ‘luxury goods’ has not yet been defined for the purposes of taxation. However, we don’t really anticipate sales being affected too much as the luxury market is not driven by price. The luxury consumer is motivated by fine quality, limited availability and unique designs; and this will continue to be the case.

E In the last decade, what would you say the demand focus has been? How have manufacturers responded to this demand? How often do consumers buy luxury watches?

Brands have been moving towards developing timepieces with higher complications, higher value, and a longer lifespan as consumers have been converted into connoisseurs; becoming more educated and passionate about watches, and are constantly adding to their collections. Watch enthusiasts will purchase several pieces each year, whereas in the past a watch was a purchase that was made traditionally only on special occasions, such as graduation, marriage, and other milestones.

E How important is the Middle East luxury watch market? How is this reflected in the consumer demand?

It’s a very important part of the Middle East luxury industry. Demand is such that the region’s watch enthusiasts often attend the annual BaselWorld jewellery and watch trade fair, and have thus become important watch collectors. Also, thanks to the proliferation of features published in the media, the market has become a great deal more aware and educated about the different brands and innovations, and what makes each piece unique.

E Of all luxury timepieces, which is your personal favorite? Why?

Over the years I have acquired many favorites, among the brands that we carry. Currently I am wearing the Guy Ellia Time Square Convex. It is unbranded, it sits perfectly on my wrist due to its unique curved shape, it is big and bold and yet understated and refined — it epitomizes luxury to me.

The Swiss watch manufacturer IWC is one of the oldest in the world.  Executive interviewed its regional brand manager about the company’s sales and the latest trends.

E What is your definition of ‘luxury’?

Luxury to us is the high standards that form an integral part of IWC’s legendary quality, where absolutely nothing is left to chance and where there is one overriding objective: to ensure that every single watch goes on satisfying the demands of its owner for many, many years to come.

E Which brand is your biggest competition in the Middle East?

All luxury brands that are inspired by technical innovations are a competition. IWC is synonymous with technological innovation, functional design, craftsmanship of the first order and durability. Our philosophy is based on untiring enterprise and quality at the highest level.

E Let’s talk about the most luxurious timepiece you are selling at present. How much is it, what is it comprised of? What is the most popular watch you have sold to date?

One of our most exclusive and expensive watches ever sold was the ‘Grand Complication’, until today still the most complicated watch in IWC’s collection, that was ornamented with baguette-cut sapphires. This watch was not produced on order, but was produced in order to exemplify the extent of what IWC can do in the realm of jewellery watches. The Grand Complication took seven years to develop. This outstanding masterpiece has a complex movement with chronograph, perpetual calendar, and moon phase display is powered by energy generated by the movement of the wearer’s arm. Production is limited to 50 watches per year. We have sold these limited edition Grand Complication full diamonds in India and Oman. The average price was around $500,000.

E What are the latest trends in luxury watches in the MENA region? Recently, people have been sporting large, luxurious timepieces. What will be ‘in’ next year?

IWC focuses on men’s watches with this year’s new Vintage collection, as we pay homage to the pioneering spirit of IWC. Big watches are in demand as are watches in steel and precious metals.

E In the last decade, what would you say the demand focus has been? How have manufacturers responded to this demand? How often do consumers buy luxury watches?

The demand in the last couple of years has been for big watches, featuring technical innovations with new colors; brown is a popular color. IWC however does not follow trends but rather sets them.

Our collections, including the most exclusive ones, are often the modern interpretation of the past incorporating the latest technology and new materials. Mostly connoisseurs and collectors buy our products.

E How important is the Middle East luxury watch market? How is this reflected in the consumer demand?

The Middle East is a dynamic and a strong new market with a bold future potential for growth. Demand for our brand in this market has been particularly robust with 75% of IWC collection being sold out. This is a strong indicator and proof for the demand of the brand in the region.

E Of all luxury timepieces, which is your personal favorite? Why?

The IWC Da Vinci Perpetual Calendar limited edition Kurt Klaus for its beauty, technicality, and tribute to such a fabulous IWC watchmaker.

Based in Lebanon as the Managing Director of watch distributor Ets. Hagop Atamian, Mher Atamian sat down with Executive to share his insight on the luxury watch sector in the Middle East.

E How would you define “luxury”?

For me, luxury is something you can afford to spoil yourself with. It’s something you buy, and want to enjoy and use for pleasure. It’s not something you need to have. The word ‘spoil’ defines it well, because you want to give yourself satisfaction by buying something if you can afford it.

E In your opinion, which are the top 5 selling luxury brands in the Middle East?

