The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
Introducing our latest BoF Professional briefing, Worldview, your weekly analysis on the global markets that increasingly drive growth in fashion, including spotlights on must-know people, companies and places, and a round-up of international news.
Dragging a Billion-Dollar Retailer into the Digital Age
The month ahead is crunch time for Marwan Moukarzel. Not only is he steering a brick-and-mortar behemoth through the choppy waters of the pandemic during one of the most important sales periods of the year, but he must also plug a newly acquired e-tailer into his sprawling business back in Saudi Arabia — one that operates more than 1800 stores for 90 brands across a dozen countries. The word “complicated” doesn’t come close to describing the task at hand, yet the man responsible for it seems remarkably unfazed.
The Lebanese native is used to working under pressure in tense, complex environments. Having spent most of his career growing the Azadea retail empire in Beirut during an extended period of conflict, instability and crisis in his home country, Moukarzel also worked in Qatar and Abu Dhabi before moving to Saudi Arabia two years ago to lead Alhokair Fashion Retail where he has been dragging the mall-based franchise giant into the digital age, expanding its global footprint on behalf of brands like Zara, Gap and Estée Lauder.
Doing business in the conservative kingdom of Saudi Arabia has never been straightforward, but the pandemic added new layers of complexity to the remit of retail executives like Moukarzel, even as the country embarked on a series of social reforms and colossal new urban developments like Neom and Qiddiya that bookend its ambitious master plan called Vision 2030. The kingdom’s economy fared better last year than other emerging markets, but the 3.7 percent contraction was nonetheless felt across Saudi society.
Beyond the impact in cities like Riyadh and Dammam which are driven by local consumers, restrictions placed on international travel prevented millions of pilgrims from performing the umrah and hajj last year. The collapse of tourism meant that Saudi cities with rapidly developing retail infrastructure built to accommodate Muslim visitors from abroad, like Jeddah, Makkah (Mecca) and Medina, took an even greater hit.
That’s not all Moukarzel had to worry about. Due to restrained consumer spending across many other markets where his firm operates, last year was a struggle. For the nine-month period ended 31 December 2020, Alhokair reported a decline in revenues of 27.2 percent year-on-year to 3.1 billion riyals ($826 million). Now, after a year of firefighting, the multilingual executive is feeling optimistic again — and for good reason.
Unlike last year, lockdown restrictions for Saudi retailers were relaxed prior to this year’s Ramadan, which started on Monday. Across the Muslim world, the holy month is a period of spiritual reflection, fasting and prayer, but the climax of celebrations during the festival of Eid al-Fitr also traditionally provides retailers with a spike in sales. In many parts of the Middle East, North Africa and Central Asia where Alhokair owns and operates stores for international brands, the current Ramadan sales period is expected to be less challenging than last year’s.
More importantly, Moukarzel now has a potential game-changer up his sleeve that could help sustain a faster recovery and offer long-term growth in the form of Vogacloset.com, the e-commerce platform he acquired last month for Alhokair and its sister company Arabian Centres, which owns some of the shopping malls where Alhokair’s franchise stores are located.
Together, the Saudi companies took a 51 percent stake in the UK-based fast fashion site led by Hanin Hamarneh which sells brands like Levi’s and digital-first players including Boohoo and PrettyLittleThing to Middle Eastern consumers. The Vogacloset network will allow Moukarzel to extend Alhokair’s footprint to attractive Gulf markets like Bahrain, Oman, Kuwait, Qatar and Dubai in the United Arab Emirates.
New markets and a new portfolio of brands are just the icing on the cake in this deal. The real reason Moukarzel calls it a “milestone” is because Vogacloset is the foundation on which he can build out the legacy retailer’s digital future. By this March, Moukarzel said online purchases accounted for 6 percent of Alhokair’s sales, up from less than 1 percent a year earlier. But with Dubai-based e-commerce players like Emaar-backed Noon and Namshi expanding across the region and Amazon pushing into the kingdom after acquiring Souq, he can’t afford to take his foot off the accelerator.
