Luxury brands are thriving in the UAE as Dubai continues to be one of the most attractive luxury destinations for Middle Eastern consumers, according to the 2018 Global Powers of Luxury Goods report released by Deloitte. The UAE’s importance as a luxury hub is emphasized by the fact that it provides a strong base for companies wanting to step into the Middle Eastern market, the report states. What drives this success?
The luxury market in the Middle East and Africa is projected to reach a whopping $15.1 billion by 2022, blooming at a remarkable compound annual growth rate of 5.6 percent, according to a GlobalData report. This corresponds with the Bain & Company prediction that the global luxury market growth will jump 4 to 5 percent per year by 2025, demonstrating considerable success.
This has not always been the case – the UAE’s success story in the luxury industry has grown gradually from the OPEC-driven riches of the 1970s, and the rise of a local shopping culture in the ‘80s and ‘90s, to the massive investments – from both local and foreign investors – into luxury retail in the 21st century. The UAE has now grown to become the largest luxury market in the Middle East and Africa and will continue being successful in the region till 2022, the GlobalData report states.
To some, this may come across as a surprising trend given currency fluctuations, signs of a slowing global economy, tightening measures by banks, volatility in oil prices, and geopolitical tensions. However, those seasoned in the region’s luxury sector know that the factors for success in a niche luxury market rise above these global fears.
Factors for success
Brand loyalty begins at a young age. The Middle East has one of the largest populations of people under 30 in the world – and they are not only richer than the global average, but they also buy more. According to Deloitte’s Global Powers of Luxury Goods report, millennials and Gen Z are expected to account for more than 40 percent of the luxury goods market by 2025, which is a 10 percent jump from 2016. Teenagers and adolescents tend to spend on clothes, accessories, and jewelry – a trend that’s only increased since the adoption of social media strategies and social media influencers.
The GlobalData report suggests that luxury retailers in the region have begun making the most of digital platforms to boost sales. A few years ago, people were drawn to brick-and-mortar luxury stores through print and television ads, hoardings along the highways, as well as celebrities and parental influencers. Now people are spending more time staring at screens, plugged into social media platforms and what is “trending”. This means that e-commerce and retail shopping at stores have grown hand-in-hand, with consumers browsing through various options online and then hitting the stores to make the most of the emotional touch-points involved in the purchase.
There can be no discussion on the success of the region’s luxury market without mentioning the impact of the Chinese. While some visionary companies such as the Al Fardan Group began their journey into the luxury segment by bringing jewels such as diamonds from China into the UAE, others jumped onto the bandwagon by creating a regional market to attract Chinese investors and customers.
Dubai remains one of the top destinations for China’s luxury buyers. Official figures released by Dubai’s Department of Tourism and Commerce Marketing pegged Chinese tourist numbers at 857,000, a rise of 12 percent from the previous year. The total global luxury market share is expected to hit $397 billion by 2025, with Chinese consumers accounting for 44 percent of the consumption, according to a McKinsey & Co report. Government initiatives such as announcing VAT refunds to tourists in the UAE have only further fueled the success of the UAE luxury industry.