There are a lot of brands in the Middle East. If you want to talk about luxury, let’s say it starts at about $5,000. Now you have to divide that into two groups, ladies’ and men’s, because the brands that are strong for men are not necessarily the ladies’ brands. I would say the top brands in the Middle East that I deal with are Breguet, IWC, and Jaeger-LeCoultre. Other brands that are also leading luxury brands are Patek Philippe, Rolex and Audemars Piguet. They are predominantly men’s watches and people like these brands as they have strong brand awareness. Ladies go for brands like Cartier, Chopard, Bvlgari — more fashionable but luxurious at the same time.

E Let’s talk about the most luxurious timepiece you are selling at present. How much is it and how many have you sold?

Price-wise it’s Breguet. Breguet and Patek Phillipe today are the highest you can go. These are the two brands which are globally known to be the highest ranked among the luxury brands. They are the brands that have been in existence for a really long time. Breguet is a brand where, if you look at the history, you’ll see that Napoleon Bonaparte had one, all the Russian tsars had one, so we’ll go with Breguet. The highest-priced watch that I have sold so far was a tourbillon at around $180,000. We actually sell five to six tourbillon watches per year. Our market, surprisingly, is a watch market. I usually don’t carry such watches in my showroom because the deliveries take five to six months, and sometimes even more, and in general they are presold to clients who order them and have patience enough to wait until we get it.

Breguet is the most sold in terms of value but at the same time I don’t sell as many pieces as IWC, Jaeger-LeCoultre, and Blancpain. IWC and Jaeger-LeCoultre have a nice core price range of $5,000-15,000, which are more affordable. I have sold mostly from these two because of their price point. These watches are considered to be really luxurious watches, but also quite affordable.

E When a new luxurious timepiece is released, what kind of customers are they designed for?

Definitely not strictly high class. Around 80% of my clients are Lebanese, living here. Some of them have a very high income and are rich, but on the other hand we have the upper-middle class who earn a good salary and want to enjoy life and have a nice watch. And these people are good clients; they are coming back every year to buy a piece. It doesn’t have to be the most expensive or at the $30,000-40,000 price-point, but it will still be between $7,000 and $10,000. These customers really know how to live and to dress; they are very aware of all the new models coming out. Some customers call and ask questions before the watch is even launched. It’s amazing how much they know and how much they follow up; they read and follow the details and the mechanisms. It’s amazing.

E Do you have payment plans for those purchasing luxury items or are customers expected to pay in one shot?

We have recently liaised with Bank of Beirut, and came up with a payment plan for purchases between $1,000-10,000 where you could pay through the bank in a number of increments. There is only a very, very small interest rate. We are absorbing part of that percentage, so it’s working. There are a lot of people who would want to upgrade their watch and don’t have the cash, but they have the income so the bank checks on their credit.

E What are the latest trends in luxury watches in the MENA region? Recently, people have been sporting large, luxurious timepieces. What will be ‘in’ next year?

Sports watches are definitely in; even the classic brands are coming up with sports watches in their lines. For men it can be a thin, sleek watch, because some very strong, luxurious brands don’t necessarily do sports or large watches. Then again, with brands like IWC and Jaeger, the trends are watches with diameters of 45 to 46, which is quite big on the wrist; this is very trendy. For ladies, again, it is the bigger watches, and yellow and pink gold are the trends. Before, we use to be a market where pink gold was not so ‘in’, but now ladies are wearing pink gold more. People buy what they like by shape, the advertised model, etc. You can wear a sports watch with a suit now; there’s no more changing watches for specific events.

E In terms of profitability, how is the current situation? Are you expecting an increase this year?

We’re definitely expecting an increase. The first five months of 2008 were difficult, but we still maintained last year’s figures. Now that everything has cleared up and we’re getting a lot of tourists, things are picking up and are above what they were last year and the year before. So we’re expecting a significant increase this year, especially because a lot of Lebanese are coming back. We rely on those customers.

E In the last decade, what would you say the demand focus has been and how have manufacturers responded?

For the last five years all the luxury companies have been increasing their sales tremendously. This shows that the luxury market is really going up. More and more people are buying, mainly due to the opening of two big markets: India and China. They have opened up to the world as there are no more imposed restrictions by their governments for importations. Such emerging markets with large populations have millions of rich people so all the luxury brands make sales, even if Europe and the US, which is in recession, are slightly behind. Their sales are soaring because of those two countries which are really taking a lot of watches. So, the luxury market is increasing for all brands, some brands more than others.

We are experiencing a lack of product. All the brands have very bad delivery terms now. We have a huge demand; I could sell 50% more than what I’m selling now if I were to get enough goods. Thus demand is increasing, but production is increasing by ten times less, and so there’s a large gap.

Luxury is really a good place to be. I think it will sustain this growth for maybe a few years; I don’t know how long it will last. I would say the focus demand is complicated watches. The more complicated the watch is, the more things there are inside, the more difficult the production becomes, the more time it takes, the more expensive it is. More and more people are asking for complicated watches, which start at $40-50,000.

