designer-luxury
designer-luxury

The Global Challenge: Fashion Heads to the Middle East

The Middle East has been the hottest region for luxury this year, but even it, like most other areas, is facing a slowdown.

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WWD Year In Fashion issue 12/15/2008
At Ralph Lauren’s spring collection, unveiled during fashion week in September, models made their exits through an Arabian archway adorned with a single filigreed hanging lamp. It set the tone for a beautiful collection full of Middle Eastern touches, from the golden desert textures to harem pants, turbans and exotic jewelry.

Lauren of Arabia — as WWD dubbed the designer — couldn’t have hit the fashion Zeitgeist at the time any better. It’s fair to say that this year, the Middle East eclipsed China as the much-buzzed-about region for fashion companies to explore.

With every rise in the price of a barrel of oil, the oil-rich region got a little richer. Places such as Kuwait, Qatar and Abu Dhabi became even more flush with cash, and that part of the world became one of the fastest-growing regions for luxury and fashion — and deal-making. Dubai amplified its status as the desert region’s epicenter, with tourists from nearby countries, from Iran to Saudi Arabia, descending on the Persian Gulf city to play. They came with deep pockets and a seemingly endless appetite for luxury. It came as little surprise then that major luxury brands were rushing to the region to benefit from the momentum.

That said, even the Middle East hasn’t been immune to the global financial crisis, especially with slumping oil prices. Dubai in particular has found itself in a precarious situation. Unlike some of its neighboring Gulf countries, Dubai’s wealth does not come from oil, and it is largely reliant on tourism, expatriate communities and construction. The Arab emirate has been going through a spectacular building spree in recent years that is widely expected to slow down — especially as the number of tourists and expats arriving in Dubai is expected to decline next year.

“It’s all built of a very precarious base, because it’s all being financed by the other countries,” said one industry source on condition of anonymity. “There is a huge amount of building already accomplished, and a huge amount of building under way. You can’t help but wonder who is going to fill up those buildings, and how are they going to pay for them?”

Despite the caution, many fashion houses have been forging ahead with their plans for the region. Lauren already has two stores in Dubai, Kuwait City and Saudi Arabia, and added another in not-too-far Istanbul in October.

In September, Bloomingdale’s said it was opening two stores — a three-level, 146,000-square-foot men’s and women’s apparel and accessories unit and a one-level, 54,000-square-foot home store — at the Dubai Mall, which is attached to the Burj Dubai, the world’s tallest building. The Burj Dubai will boast an Armani Hotel when construction is completed next year, although it is said to be in a holding pattern at the moment.

Karl Lagerfeld in July teamed up with Dubai Infinity Holdings to conceive and design 80 residential homes on Dubai’s Isla Moda. When finished, the island, dedicated to fashion, will be part of the city’s “The World” project, a man-made cluster of islands in the form of the world’s continents.

Christian Lacroix, meanwhile, said this year that he will add his design touches to a residential tower in Dubai in a joint venture with Kuwaiti-based developer Abyaar.

Roberto Cavalli, too, jumped on the bandwagon, opening his first nightclub, Cavalli Club, at the Fairmont Hotel in Dubai last month. The venture is in partnership with Pragma Group, an investment, outsourcing and business incubator based in the United Arab Emirates.

Qatar, meanwhile, also has been getting its fair bit of attention these days. The I.M. Pei-designed Museum of Islamic Art opened in Doha last month, and a man-made island development called The Pearl will, when completed, offer 280,000 square feet of retail space for luxury brands. In recent months, there also has been buzz about an investment vehicle linked to Qatar’s ruling family looking to invest in Lanvin.

Just how much the economic depression will impact the region remains to be seen. Other emerging markets, for one, are already feeling the pinch. After privatization has created enormous wealth for some in the last decade, Russia has recently been experiencing a slowdown. China, where manufacturers depend on exports to fuel much of the country’s income, has also taken a hit.

“For a Madison Avenue type of retailer, it’s not pretty,” an industry source said. “The top luxury distributors are either freezing or pulling back. The demand for China imports is down and factories are closing.”

As for India — another much-anticipated emerging market — it remains to be seen how the terrorist attacks in Mumbai late last month will affect the local economy. It is sure to have an impact on tourism in the region.

In the Middle East, however, nothing seems to be putting a damper on the party spirit, at least for now. In late November, billionaire hotel mogul Sol Kerzner spent $20 million on the launch of his $1.2 billion Atlantis The Palm resort in Dubai. The three-day party brought out the likes of Kylie Minogue, who performed, as well as Charlize Theron, Mary-Kate Olsen, Janet Jackson, Quincy Jones, Lindsay Lohan and Samantha Ronson, the Duchess of York, Robert De Niro and Mischa Barton.

“You are dealing with countries [in the Middle East] that have significant natural resources,” said Robert Burke, founder, president and chief executive officer of Robert Burke Associates. “Even when [the price of] oil is dropped in half, there is still wealth there, and money that they are interested in using to their advantage.”
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