Rob L. Wagner روب لستر واقنر

April 1, 2016

Kingdom of Luxury Shopping

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By Rob L. Wagner

The Arab Weekly

1 April 2016

Jeddah – Marwa Alkady was shopping recently for clothes for her husband on Jeddah’s fashionable Tahlia Street and she wasn’t about to devi­ate from her plan for his ensemble.

By the end of a long day she had everything she wanted: embroi­dered midnight blue thobe for the winter, Mont Blanc fountain pen for the pocket, white Dunhill ghutra and Burberry cufflinks to match his IWC Schaffhausen watch.

“We went to London last summer, so he’s kind of spoiled,” said the 25-year-old newlywed. “After seeing what the shops have there, we have the same expectations here. Once you have the taste of best clothes and jewellery, you really don’t want to lower your standards.”

Travelling abroad has raised the bar for many Saudis, who find lux­ury brand shopping almost a neces­sity. In a country with a rigid dress code of thobes and abayas, a new generation of Saudis is emerging for whom individuality is a key compo­nent to expressing themselves.

The luxury brand industry in the past decade has experienced phe­nomenal growth of as much as 9.5% annually. The proliferation of malls, disposable income and cheaper travel to the West — particularly London, Paris and New York — have led to luxury brands developing so­phisticated marketing campaigns to attract affluent Arab buyers.

In Saudi Arabia, a study by mar­ket researchers Canadean, sales of clothing, footwear, accessories and luxury goods reached $11.9 billion in 2012, a 9.5% jump from 2011. Even during the first full year of the reces­sion in 2009 sales climbed a respect­able 5.8% over the previous year.

Nicky Valentine of the London-based NV Luxury Ltd., which ad­vises international luxury brand companies on expansion and man­agement issues, said tourism and accessibility to luxury products have a lot do with robust sales.

“Growth has increased due to dis­tribution of brands,” Valentine said. “Tourism levels increased in places like Dubai and Abu Dhabi.”

Shaun Borstrock, associate dean of School of Business, Innovation and Projects at the University of Hertfordshire in England and who tracks luxury brands’ global market­ing strategies, said luxury retailers tap into two kinds of Middle East consumers: the buyers who “shout” their wealth with showy accesso­ries and those who “whisper” their affluent lifestyle with understated branding.

“When we are talking about true luxury we have consumers who are not opposed to spending con­siderable amounts of money and are willing to buy big-name items that are European and have herit­age,” Borstrock said. “Then you also have the lesser known brands the consumer buys in which they are saying they know what’s going on. These consumers who buy a watch, for example, will go to a horolo­gist for a watch made especially for them rather than a mass producer of watches.”

Luxury retailers are adapting to the shopping habits of citizens and expatriates in the Gulf region. The increased numbers of malls, espe­cially in Saudi Arabia, shapes the way retailers think about the mar­ket.

“The mall environment is more practical and they are open pretty late into the night, 11.30 and 12,” Val­entine said. “These are destination malls with attractions like aquari­ums in saturated areas. Women’s fashion sections and men’s fashions are more popular there. It’s like a lit­tle Bond Street.”

Theme malls are expected to in­crease substantially in Riyadh with retail sales expected to grow from $92 billion in 2013 to $130 billion by 2018, according to a 2014 study by the auditing firm KMPG.

In 2014, Riyadh’s mall retail space was about 1.45 million sq. metres with an increase of another 700,000 sq. metres projected by 2018, according to KMPG. Six malls in Riyadh that will anchor luxury brand retailers are planned through 2018. The Majid Al-Futtaim Mall, at 180,000 sq. metres, is sched­uled for completion in 2017 and the 250,000-sq.-metre Diriyah Gate is to open a year later.

Luxury brand sellers are eager to fill the expansive theme malls be­cause the financial risks are mini­mal. The sole agent distributor re­quirement in Saudi Arabia was an ironclad agreement for many years in which foreign businesses were required to obtain a Saudi agent to establish a store or company in the kingdom.

The sole agent requirement be­came voluntarily after Saudi Arabia joined the World Trade Organisation in 2005. However, most luxury re­tailers continue their relationships with their agents instead of directly establishing their own stores to re­duce the financial risks.

“The onus is on the licensee who is in effect buying the franchise and is taking the financial risks,” said Borstrock, who noted that there is no advantage for foreign companies to go it alone in Saudi Arabia. “Lux­ury brands want the representation [in foreign countries] but don’t want the burden.”

Luxury brands tailor their prod­ucts for the Arab consumer but keep their core identity intact.

“A range of 70-80% of the stock would be the same,” Valentine said. “Then the adaption may be in jewel­lery brands like diamonds. There is a huge market for big fat sets, necklac­es, headdresses, bangles and rings.”

There is a risk that too much tai­loring to Middle East tastes may reduce the luxury accessories that buyers really want. A common per­ception among Saudi women buy­ers, according to shopper Alkady, is that many stores are selling inven­tory that have failed to attract buy­ers in the West.

“I don’t think that any brand wants to sell their rejected stock,” Valentine said. “The flagship stores get the top collections. It depends on the size of the store. I looked at Tiffany’s in the Middle East and they have a pretty big footprint with an upgraded collection that is larger than their store in Manhattan.”

Borstrock said the perception is common but he noted it’s impossi­ble for luxury retailers to fully stock every store, especially high-end retailers with hundreds of stores worldwide.

“Louis Vuitton in a typical season produces about 200,000 items for any one market,” he said. “It’s im­possible for them to show every sin­gle item in every single store.”

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