News Release: Luxury Retail Market Overview - Middle East ...

News Release: Luxury Retail Market Overview - Middle East
Chalhoub Group in partnership with Fondazione Altagamma Milan, 16th May 2011
Overview
The Gulf Area was the discussion topic in the conference organized in May 2011 by Fondazione
Altagamma and Chalhoub Group. C-level management from various organizations debated the
nature and stage of luxury retail in the Middle East region. Key speakers and panelists included:
• Gabriella Scarpa - Chairman, Acqua di Parma
• Patrick Chalhoub - CO-CEO, Chalhoub Group
• Laudomia Pucci - Image Director, Emilio Pucci
• Santo Versace - Chairman, Fondazione Altagamma
• Armando Branchini - Executive Director, Fondazione Altagamma
• Paolo Anselmi - Deputy Chairman, GFK-Eurisko
• Vittorio Missoni - Chairman, Missoni
• Stefano Sincini - CEO, Tod’s
• Massimo Piombini - Commercial Director WW, Valentino
According to Altagamma Consensus 2011 the luxury retail market in the Middle East* has total value of
€ 4.1 billion (approx. 2% of the total global luxury market) and is expected to further grow 10% - 12% by
the year 2013. Due to peculiarity and continually evolving nature of the market key topics of panel
discussion involved profiling the regional luxury retail consumers and characterising the upper class of
the Arab world; debating relevant strategies and brand building operations luxury brands should
adopt in order to succeed in the region.
The evolution of customs and lifestyles in the Middle East
In general, the richest countries in the Arab market were not as severely affected by the recent
economic crisis than the West. According to Chalhoub Group the most promising cities for luxury
consumption in the Gulf are Abu Dhabi (UAE), Riyadh (KSA) and Doha (Qatar). In the long term,
despite of the recent political instabilities potential of Egypt, Kingdom of Saudi Arabia, and Iran should
not be underestimated either. All three countries have rapid population growth with a large proportion
of young people.
The surveys conducted over the past years among the Arabian Peninsula population, particularly on
that of the Emirates, show a large and rapid process of cultural modernization, which has supported
the diffusion of economic prosperity produced initially by oil and later by the development of other
sectors such as trade, tourism and above all the real estate industry. The spread of economic
prosperity has provided access to growing segments of the population to higher education degrees.
And this in turn has lead to a progressive opening of information first through universal access to
traditional media such as newspapers and television and then - more recently - to new media, from
satellite television to the Internet.
* Countries; Oman, United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Kuwait, Iraq and Iran, Jordan, Egypt and Lebanon

Attachment to traditions
Living conditions have changed in a profound way and modernization has transformed the traditional
way of life. However, important to remember that there are still some peculiarities in these countries
that concern the relationship with tradition and must always be kept in mind, in particular with religious
tradition.
In the countries of Arab culture, even in the most “Western” in terms of culture and lifestyle,
modernization never means secularization or separation from religion. It should also be noted,
however, that in the Middle East fundamentalists are a small minority. Religious fanaticism is practically
absent, and the vast majority of the population is peaceful and tolerant. But respect for tradition
remains a benchmark that has many implications.
Tradition is the foundation of a strong sense of national and regional identity. It means that family
remains the pivot around which everyday private and social life turns. Especially women often share
the act of purchasing with members of their family such as mother, sisters, and sisters – in – law.
Consumers seem to live without conflict between attachment to tradition and the search for a
personal style, between adherence to social codes of region and forms of individual expression,
between the love for certain brand and the search for a quality product. For consumers, the former
does not seem to affect the latter.
Women's clothing and status
Tradition is also subject to certain social relations customs such as female clothing.
In the Middle East region local women dress in the traditional way - wearing the shayla (a traditional
scarf on her head) and the abaya (a long black robe) – as their deliberate choice, as an explicit sign
of their participation in a tradition and a culture. Brands must take this into account particularly in the
commercial communication with the consumer.
The most important phenomenon related to the cultural modernization of the Middle East is certainly
the transformation of the status and role of women. Over the past two to three decades, women have
gained more autonomy and power. Women today not only play sports and drive cars, but also have
access to higher education. In the UAE, women represent 75% of university students and, as is
happening in European countries, they often get better results in studies than men.
This has led to an increasing presence of women in employment (women now represent 30% of the
workforce in the UAE) and led them to have access to professions that were exclusively male in the not
too distant past: banking, commerce, journalism, public administration, diplomacy and even highlevel
managerial positions.
It is important to note that this process involves all of the female population across the region and not
just the educated and westernized elite. The possibility of cultural and professional qualification is an
opportunity that women are increasingly taking advantage of. Consequently this has significant
implications on women's choices in life as well as demographic dynamics.
Women devote themselves increasingly to their “career”, postponing marriage until the age of 30. This
has resulted in the decline of the extended family and the polygamous model (the four wives allowed
by Islam are a rarity today) as well as drastic reduction in fertility. Sufficient to say that the average
number of children per woman between 1980 and 2000 - within a generation - has fallen by half,
decreasing from 6.5 to 3.3.
Women of Oman, Qatar and the UAE have independence that was unthinkable at the time their
mothers and grandmothers. Today, women have the right to maintain their income for themselves,
unlike men whose wages must be used to support the family. And today almost all marriages are of
combined knowledge; e.g. both future spouses are allowed to refuse the marriage if the “promised
spouse” is not the right person. Women also have the right to seek divorce.