Digital is clearly top of mind for the former auditor with a contagious grin. When Moukarzel speaks to the local press, he makes a point of distinguishing between strategies that are “omnichannel-able” or not, as he puts it, and “Instagramable” or not. Buzzwords though they may be, these powerful but elusive qualities are a far cry from the priorities that Alhokair held dear in 1990 when the firm was founded by Saudi property developer Fawaz Abdulaziz Alhokair and his brothers Abdulmajeed and Salman. Back then, their conversations would have focused on uncomplicated principles like sales per square foot.
As Moukarzel and his merchant peers around the world now look toward the bumpy road ahead, it may seem like he has an easier ride than most. Mall culture in the Middle East is far more resilient than it is in other regions and the Saudi market is predicted to be a growth engine for fashion retail come what may. But he must still contend with the shifting sands of physical retail underfoot and do so while manoeuvring his way across a virtual chessboard of stakeholders.
Not only is Moukarzel answerable to rapidly evolving fashion and beauty customers in markets as diverse as Egypt is to Serbia or Azerbaijan is to Morocco, but he must also anticipate the needs of the company’s discreet founding family members, the edicts of the Saudi government and the expectations of Alhokair investors on Riyadh’s Tadawul stock exchange. That’s quite a balancing act.
The Bottom Line: Saudi retail partners like Rubaiyat and Saudi Jawahir Trading may have dominated the luxury market for decades but Alhokair occupies an enviable position in the mass market of a country predicted to drive significant growth in the years ahead.
The Indian Jewellery Giant With an Edge Over European Rivals
European jewellers must look longingly at companies like Kalyan. One of India’s largest purveyors of gold, diamond and gemstone jewellery, the firm reported year-on-year revenue growth of nearly 60 percent for the fourth quarter of fiscal year 2021. The company’s IPO may have been tepid last month but Kalyan has enviable reach. In recent years, the Kerala-based jeweller has expanded so widely across the country and penetrated so deeply into urban markets that there are now 18 stores in Mumbai alone. You’d be hard-pressed to find a city of consequence in the whole country that doesn’t boast a flagship or at least one of the firm’s “mini-store” formats. In contrast, some of the most famous European jewellery houses only have a handful of outposts nationwide which is surprising considering that India consistently ranks as one of the top markets worldwide for gold jewellery.
But the real advantage that local brands have is that they understand the nuances of local tastes and are designed specifically with the Indian client in mind using local motifs that are fitting for the many cultural milestones and festive occasions that are unique to this market. That’s not all. Players like Kalyan have enough clout — and budget — to recruit A-list celebrity ambassadors like film legend Amitabh Bachchan and Bollywood favourite Katrina Kaif to make the brand even more aspirational and relevant.
The Bottom Line: Kalyan and Indian jewellery brands launched by conglomerates like Reliance and Tata-owned Titan and Tanishq have the scale and influence in the local market that most European rivals can’t remotely match.
Introducing China’s Unlikeliest Fashion Hub
The small Chinese city of Xiuwu is trying to punch above its weight. Marketing itself as the capital of Hanfu fashion, the scenic but sleepy town has announced it will hold the country’s first B2B and B2C expo dedicated to brands inspired by traditional Chinese costume. The fourth-tier city, located an hour’s drive from Henan’s provincial capital of Zhengzhou, is neither an apparel manufacturing hub nor a trendsetter — but organisers don’t see that as an obstacle. Xiuwu can simply plug its events into the forums where most Hanfu sales take place, Alibaba’s Taobao and Tmall platforms.
Even though you’re more likely to see real Hanfu street style in booming cities with bags of heritage like Xi’an, Xiuwu hopes to bask in the tourism receipts that come with its newfound status as the centre of a small but fast-growing movement. Hanfu clothing, which is typically based on styles from the Ming, Song and Tang dynasties, remains a niche market in China driven by young people inspired by their favourite celebrities wearing period costume in epic films, the ACG (anime, comics and games) scene, and communities on social media platforms like Douyin.
