Middle East Retail Returns to Growth Track

Luxury brands Hermès, Oscar de la Renta and Van Cleef & Arpels see potential though overall spending hasn't fully recovered.

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The retail pulse is back in the Middle East.

Fashion brands point to positive trends in the region, including the return of tourists, particularly in Dubai. Wealthy Chinese are streaming in — picking up the slack from fewer Russian visitors — shoring up a fast-growing destination for Europe’s luxury players even though business isn’t near pre-recession levels.

Hermès, which operates five stores in the region, is to open in Beirut, Lebanon, on July 30, with three more stores on the way over the next two years in Kuwait; Abu Dhabi, United Arab Emirates, and Saudi Arabia. Missoni and Oscar de la Renta also plan to launch in the Middle East. De la Renta will open three boutiques in the next 18 months in Riyadh, Saudi Arabia; Abu Dhabi, and Doha, Qatar, with a shop-in-shop in Riyadh in 2011.

Van Cleef & Arpels, which owns stores in Dubai, Bahrain and Kuwait, is to open a shop in Kuwait this month, followed by units in Doha in October and Jeddah, Saudi Arabia, toward the end of this year or early next year.

Last week, Christian Louboutin was in Beirut to mark the opening of a 1,000-square-foot store and autograph his red-soled styles. The launch of that boutique followed the March opening of a Louboutin store in Jeddah. Both are in partnership with Chalhoub Group. More openings are planned for Dubai and Riyadh before the end of the year.

Also last week, Louis Vuitton opened its first store in Beirut, a two-level, 2,900-square-foot unit at 103 Allenby Street near the Beirut Souks. Dior and Chloé launched units in Beirut in December.

And Giorgio Armani put his stamp on the Dubai skyline in April, opening a 160-room hotel in the Burj Khalifa tower, the world’s tallest building.

Lebanon’s best-known fashion export, Elie Saab, last month opened his first flagship in the Dubai Mall. Saab, who counts the Middle East as his biggest market, described the location as a “luxurious and strategic destination.” He also operates flagships in Paris, London and Beirut. Coming within the next 18 months are locations in Beverly Hills, Hong Kong and Moscow.

European brands have a history in the region, with Ferragamo arriving in 1994, Tiffany & Co. in 1995, Louis Vuitton, Gucci and Burberry in 1997 and Cartier in 2000.

The market is forecast to grow 6.6 percent this year, according to Italy’s luxury goods association, Fondazione Altagamma. Although trade is picking up, retailers acknowledged the global recession, fluctuating dollar and ruptured credit lines are among the factors that have contributed to a general decline in spending in the region over the past two years.

“Traffic in stores is much slower, but from indications we get from brands we work with, business and tourism is coming back,” said Christophe Penne, vice president and merchandise manager, Al Rubaiyat Co., which operates 63 multibrand stores and branded partnerships in Saudi Arabia, with 24 store openings over the past two years that were planned before the downturn. Brands distributed by the company include Balenciaga, Lanvin, Prada, Ralph Lauren and Yves Saint Laurent.

With consumers looking for quality heritage product rather than trendy fashion, the luxury retailer scaled down volumes and shed 22 niche brands.

“We strengthened our top-tier luxury business and cut off midrange and niche brands,” said Penne, adding that Saudi Arabia’s large royal family is the kingdom’s biggest consumer of luxury goods.

The drop in local spending power, on some levels, is relative. “I was talking to a prince recently who said, ‘[During a crisis] billionaires become millionaires,’” Penne said.

Saudi Arabia, a closed, conservative market, showed resilience during the financial crisis, experts said. Dubai, which was hardhit by a steep decline in tourism, on which it depends, is showing the speediest rebound.

Monthly traffic at the grandiose Dubai Mall, which opened in 2008, has reached as many as five million visitors. New mall developments in the region include the just-opened Mirdif City Centre in Dubai and the Dalma Mall in Abu Dhabi, which is to open later this year. Both are about 2 million square feet.

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