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The 2014 arab luxury world conference shines a light on the business of luxury in the Middle East.

June marked a milestone in the history of the Middle East’s luxury sector, with the first arab luxury world conference taking place on June 2 and 3, focusing on the business of luxury in the region.

Held at the Westin Dubai Mina Seyahi, the event became a national platform for those working in the luxury sector, with a host of panel discussions, breakout sessions and workshops by more than 130 expert speakers and panellists, bringing to light issues and trends that will shape the scene in the coming years.

Aficionado highlights a selection of the most important insights from the 2014 arab luxury world conference.

Innovation drives regional luxury. Speaking about the future of the luxury market at the inaugural arab luxury world conference, Rémy Oudghiri, Paris-based director of trends and insights at market research firm Ipsos, remarks that, while the Middle East shares global values on luxury, it stands out from other regions for seeking out the most innovative products and styles.

“Everything that is new is prized in the Middle East region,” Oudghiri says. “In Europe, people are buying traditions. When they turn to luxury brands, of course, they want new products, but also the history and heritage of the brands. In the Middle East, however, it’s not a question of tradition. For Middle Eastern consumers, the driver is innovation. Luxury is a symbol of the future, just look at Dubai.”

Perfumes and fragrances top the charts. Another area where the Middle East stands a class apart from global perspectives is through its belief that perfumes and fragrances best exemplify luxury, when other regions consider jewellery a symbol of luxury, along with cars and fashion.

“When it comes to the Middle East, what’s very interesting to note is that it’s the only region in the world where fragrances are considered at the top of luxury. There’s really a big difference with Europe, for example, where perfumes are considered mainstream or part of a landscape that’s not considered high luxury,” Oudghiri points out.

Meanwhile, Alain Lorenzo, president and CEO of fragrance brands at LVMH, also reveals a surprising fact based on research conducted by Chalhoub Group: in the Middle East, 50 percent of fragrances used by consumers are oud-based.

“We know there is this tradition of oud-based fragrances in the region, which is why, over the past four to five years, we have taken some of our best fragrances and launched their oud-based versions,” says Lorenzo. “However, I did not expect them to do so well…

“In the Middle East, Saudi Arabia is, for us, the best-performing market , followed by Qatar. When I look at our rankings, they are the best in those two markets. These markets are approximately 100 percent Arab, when compared with Dubai, for example, where a lot of expatriates reside and tourists visit, which is an important difference.”

Women spearhead the Saudi luxury sector. The luxury market is gaining ground in Saudi Arabia and women are driving the fashion and accessories segment, which has the biggest market share in the kingdom’s premium goods markets, according to a breakout session that applied the Chatham House Rule to protect sources and encourage free speech.

Although the Saudi luxury market has a lot in common with the rest of GCC countries’, it has its own unique dynamics. Panellists believe that shopping models, such as The Dubai Mall, would not work in Saudi Arabia and, therefore, smaller, more niche malls are the way to move ahead. Saudi women go shopping knowing what they want, as they do extensive research prior to entering a premium outlet, remarks another panellist.

With regards to digital presence, another panellist says that several brands are following the ‘copy-paste’ approach when it comes to creating content in Arabic.

Meanwhile, affordable luxury is growing exponentially in the kingdom. Saudi shoppers that are buying high-end mass brands have moved towards highly niche products, while new-generation Saudis are driving the affordable luxury segment.

However, one of the sore points, according to the panellists, is the pricing of premium products, and brands should do more to synchronise them.

Change in consumer buying patterns. The region’s luxury industry is witnessing a considerable shift in the buying patterns of ultra-high-net-worth individuals (UHNWIs), says Erwin Bamps, chief operating officer at Gulf Craft.

Regional UHNWIs are looking for bespoke experiences, but in a family oriented context, in that they want to connect with loved ones in the most discreet way possible. Hence, this change in behaviour totally redefines the concept of luxury.

“The concept of luxury has evolved from a show-off lifestyle to a more discreet and humble one; people want to enjoy the result of their hard work, but away from the public,” adds Tine Arentsen Willumsen, CEO of Above and Beyond.

Regional UHNWIs are now more and more interested in arts. With Abu Dhabi positioning itself as the art hub of the UAE, the demand for objets d’art is growing. Sarah Aziz from auction house Christie’s says that art is a very important feature of the Arab culture; historically, rulers always sponsored artists and, today, this passion for art is represented by a new generation of customers that is interested in its collections.

However, Willumsen adds that more has to be done in order to appeal to customers: “To convince UHNWIs to purchase luxury items or services, brands have to be creative and go the extra mile to satisfy these customers that have everything.”

Future of online branded content looks bright. The trend of brands creating and curating content online is likely to pick up in 2015, according to Darius Labelle, head of creative strategies for the Mena region at Havas Digital, while speaking at a panel session, It’s All About Content.

“Over the past few years, we have heard a lot about brands as publishers. Hopefully, next year, we will see that happening for the first time,” he says.

