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.