Some who dismissed Hanfu as a fad had second thoughts when they heard that Shisanyu, a nostalgic fashion brand founded by Xiao Doukou, secured over 100 million yuan ($15.24 million) in Series A funding led by Loyal Valley Capital and video-sharing giant Bilibili. What’s more, the patriotic forces of guochao that are now driving some consumers to choose domestic brands over more famous international brands could propel the movement forward faster. At the very least, Hanfu is a fashion subculture to watch and little Xiuwu was smart to spot the opportunity before one of China’s real fashion capitals co-opted it.
The Bottom Line: No one expects the Hanfu movement to displace western fashion in the world’s largest apparel market but if traditional clothes regain the cachet in China that kimonos and hanboks have in Japan and Korea as desirable occasionwear, then it will be an important niche for western brands to monitor.
FASHION, BUSINESS & ECONOMY
Africa’s luxury consumers lean on personal shoppers during pandemic. Though it would be natural to think that the pandemic would be bad for the businesses of the European-based personal shoppers who cater to Africa’s high-net-worth consumers, many have thrived over the past year, according to a Forbes Africa report.
Balmain launches capsule with Colombian reggaeton star Maluma. Singer-songwriter, Maluma, is the first Latin American artist to launch a limited edition ready-to-wear collection in collaboration with Olivier Rousteing’s Balmain.
Online sales in UAE & Saudi Arabia to top $2 billion this Ramadan season. Retailers in the United Arab Emirates and Saudi Arabia are expecting e-commerce sales for the holy month of Ramadan, which begins today, to reach $2 billion in gross merchandise value (GMV), according to an Arabian Business report.
Levi’s bounces back to beat pre-pandemic performance in India. Denim giant Levi’s Strauss & Co’s Indian sales returned to growth last quarter, outpacing other Asian markets, according to an Economic Times report. The Asia region more broadly saw sales decline 8 percent for the company in its first-quarter earnings report.
China fines Alibaba record $2.8 billion after monopoly probe. The 18.2 billion yuan penalty is triple the previous high of almost $1 billion that US chipmaker Qualcomm Inc. had to pay in 2015, and was based on 4 percent of Alibaba’s 2019 domestic revenue, according to China’s antitrust watchdog.
PrettyLittleThing launches in Saudi Arabia. The new platform features ready-to-wear, handbags, shoes and accessories and boosts PrettyLittleThing’s presence in the region after expanding to the United Arab Emirates in 2020.
Russian e-commerce leader Wildberries takes aim at US market. This marks the 14th country in which Wildberries, founded by Russia’s richest women, Tatiana Bakalchuk, has a presence, after launching in France, Italy, Spain and Germany earlier this year.
Luxury sales on Tmall rise 159 percent in Q1. Tmall’s Luxury Pavilion, an app-within-an-app currently home to more than 200 luxury brand flagships, saw sales jump 159 percent year-on-year over the January to March 2021 period, according to statistics provided by Tmall to local Chinese media.
Shenzhen Fashion Week kicks off. Its calendar features runway shows from 80 domestic brands, including Ellassay, Yinger and Kaltendin, as well as concurrently running tradeshows, forums and fashion exhibitions. The event runs until April 19.
Hong Kong retailer stocks jump after city eases travel rules. Hong Kong firms dependent on tourism rallied after the government said it was planning to relax travel restrictions across the border from as early as a month’s end, signalling a possible rebound for a sector acutely impacted from the year-long pandemic.
Dior shows Pre-Fall collection in Shanghai. The sparse concrete interior of Shanghai’s Long Museum was transformed into an unlikely disco scene for the 1,000 guests invited to see Dior’s Pre-Fall 2021 collection on April 12.
Amazon hits $3 billion in global sales from India. Amazon India said it has enabled exports of Indian-made goods worth $3 billion and created over a million local jobs since it began operating in the Asian nation about a decade ago and about $1 billion of that total was generated since January 2020. More than 50,000 offline retailers and neighbourhood stores are now on the platform, the company’s country chief told local business media.
Uniqlo owner Fast Retailing lifts full-year profit outlook as China shines. Japan’s Fast Retailing, the owner of clothing brand Uniqlo, reported a 23 percent jump in half-yearly operating profit and raised its full-year profit estimate, helped by a robust performance in China.