E How important is the Middle East luxury watch market and how is this reflected in the consumer demand?

To the brands, the Middle East market is around 4-5% of their worldwide turnover, in general. You’re talking about millions, so it’s not a small percentage. It is important for the market because the Middle Easterners are buyers of diamond and gold watches, they are spenders, and there’s a lot of money in this market. Lebanon is considered to be a priority for most of the brands. We have the smallest population of countries in the Middle East, but the people in Lebanon are educated in the watch-sense. They know what the trends are; they follow the details much more closely than the GCC countries. Retailers and agents consider Lebanon as a key market in the region, maybe third or fourth in terms of turnover and in terms of importance.

E Of all luxury timepieces, which is your personal favorite?

One of my favorite brands is IWC because its watches are sportier and large in size. That’s my type of watch. Also Tag Heuer, whose prices range from $2,000-5,000, because they have very innovative, sporty watches. For example, they have just launched the new Grand Carrera which is quite an innovative model. I believe that Tag Heuer has set trend for sports-elegance.

While women mostly spoil themselves with handbags and jewelry for their opulent amusement, today’s executive men indulge in luxurious timepieces. Sporting lavish watches allow successful men to adorn themselves with complicated, sumptuous, and yet rather masculine pieces of ‘jewelry’. The range of accessories for women is much wider than that for men, leaving watches to act as the chief decorative means for men to express themselves in a classy way.

Top luxury watch brands around the globe all face the same problem: how to meet the consumer demand. The perpetual obstacle lies in managing how to deliver all the plush watches customers have ordered in a timely manner. This dilemma involves the fact that top brands’ strategies follow the basic rule of supply and demand — and the less there is available of a watch, the more people will desire to own it. As the Middle East’s General Manager of TAG Heuer, Eric Vergnes noted, his brand “cannot supply enough to our markets[, as] there is already a long waiting list!” Limited editions and availability leave tasteful customers yearning to be exclusive, whether or not enough watches are actually available does not stop the orders from flying in.

Evidently, their strategy is working exceptionally well. The global luxury watch market is believed to be valued at around $28 billion, according to Swiss bank Vontobel. The luxury watch industry continues to flourish in the Middle East, and especially in the Gulf region. In 2007, the Middle East and other emerging markets accounted for roughly 20% of Swiss watch exports, helping to raise sales for Swatch Group and Richemont. Although rather secretive with sales figures, for the last five years leading luxury brands’ sales in the Middle East are believed to be witnessing double-digit growth, as noted by the Managing Director of luxury watch distributor Atamian Hagop Est., Mher Atamian. On a per capita basis, the Middle Eastern luxury timepiece industry is said to account for nearly as many watches as some of the world’s biggest markets.

At present, and unsurprisingly, the two largest markets for the ritzy watch industry in the Middle East are Saudi Arabia and the UAE. Between them, these Gulf states account for around 75% of the regional luxury watch market. Throughout the region, TAG Heuer reported a growth of 45% sales increase, and to date “are enjoying a 100% growth versus last year at the same period”, highlighted Vergnes. The GM also added that even though the Middle East is still a small region “in TAG Heuer worldwide turnover, the share is growing and should become really important after a couple of years.”  

As one of the world’s largest exhibitions for luxury watches, BaselWorld closed this year’s edition after witnessing its largest-ever attendance and bold commerce results. Displaying their affluence across the globe, the number of Middle Eastern patrons increased from last year’s fair. The beefed-up strength of the exhibition emphasizes the vivacity of today’s global luxury market.

The oil rich countries and their neighbors definitely possess a vast spending power, allowing them to spoil themselves in plush items dripping with diamonds, gold and platinum, to their pampered hearts desire. 

The Middle East market

Like other luxury brands, TAG Heuer is “doing extremely well in the region,” said Eric Vergnes. Due to its Swiss heritage, he trusts that TAG Heuer delivers the “highest quality level” of watch making while possessing a “strong brand identity.” Vergnes believes the Middle East is “a huge and growing market: not only the Middle Easterners are keen on purchasing nice pieces, but thanks to the strong development of tourism in high end shopping destinations — such as Dubai — we enjoy a fast growing demand from tourists.”

Similarly, Bernard Fornas, President and CEO of Cartier International, maintains that the “Middle East is a very important market for Cartier … [I am] very comfortable coming to the region. It holds a lot of promise and is one of the best performing regions in the world.”

According to Vergnes, “people in the Middle East have a strong taste and knowledge for luxury goods. As such, we are selling to a wide scope of customers, not only high class patrons but also numerous people looking for qualitative and exclusive models.” He added that, “consumers have become more and more connoisseurs, or watch collectors: from one piece in the past, it is no longer seldom to find people who like to buy nice pieces as often as they can afford it.”

