The time has come for us to look beyond our backyards, and see the potential that luxury brands have in the Middle East.
By: HH Alexandra Orloff, CEO, Sacha Orloff Ltd
Posted on: July 10, 2010
The time has come for us to look beyond our backyards, and see the potential that luxury brands have in the Middle East. As change is a constant factor in time, and more so in the Middle East, results are different from what we expect, and are often fast, if not unpredictable. However, an increasing number of luxury players, including all powerful French Luxury Comite Colbert members, have identified the Middle East as a top target.
One should consider the degree of transformation, reforms and an ever increasing younger population longing to become self sufficient as the main factors for Middle Eastern luxury growth. Coupled with a thirst for education and the need to be seen in a different light, the Middle East is favoured for its rich cultural identity. Young Arabic entrepreneurs are striving to gain the same acknowledgement as their Western counterparts.
There is no question about the potential of the Gulf markets. They are some of the premier buyers of luxury goods in Europe. However, the question is not in their spending power, but in their accessibility as new luxury markets, particularly, the less reachable markets of Saudi Arabia and its neighbours Qatar, Bahrain and Kuwait.
The recovery luxury hub Dubai has been slow. Abu Dhabi, a hidden pearl in the Emirates saved its popular neighbour Dubai from a total collapse. In other words, the future of both these countries is interlinked. They complement each other and integrate their weaknesses and strengths. Therefore, Emirates will remain a luxury shopping destination, where culture, leisure, luxury brands will be balanced, bartered and traded.
Abu Dhabi’s strategic development, cultural and financial services, and high-end tourism, paired with rich energy resources, guarantee its long-term future as a luxury market. Qatar and Bahrain present a lot of resemblances with Abu Dhabi, with both showing a strong potential underlined by immense wealth and a flourishing economy.
Other regions such as Cairo and Beirut are aiming to place themselves on the map, although both suffer from an inability to marry identity and economic growth. Simple issues, such as a lack of luxury retail space are worsened by Cairo’s harsh and rigid approach to business and sales development, limiting the spending power of a younger, more affluent population.
Beirut, on the other hand, has held tight to its European identity within the fashion world, although it has also held tight to outdated production and retail facilities. There is no question that both these markets are in dire need of fresh air - a need for maturity and sophistication - which could make them key luxury markets in the near future.
The markets of Saudi Arabia, Bahrain, Qatar and Kuwait have already considerably strengthened their positions. Saudi Arabia leads the region with new players in the Middle East luxury market. Tremendous wealth is nestling in the Kingdom which remains relatively the biggest untapped luxury market given the scale of its potential. But it is a very difficult market; hard to crack and control, and requiring a profound understanding of its consumers, its culture and its evolutionary path.
One of the challenges for Western luxury businesses is the consumer culture within Saudi Arabia, which is tilted towards reputable brands, often recommended by family, friends and social status. However, influential changes are already appearing as new concepts are being thought of by visionary Arabic entrepreneurs, who are utilising the Gulf’s need for economic diversification to their advantage. Consequently Saudi Arabia is a market where much can be achieved and developed, but it is required to understand its socio-culture identity as well as near tribal dynamics which form everyday business.
As a Western newcomer, the main difficulty is product or retail distribution, as these are ruled by powerful empire-like families who will dice your success. However, the retail market is heavily dependent on imports for accessories and western fashion clothes. Western brands are considered high-end and targeted towards the upper social class. It is as difficult for young national designers to make a name for themselves and to be exported to the West; as much for young and trendy western designers to be accepted in this region.
However, the gap could be filled by national and international luxury brands, where they could inculcate a desire for excellence, differentiation, invention and creation.
To quote one of the leaders of the textile industry in Italy, Matteo Marzotto told Reuters, “Ideas count more than money in the crisis-hit luxury industry. We are living an historical change, you need ideas”. There are many ideas in Saudi Arabia. However, luxury has to be seen as a door to excellence, where high-end European brands should surpass their efforts resulting in greater revenue; where national and local luxury brands can reach and maintain an international standard of quality and consistency; where the level of customer service equals that of Europe to increase growth; and where rigourous employee training is put into practice.
The main obstruction for Western luxury brands is not entry in the Middle East, but their own narrow knowledge and vision of the region. Ultimately, the Middle East is not a single entity, just as Europe is not. To access and grow within this market, luxury brands have to envisage each market as a different brand, where change is needed, and where opportunities are dormant but not exhausted, permitting the global luxury market to regain a second life, if not a second chance.
Russian and Spanish aristocrat, HH Alexandra Orloff, is the CEO and owner of Sacha Orloff Ltd, a consultancy offering services and products in luxury jewellery, watches, and fashion industry. Having worked in numerous prestigious luxury brands, she has enormous expertise in strategy development for luxury brands across emerging markets.