Fashion E-Commerce Flowers in the Middle East

E-commerce is set to grow dramatically in the Gulf States over the next few years. Which fashion retailers are poised to seize the opportunity and how they are adapting their models to suit the specifics of the market?

Dubai | Source: Shutterstock

DUBAI, United Arab Emirates — The wealthy, fashion-loving states of the Arabian Gulf are famous for their lavish, mega-sized shopping malls. But alongside these temples to physical retail, e-commerce is expected to grow dramatically in the region over the next few years, fuelled by rising broadband penetration and growing comfort with online payment amongst a population that is increasingly tech-savvy and wired. Estimates vary on the current size of the market and its potential, but a study by the Interactive Media in Retail Group (IMRG), based in London, predicts that total e-commerce sales in the Gulf will increase from $3.3 billion in 2010, when rapid growth began, to $15 billion by 2015.

The momentum has given rise to a number of regionally-focused fashion e-tailers like Namshi.com, a Dubai-based a start-up launched in late 2011, which has since secured $20 million in financing from JP Morgan Chase and Blakeney Management to fuel a major expansion.

“My partners and I decided to launch Namshi because, at the time, there were no major players addressing the demand for customers in the Gulf to buy in-season fashion online. Given the booming traditional retail market, the success of online discounters, and the interest of global investors to address the unmet market needs, I decided to form a team here in Dubai to build Namshi,” former McKinsey consultant and Namshi co-founder Muhammed Mekki told BoF.

Dia-Style.com, a social commerce company based in London, but focused primarily on the Middle East market, launched early the following year. “E-commerce was reaching a tipping point in the Middle East and consumers were becoming more comfortable about shopping online,” said Rasha Khouri, the company’s chief executive and founder. “But there was a gap in the market for a large-scale online luxury experience. There are already some fashion sites that operate in the Gulf, but they are mostly either discount sites or market high street brands. Additionally, none of the leading [global] luxury e-tailers operate e-commerce sites in the Arabic language.”

But a number of international luxury fashion retailers, including Matches Fashion, Moda Operandi and Net-a-Porter, have their sights set on the growing Middle East opportunity.

“The Middle Eastern market is increasingly important to us and we are seeing significant growth across the region with a 250 percent increase on Q1 2012,” said Tom Chapman, joint chief executive of Matches Fashion. “The region currently accounts for 3.5 percent of our total revenue with a far higher than average order value.”

“For us, there is such a heartbeat in terms of fashion appetite in the region,” said Alison Loehnis, managing director of Net-a-Porter, who revealed that the company was “looking at” translating their womenswear site into regional languages. The UAE, which leads the Gulf States in e-commerce spending, and Qatar are both amongst the company’s top ten markets, she added.

“The Middle East is one of our fastest growing markets and now constitutes between 15-20 percent of our overall business,” confirmed Aslaug Magnusdottir, co-Founder and chief executive of Moda Operandi.

But for luxury fashion retailers, tapping the e-commerce opportunity in the Gulf requires a different approach to building and maintaining customer relationships than in more established markets like the US or Europe. “The main barrier that prevents Middle Eastern clients from purchasing online is trust — and so what we realized is that we needed to take a more personal approach. They have an extensive selection of brands available to them in the luxury malls, but feedback from clients was that they could feel too vast and impersonal,” said Chapman, who recently held a series of events in Dubai that were as much about “fact finding” as customer and media engagement.

“Many of our initial customers came to us by word-of-mouth — there are concentrated pockets of customers in the region who are friends with one another — but we achieved even greater market penetration through a regional partner with whom we’ve done a series of events,” added Magnusdottir. “Middle Eastern women have strongly responded to the direct personal contact we strive to make at these events … which have been very effective in terms of acquiring new customers in the region as well as building brand loyalty,” she continued.

Getting the product selection right is also critical.

There was a time, not that long ago, when fashion designers marketed glitzy djellabas and other highly localised (and often diamanté encrusted) products to the wealthy inhabitants of the Gulf States. But, while they may still have certain specific cultural requirements, today, luxury consumers in the region are just as sophisticated, globally-minded and assured in their fashion vocabulary as their counterparts in New York, London and Paris.

“Our Middle Eastern clientele tend to appreciate special gowns, dresses and long-sleeved pieces, but they have also shown a growing amount of interest in our emerging designers,” said Magnusdottir.

“Across the territories we trade in across the Middle East, we have a very sophisticated customer. She’s very international. She travels. She’s fashion-savvy. Newness is really key,” added Loehnis.

“They are extremely well travelled, many with multiple residences in the Middle East and Europe and they are very fashion-literate with a good understanding of luxury,” echoed Chapman. “If they love something it doesn’t matter what the brand is; they are very open and adventurous about new designers, which is exciting, as it means there is no real brand resistance in the way there can be in other [emerging] markets… They are not just looking for gowns,” he continued.

“They don’t like major brands tailoring the product selection to an incorrect and possibly old-fashioned preconception of the Middle Eastern taste.”