Fornas of Cartier feels “at home” in the Middle Eastern market and pointed out that Cartier has “dramatically increased the desirability of the brand in the Middle East, a region noted as much for its economic prowess as its taste for up-market luxury goods.” Further, Fornas mentioned Cartier’s robust presence in countries such as Qatar, Lebanon, Saudi Arabia, Bahrain, and Kuwait, asserting that “Cartier has both the muscle and structure to make further deep inroads in the region.”

The finer things

Many watch collectors and admirers specifically look out for a tourbillon, a special addition to the mechanics of a watch escapement. The first tourbillon was invented in 1795 by Abraham-Louis Breguet, in order to counter gravity’s effect on timekeeping; it does so by mounting the escapement in a revolving confinement, to counterbalance the effect of gravity when the watch is turned. While old technologies are improved, leading brands find themselves competing against one another, striving for revolutionary innovation of ancient watch making traditions. Originally crafted for the traditional pocket watch, the tourbillon is now popular in most luxurious wristwatches.

At Geneva’s annual watch trade fair (known as Salon International de la Haute Horlogerie), Jaeger-LeCoultre displayed a tourbillon timepiece retailing for a staggering $639,692. While most tourbillions are now found in wristwatches, some lavish brands are still producing classic pocket watches.

However, for most high class patrons, such a high price tag is usually not ideal. Most watch collectors and appreciators purchase more ‘affordable’ luxury timepieces, with the average price ranging between $5,000-50,000.

Crème de la crème

The most globally distinguished watch brands are Rolex, Patek Philippe, TAG Heuer, IWC, Chopard, Breguet, Hublot, Jaeger-LeCoultre, Omega, Girad-Perrègaux, Bvlgari, Cartier, Audemars Piguet, and the list goes on. It seems the palatial watch industry is crowded with over 25 eminent brands, but Rolex continues to be the international favorite. One of its most expensive masterpieces is the Royal Oyster Perpetual Day-date Special Edition for men. This watch is valued at around $250,000 as is made up of platinum and intricately cut diamonds. This specific timepiece boasts a 39 mm platinum case, a bezel set with 42 baguette diamonds, a diamond meteorite dial, and an oyster 20 mm bracelet set in 71 baguette diamonds. While each brand has its own DNA, there are a quite a few that have developed a uniqueness to make them stand out amongst the crowd.

Patek Philippe prizes its marvelously upgraded Star Caliber 2000, a captivating pocket watch that took eight years to develop and design. The brand boasts that this model has “added a new luminary to the horological firmament.” Joining the most renowned timepieces around, the Star Caliber “presents a totally new combination of stunning complications for which six patents have been filed, elevating its status to unprecedented levels of complexity.” You would think the functions of a pocket watch are rather basic, but with over 1,000 parts and two faces, Patek Philippe’s Star Caliber 2000 proves otherwise.

This watch synchronizes time with the perpetual calendar, facilitating the reading of local time as well as actual solar time. What’s even more fascinating is this pocket-sized timepiece’s capability to indicate the times of sunrise and sunset, tracking the celestial chart, leap year cycle, season, and even the phases of the moon. This masterpiece is available in platinum as well as three variations of sumptuous gold — white, yellow, and rose — with the former case weighing 364 grams and the latter 280g.

TAG Heuer recently launched its Grand Carrera in the Middle East, holding an average price-point of $4,455, with Vergnes swanking that this model “is a beautiful evolution of our iconic Carrera model, born in 1964. The latest models are bolder, with many design evolutions, beautiful details and innovations such as the RS (rotating system) inspired by GT cars.” Some of the brands’ popular models include the Carrera tachymeter and the Aquaracer Chrono. TAG Heuer also accommodates its feminine patrons through one of its best selling pieces — the 32 mm Aquaracer — which possesses a dial soaked in diamonds as well as a bezel embellished with more diamonds. 

Trends

Finding revolutionary designs and fine aesthetically pleasing details tops the criteria for most luxury buyers. Vergnes holds that trends formulate from the consumers’ search “for innovative designs and functions that [have] remained faithful to the heritage and exclusivity of the brands.”

Specific trends are characterized by red and pink gold frames which are rather popular for ladies, as Verges of TAG Heuer underlined that his brand’s “limited editions such as diamonds or rose gold pieces are extremely popular” in the region. Most men flock to bold, large sports timepieces, the latest trend being towards larger pieces, for both men and women. In Verges’ words, “Women tend to like larger watches with diamonds at night, and borrow their husbands’/boyfriends’ large chronos during the day.”

In short, the luxury watch industry of the Middle East has and will continue to flourish. Whether your luxury price tag is defined by $1,000 or $100,000+, patrons of our region indulging in extravagant items have a lot to choose from. Keep track of time as, in such a luxurious age, time is money.