Dior’s net income in Korea up 250 percent in 2020. Christian Dior Couture Korea Co., the South Korean branch of French luxury brand Christian Dior, reported 328.5 billion won in sales and 77.7 billion won in net income, up by 75.8 percent and 253.4 percent, respectively, according to data released by Korea’s Financial Supervisory Service, as reported by Koreabizwire.com.
Report: Indian beauty start-up Nykaa taps banks for $500 million IPO. The online cosmetics retailer is working with Kotak Mahindra Capital Co. and Morgan Stanley on the potential offering, said the people, who asked not to be identified as the information is private. A listing could value the TPG Capital-backed start-up at about $4 billion, the people added.
Shanghai Fashion Week wraps up. This Autumn/Winter 2021 edition was the second in-person fashion week hosted in Shanghai since China re-opened following its most serious outbreak of Covid-19 infections in the first quarter of 2020.
Watches and Wonders kicks off Shanghai event. A total of 19 brands, including Cartier, Rolex, Jaeger-LeCoultre, Vacheron Constantin, IWC Schaffhausen and Piaget will be exhibiting at the event, twice as many as last year.
THE BUSINESS OF BEAUTY
K-Beauty brand apologises for eco-friendly ‘paper bottle’ that’s actually plastic. The discovery was made by a customer who posted images of the bottle in a Facebook group dedicated to plastic-free shopping. In a statement published by The Korea Herald, Innisfree said it “overlooked the possibility that the naming could mislead people to think the whole packaging is made of paper” and apologised for the confusion caused.
Guangzhou builds ‘beauty park’ to boost Chinese cosmetics industry. The park is expected to generate 8.6 billion yuan ($1.3 billion) worth of cosmetics and skincare products annually and will set up more local brands to compete with international giants in a beauty market valued at $52 billion last year.
Indonesian e-commerce firm Bukalapak raises $234 million. The latest funding round comes amid a frenzy of interest from global investors in gaining exposure to the fast-growing Southeast Asian technology sector with the prospect of listings of startups worth tens of billions of dollars.
Nykaa Fashion acquires jeweller Pipa Bella. The digital jewellery retailer will continue to operate its own website while expanding its e-commerce presence on Nykaa Fashion’s platform. The value of the deal announced on Monday has not been disclosed.
India’s Reliance Industries’ Ambani family hit with $3.36 million fine. The Securities Exchange and Board of India (SEBI) has imposed a 25 crore rupees ($3.36 million) penalty on the Ambani family and related entities for offences related to the increase of their shareholding in Reliance Industries back in 2000, according to a Bloomberg Quint report.
Walmart to build India warehouse with billionaire Adani. The partnership marks the entry of Adani, India’s fastest-rising billionaire, into the three-way fight for domination of India’s online shopping space.
Osamu Kimura appointed president of Japanese retail giant Adastria. Kimura, currently Adastria’s executive vice president, will take over as president of the fashion group from Michio Fukuda effective May 27. Fukuda will remain chairman and director, Senken Shimbun reports.
SUPPLY CHAIN & TECHNOLOGY
China’s garment industry output rises 38 percent in Jan-Feb. Over these two months, the combined operating revenue for 12,438 major garment firms surveyed by the ministry equalled 179.2 billion yuan ($27.4 billion), rising 21.4 percent year-on-year.
Kakao reportedly eyeing fashion e-commerce app Zigzag. The deal, said to be in the works by local media outlets last week, could see the South Korean tech giant acquire a controlling stake worth around $1 billion in Zigzag, a six-year-old start-up.
Southeast Asian ‘super app’ grab set for US IPO. Softbank-backed Grab is gearing up to merge with the blank-cheque vehicle in a deal that will value the technology group at about $35 billion, according to a report in The Financial Times.
JD.com, Bytedance among Chinese tech firms warned by regulators. Representatives from 34 of China’s most prominent tech companies were summoned to a meeting with the State Administration for Market Regulation (SAMR), according to a statement on its website.