Young population
This redefinition of family roles, in the sense of greater equality, also affects the relationship between
parents and children. The role of “patriarch” is decreasing and even young people can enjoy greater
freedom and autonomy.
In the Middle East countries, there is certainly less “outrageous” common behavior - such as excessive
consumption of alcohol or drug use - but new media technology products have now spread, similar to
that of European countries: Ipod, Ipone, Blackberry, satellite TV, Internet access and social networks.
These are now symbols of status and of a modern and Westernized lifestyle, but above all they
symbolize improved access to global information flows and globalization, thus further accelerating the
process of cultural modernization that also expresses the aspiration to acquire products and brands
that are “symbols” of the highest quality in the West.
The dynamics of luxury consumption
There has been and still is an ongoing process of rapid economic and social modernization. Looking to
the future the main challenge seems to be at the cultural level ability to reconcile the freedom
associated with the modern lifestyle with traditional values.
This shift from an identity defined by family and religious membership and the acceptance of
distinctive features of modernity and individual success centrally involves the culture of consumption.
Businesses that operate in these markets by offering their products and brands must try to
accommodate the search for a balance between respect for tradition and social codes that are
inspired by it and the aspiration - now increasingly perceived - and individual expression and personal
style.
The local population considers shopping as an important social and entertainment destination, and
leisure activity that are often practiced with friends (70%), or sisters and mothers (40%). Friends and
family are in fact considered women's main sources of inspiration in making purchasing decisions. Malls
play a huge role in the social life of the people and are considered to be a social clubs and gathering
places for young people. Increased number of young men and women develop a form of shopping
addiction that combined with particular social features (high income, increasing purchasing power,
dynamics of the youth and shopping as free time leisure activity) stimulates favorable consumer
behavior towards luxury goods.
Buyers of luxury products remain to be very much logo-driven despite of growing interest in quality and
exclusivity. A survey conducted in 2010 revealed that young people living in the Gulf spend an
average of almost € 100 per month on perfumes and cosmetics, € 460 on clothing, € 320 on
accessories and € 240 on gifts. *
Finally, they want tlogos to be visible and recognized (up to 90% in Riyad) and tend to express their
individuality through a personal style and preference for limited edition products. *
The most well-known and preferred brands are high-end recognizable fashion brands such as Chanel,
Dior, Gucci, Givenchy, Fendi, and Armani. **
* Source: Chalhoub Group, Youth and Luxury 2010, conducted on 1,300 15-29 GCC locals
** Source: Chalhoub Group, U&A 09, conducted on 2,000 GCC females

How to succeed in the Middle East?
To be successful in any luxury retail market one must know its dynamics well. Successfully operating in
the Middle East can be very complex, so pay attention to the following:
i. Get to know the market and the consumer
ii. The Arab market is not just Dubai or Abu Dhabi. Keep in mind that in the Middle East,
population varies from country to country and that markets have a different level of maturity.
The countries also have a different consumer mix. Iran is very different from the United Arab
Emirates. This means that brand building strategies should vary from country to country.
iii. Act with commitment and participation. Think in terms of “investment” in those countries and
not just as areas in which to plant your POS
iv. Know key regional player and retail environment landscape in each country
v. Profile your customer
vi. A good start may be to penetrate the market through market windows (eg. Beirut, Manama,
Dubai) and then through the residential local markets - not just tourist destination cities such as
Dubai – for example: Kuwait City, Jeddah, Riyadh, Doha.
vii. The easiest way to access these markets is a partnership with specialized companies (such as
Chalhoub Group, Al Tayer etc)
viii. Don't forget to undertake international brand awareness operations, tailoring your marketing
to the Middle East through a dual action: building your own brand in the Middle East and
constructing your Arab customer base worldwide
ix. You must adapt, create and interpret while remaining faithful to the values of your brand
“These countries represent a fascinating world and a market that after so many years it is still hard to
know the distinctive features in detail. But we know that consumers have a favorable bias in the
Middle East to purchase beautiful well-made things. The conditions for significant growth in this area
are all there, given the high spending power of consumers."
Santo Versace, Chairman, Fondazione Altagamma
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About Luxury Movement
Luxury Movement is an international boutique management advisory firm specializing in luxury goods &
services industry. Based in Dubai with strategic partnerships in London and Moscow the company
focus on servicing its clients within the Middle East and Emerging Asia. Luxury Movement offers a wide
spectrum of services for established and emerging luxury companies incl. market research and market
entry strategies into the Middle East, brand positioning and communication strategies, feasibility
studies, boutique audits and sales and service training.
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