The luxury retail industry has emerged stronger and more dynamic than ever from the pandemic crisis, and the Middle East is poised to be a key growth driver for the region going forward. This is largely driven by a young and ambitious middle class population, with about 75 percent of the demographic within the working age group.
Despite a boom in new store activity in the Middle East in 2021, its global share is only 3 percent, highlighting the region’s low potential, according to the Seville Global Luxury Retail report. With traditional luxury retail hubs such as Dubai and Doha that have seen a steady influx of luxury brands, there is an increasing appetite for brands to explore other markets such as Saudi Arabia.
Saudi brand prominence
In 2021, there was an increase in activity in Saudi Arabia, where Dubai was historically the center of new store openings. The Kingdom’s luxury market is growing rapidly, with sales projected to reach $22.2 billion by 2024, reflecting an average annual growth rate of 7.2 percent between 2019-24.
Saudi Arabia tops the agenda of many brands. Traditionally, Saudi citizens have been a major driver of luxury retail demand in the region. According to a recent study, on average, about 50 percent of Saudi citizens spend on luxury goods while traveling abroad. With the recent opening up of the Saudi economy and significant diversification into sectors such as travel and tourism, the rise and availability of luxury retail in the Kingdom is only bound to increase over the next few years.
luxury becomes luxury
This growth will coincide with the launch of various luxury hotels such as St. Regis, Editions, Fairmont, Raffles, Intercontinental, Grand Hyatt and Jumeirah and coveted lifestyle designations such as Amala and The Red Sea Project. The maturing market would further invite more consumption of luxury goods within the Kingdom.
Qatar is another luxury market that we have seen a huge influx of brands recently. Most luxury homes, including Gucci, Prada, Dior, Valentino, Fendi, Bottega Veneta, and Loro Piana, set up shop at the opening of the luxury mall Place Vendome.
Dubai has been and will remain a major center of luxury retail in the region. The city offers a mature retail infrastructure and has seen a significant rebound in tourism activity, especially due to its handling of the pandemic. The city ranks high on lifestyle offerings and has a first-mover advantage in attracting luxury travelers and high-net-worth individuals.
influx of rich
According to the latest Henley Global Citizens report, the United Arab Emirates is projected to attract 4,000 HNWIs in 2022, dramatically from a net inflow of 1,300 in 2019, making it the most popular place for ultra-wealthy residents to relocate. This is also reflected in its luxury retail offerings as Dubai continues to be the first place of entry for brands that are expanding into the region.
For example, Delvaux, a Belgian luxury house that recently opened in the Dubai Mall, makes its first foray into the Middle East market. The successful hosting of Expo 2020, which attracted over 24 million visitors from 178 countries in a short span of 6 months, a successful immunization campaign, proactive and pro-business policies, and multiple residency visa options are set to drive investment further. The evolution of luxury retail in Dubai.
Overall, we see a strong appetite for store openings from luxury brands in the GCC region. Brands such as Fabio Caviglia, an Italian luxury fashion house that we currently represent, recently locked in their first location in Bahrain and have expansion plans to open stores in the UAE, Saudi Arabia and Qatar.