This week, we take a look at the growing luxury brand opportunity in the Middle East, including what customer service and retail strategies are working for retailers and brands in the region. Scroll down to use Glossy+ Comments, giving the Glossy+ community the opportunity to join discussions around industry topics.
The Middle East, particularly Saudi Arabia, represents a burgeoning market for the luxury fashion and beauty sectors, marked by a young, vibrant and increasingly affluent demographic. As the region undergoes a rapid cultural and economic transformation, the fashion and beauty industries are presented with unique opportunities and challenges.
The Middle East is becoming a focal point for global luxury brands due to its significant population of people under the age of 30 and its increasing per capita wealth. Sixty-three percent of the population in the region is under 30, according to Alex Hawkins of The Future Laboratory consultancy, making it a prime market for consumer-centric brands looking to capture a new and loyal customer base.
According to Hawkins, the Saudi youth display a hybridized identity: globally influenced yet deeply rooted in their local culture. This duality is shaping consumption patterns, particularly in luxury goods. Hawkins said there is a noticeable “lean toward European luxury brands,” yet a simultaneous “growing desire to support local” brands, with about 95% of the young Saudis emphasizing the importance of Saudi-first businesses. This shift is driving a new wave of national pride and the burgeoning development of domestic luxury markets.
Jasmina Banda, chief strategy officer at the luxury retailer Chalhoub Group, noted the significant growth in the region’s luxury fashion market, which pulled in $5 billion in sales over the last year, she said.
Despite this impressive growth, Banda highlighted some challenges in the region. The fashion market in the Middle East is having a bumpy year: Sales declined 10% last year to single-digit growth this year. The challenges contributing to this slowdown include the post-Covid recovery, cheaper shopping abroad, geopolitical issues between Israel and Palestine, global polarization affecting brand stability, and global market softness.
However, overall results point to long-term opportunities for brands in the region. According to a presentation by the Chalhoub Group last month, the Gulf Cooperation Council — which accounts for Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE — personal luxury market reached a record $12.5 billion at the end of 2023, growing at double the speed of the global industry. Fashion remains the largest category, followed closely by watches and jewelry, with the high-end fashion market in the GCC reaching $5.2 billion in 2023, marking a growth of 10% year-over-year. This growth is significantly higher than the global average growth rate of 4%.
“We recently opened a Zimmerman store in Mall of Emirates in Dubai and it is doing fantastically well,” said Banda. “Zimmerman already has 50-70 stores around the world, and they have never had a physical presence in the Middle East outside of inside department stores.”
The Chalhoub Group also recently opened a second global Jacquemus store, in Dubai, and is actively looking for locations for brands like Jil Sander that have not yet entered the market.
“We’re opening our first Marni store in Saudi Arabia in Q3,” said Banda. “We have a Maison Margiela store in the Dubai Mall that’s doing really well. It’s one of the fastest-growing brands in our portfolio, and we’re looking to open quite a few more. Some of these brands that are a bit more avant-garde and cool seem to be appealing to the younger population.”
According to Banda, the Middle East is seeing significant investment in new retail infrastructure with major projects like the Solitaire Mall in Riyadh and The Grove in Abu Dhabi. Various developments in Dubai and Saudi Arabia, including Meydan and Avenues Mall in Jeddah, are set to open within the next couple of years, bringing new retail opportunities for brands.
The introduction of Riyadh’s first Fashion Week in October 2023 is a testament to the region’s burgeoning fashion scene, fostering local designers and incubating Saudi luxury brands. This local push is paralleled in the beauty industry, where there’s a rise in what’s been coined “Arab beauty,” with brands like Huda Beauty positioning themselves against well-established regional beauty trends like Korean beauty.
Michael Kliger, CEO of Mytheresa, emphasized the importance of aligning with local seasons and holidays to appeal to the Middle Eastern market.
“We run campaigns for Ramadan and Eid but also for when customers start to travel or have wedding festivities,” Kliger said. “We also host VIC events together with ambassadors in the country. Most of all, of course, all our clients in the Middle East benefit from privileges, like being invited to ‘money can’t buy events’ across the world.”
In terms of retail innovation and digital investment, Saudi Arabia is not holding back. Hawkins said Saudi Arabia aims to position itself among the world’s top 20 digitally innovative nations, with significant investments of about $6.4 billion in future technologies. This digital push is evident in various sectors including e-commerce and fintech, enhancing the consumer journey through seamless and immersive retail experiences set to be tested locally.
“Saudi Arabia still has much more potential, because it is the largest country in the GCC,” Banda said. “From the luxury perspective, it’s the largest market and that hasn’t been fully captured yet.”
She also pointed out the current limitations in the shopping experience. “There are many brand stores that are there but not many flagships,” she said. “The customer service can be patchy and the styling capabilities may be lacking in some cases.”
Mytheresa also collaborates with local influencers and designers to strengthen its presence. “The trust and reputation that these individuals bring is very important to us,” Kliger said. This year, Mytheresa collaborated with social media influencer Nojoud Al Rumaihi (580,000 Instagram followers) on a campaign to celebrate Ramadan and Eid, showcasing exclusive looks from brands like Roksanda, Safiyaa and Taller Marmo.
For international luxury brands eyeing the Saudi market, aligning with local cultural events and demonstrating a high degree of cultural sensitivity is crucial. For brands, Hawkins said it is “crucial … to consult the right people and make sure that there’s a degree of cultural navigation” to ensure brand offerings are respectful and well-received.
Banda underscored the importance of addressing local preferences and improving the overall luxury shopping experience. “In this market, the shopping experience is completely separate from other forms of entertainment that people are embarking on, so that needs to be considered when setting up retail.”
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