Op-Ed | Why Luxury Brands Should Still Believe in the UAE

Five years after the global financial crisis hit Dubai, the United Arab Emirates is poised to become a super-regional powerhouse, with compelling opportunities for luxury retailers, argues Mortimer Singer of Marvin Traub Associates.

Sowwah Square, Abu Dhabi | Source: Wikimedia

DUBAI, United Arab Emirates — During the global economic crisis, Dubai went through a tough period. They had over levered and over built. They were not the only ones, of course. But set in the hardening quick sands of the crisis and baked in Old World jealousy, the stories stuck; of supercars abandoned at the airport by shaken entrepreneurs fleeing from lenders and the law.

For quite a few years afterwards, many people, almost gleefully, announced to me that Dubai was “finished.” “What were they thinking?” was a recurring refrain. And even today, many believe that Dubai is still down and out.

This could not be further from the truth.

Retail densities in Dubai far exceed 2007 numbers. And, indeed, this shopping addict’s panacea includes malls with sales productivity levels equal to those in New York and London “fueled by the mega-mall shoppertainment concepts one finds in Dubai,” says Patrick Chalhoub, the founder and chief executive of Chalhoub Group, a leading luxury goods retailer. Today, hotel occupancy is at an all-time high and both foreign businesses and expats are flooding back to town.

“It’s the financial center of the Middle East and the main link between Europe and the United States on the one hand, and Asia on the other,” says Tony Salame the chairman and chief executive of Aishti. What’s more, the city is becoming a tourism super-magnet — a cross between Hong Kong and Las Vegas without the gaming. And, indeed, Dubai is set to surpass London, in 2015, as the world’s largest travel hub.

As Khalid Al Tayer, the CEO-retail of the Al Tayer Group, puts it, “the leadership of the city pursued an open market philosophy relative to the region, which attracted entrepreneurs from around the world to establish successful enterprises that serviced the country and the region at large.” And indeed, contrary to general perception, it’s not oil money, but the entrepreneurial families, traders, merchants and financiers who took the ruler of Dubai’s lead and invested in their homeland — whether they were Emirati, Lebanese or Indian — that actually drive this city and the region.

Of course, luxury goods companies have shown a keen interest in the UAE. Not only do they have willing and flush UAE nationals to please. But they also court tourists, in particular the Chinese, who come here in droves. In fact, their presence is so prevalent that the human resources executives of the largest retailers in Dubai visit China regularly on recruiting trips. “Luxury in particular has made its mark in this fast-paced retail environment, with Dubai now boasting the highest concentration of luxury retailers [in the world], second only to Hong Kong,” adds Chalhoub.

Then, there’s Abu Dhabi. The most that many people know about this, the more conservative capital of the UAE, can be captured in one line: “That’s where all the money is, right?” While this is true, there’s much more to the story. “It looks like Abu Dhabi is set to become the cultural centre of the Gulf region,” says Salame, referring to the presence of New York University (NYU) and the 2016 openings of the Norman Foster-designed Louvre, Frank Gehry’s Guggenheim, Zaha Hadid’s Performing Arts Museum and Tado Ando’s Maritime Museum. When it comes to retail, however, “although local purchasing power is stronger [than Dubai], infrastructure is still not as mature,” says Patrick Chalhoub.

But a major redevelopment plan, set to be complete by 2030, calls for a newly minted Central Business District to be built around Sowwah Square on Al Mariyah Island (formerly Sowwah Island). And, this August, Sowwah Square will see the opening of a luxury shopping experience, anchored by the Four Seasons and Rosewood hotels, that will host “a collection of luxury brands to rival any capital city on earth,” says Ken Himmel, co-managing director of Gulf Related and the developer of the project.

Alongside the opportunities, the UAE also poses clear challenges, however. Indeed, operating luxury stores here is not easy. There is often a tremendous amount of red tape involved in complying with municipal building codes and regulations. There are also government sanctioned sales periods outside of which retailers are prohibited from implementing markdown or other promotional and inventory clearance tactics.

You also have an Emirati woman who by custom is required to wear her abaya when she is out in public. Underneath she may be draped in Chanel, Gucci, Prada and Dior. But since she is covered, accessories are the only means for her to show off in public. It’s no surprise, then, that shoes and bags make up an even greater percentage of total sales than in other parts of the world, something that’s reflected in new retail projects. Chalhoub Group just opened a 90,000 square foot shoe store here, the largest in the world.

Emirati men, on the other hand, wear the dishdash. But unlike their female counterparts, they do not wear Western clothes underneath these robes. So comparative to other markets, the luxury menswear business in the UAE is slow, particularly at the high end. That said, everyone travels and Armani, Tom Ford and Zegna are amongst the brands that are top of mind. And, of course, it’s important to remember that Emiratis are only 20 percent of the population, which also includes expat Westerners, Arabs, Eastern Europeans, Asians and Africans — not to mention the flows of global tourists.

Indeed, in less than 5 years, Abu Dhabi’s museum districts will be complete, as will a new $7 billion international airport. And the redevelopment of the Al Maryah, Saadiyat and Reem islands will be well underway. Couple this with Dubai’s comeback and my conclusion is that the UAE is a super-regional power house in the making.

Mortimer Singer is president and CEO of Marvin Traub Associates, a business development and strategy consulting firm focused on the upscale retail and consumer goods sector. 

The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.