He believes that the way advertising is evolving will help drive content online. “We are moving into a model that is multiscreen. Content that is being created for TV or online needs to move across mobile, desktop platforms and social platforms, among others”, and this will add to the digital content space.

Amira Rashad, head of media at Yahoo! Middle East, Africa and Turkey, says, over the past few years, brands have become more aware of the large role user-generated content plays.

“Advertisers are realising that they can shape the conversation and have more leverage beyond a 30-second ad or . So, strategies have evolved to embrace more of technology and to realise that it is a moving, mouldable product that changes.”

E-commerce won’t replace brick-and-mortar stores. E-commerce is not expected to replace brick-and-mortar stores, but will serve as a complementary sales channel. However, one of the reasons luxury brands are hesitant on selling online is because of brand perception.

“Luxury brands are worried about their image and how much new things will dilute how customers see their brands. This evaluation is what often stops luxury brands from being the first ,” says Rami Tabiaat, president of Kuwait-based fashion retailer Al Ostoura International Company, which also has an online shopping website. “Statistics also show that very few have been successful at both . So, the odds are stacked against us.”

“Luxury brands were late to the game, but I’m seeing a lot more of them come online,” adds Hassan Mikail, global director of e-commerce at Aramex. He points out that, in the future, it will become increasingly important for brands to have a digital presence to cater to the new tech-savvy generation that spends considerable time online.

According to 2013 figures, the global e-commerce industry is worth approximately €10 billion, says Kapoor. “It is approximately two percent to three percent of the global luxury sales. However, it is growing twice as fast as luxury sales are growing across the world.”

Luxury’s strong link with tourism 

According to Albert Momdjian, CEO of Sokotra Capital, 60 percent of luxury consumers in Dubai are tourists and the market will grow exponentially by 2020. The Dubai Mall is the most visited destination in the world, where more than 40 per cent of its visitors are tourists.

“There is room for growth in the region when it comes to malls and retail; this demand is growing in countries such as Egypt and Saudi Arabia,” explains Alain Bejjani, senior vice-president, head of business development at Majid Al Futtaim Properties.

Meanwhile, Christophe Nicaise, CEO of Ahmed Sidiqqi & Sons, calls Dubai one of the shopping capitals of the world. “ why all brands are looking at this region as a strategic place. Any product launched today on a worldwide basis is done simultaneously in the UAE or the GCC region, as it is done in Paris, New York, Tokyo, Hong Kong and Singapore.”

“GCC customers tend to spend more in London, Milan or Paris, rather than Dubai, to experience a brand in its native home,” adds Cyrille Fabre, principal at Bain & Company.

The region remains underserved in terms of modern retail experiences. “From a straightforward customer that comes with the reference of the item they need to a picky customer that needs to know more about a brand and its history, brands should adapt and provide unique experiences,” concludes Karoline Huber, brand director Middle East and India for watch brands IWC Schaffhausen and Baume & Mercier.

The 2014 arab luxury world proved that the future of luxury in the Middle East has never looked brighter and, now, all eyes are on the next edition of the conference, which will be held in May 2015.

“The 2014 edition of arab luxury world was quite a success,” says Julien Hawari, co-CEO of Mediaquest. “The year 2015 will be an even greater success as we will, once again, be bringing together everyone that works in the luxury industry, both in the region and internationally, to have meaningful discussions, as well as networking opportunities.”

Regional trends

According to Nadine Touma Gammage, head of market and consumer intelligence division at Chalhoub Group, three main trends dominate the luxury sector in the Middle East.

Quest for indulgence

According to a Chalhoub Group survey, 94 percent of respondents from the region goes shopping ‘whenever they feel like it’ and spends an average of $2,400 per month – and this is only on select categories of fashion, beauty and gifts.

Another 78 percent adds that they make an effort to keep up with latest trends, while 76 percent is likely to translate this further into purchases. In addition,
74 percent will make a purchase even if they have not planned in advance, which, according to Gammage, displays a regional addiction to shopping.

Need for recognition

“Obviously, in this context, iconic branding is paramount,” says Gammage. “All of a sudden, we understand its purpose and its meaning.”

Many consumers in the region have certain inclinations towards established luxury brands that are recognised instantly; 90 percent of respondents in Riyadh says they want the brands they wear to be visible. An additional 82 percent adds that when they purchase a gift, they want to impress the recipient.

“This need for recognition will dictate particular expectations that customers will have in a store that we need to be aware of and address, from personal acknowledgement when a consumer enters the store to having staff standing in cue while the client sits in the lounge,” adds Gammage.

Longing for a bond

“The third trend is all about interpersonal relationships, particularly in this region and the brand-customer relationship is no exception,” Gammage states.

She says approximately 79 percent of respondents from the GCC region ranks their friends and families as their biggest influence on decision making and that it is, therefore, imperative to consider this, along with other facets of Arab culture, when considering the Middle Eastern luxury consumer.

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