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.
Tonight’s world expo opening ceremony is tipped to be a star-studded extravaganza fit for the high-octane emirate hosting this year’s mega-event.
As the commercial capital of both the United Arab Emirates and the wider Gulf region, Dubai is playing host to the first world expo in the Middle East. With 192 country pavilions created over four square kilometres, Expo 2020 Dubai is a showcase for culture, innovation and business. There’s a lot riding on the six-month fair, after it was postponed due to the coronavirus pandemic.
Over the course of the expo, retailers and brands will look to capitalise on a gradually recovering tourism industry and locally resonant brand messaging with the likes of Chanel and Giorgio Armani both hosting fashion shows in Dubai in the coming months.
“I saw what the expo did to Milano, in terms of energy, and I am sure it will be the same for Dubai. The market is extremely important for us, vital I’d say, and I am holding this special event as a sign of hope and restart,” says Giorgio Armani. “The Expo 2020 will surely highlight... the Middle East as the cradle of a new concept of luxury... and the dynamism of local life, culture, invention.”
When Dubai was awarded the rights to host the world expo, initially slated to take place from October 2020 to March 2021, organisers targeted 25 million visits over six months. A year later, that number is expected to be far lower, despite the easing of travel restrictions and the UAE’s world-leading vaccination rates, with more than 81 percent of the population fully vaccinated according to Our World in Data. Yet, even with reduced visitor numbers, business leaders in Dubai are hopeful that the expo will create a halo effect that reignites the emirate’s retail, leisure and hospitality industries.
Patrick Chalhoub, CEO of the Chalhoub Group, which operates joint ventures with brands including Louis Vuitton and Dior, says, “Hopefully we’ll get 10 million [visitors], not 25 million, and hopefully five million of those are from overseas, instead of the 15 million [we were expecting]. So, we could cry, or, we could say, ‘Fantastic, we are getting five million people who are thirsty to travel.’”
Chalhoub believes that the onus is on each business leader to maximise the opportunity that the expo presents. “Retailers have a role to play to make this a meaningful experience; if we become engaged we also get part of the reward.”
Khalid Al Tayer, CEO of luxury multibrand online retailer Ounass and managing director of Al Tayer Insignia, Al Tayer Group’s retail business, which operates joint ventures with brands including Gucci and Saint Laurent, is equally optimistic. “Following the [Tokyo] Olympics, this is one of the largest events in the world [and]… the expo narrative of sustainability and unity is more relevant today than ever as a message.”
As one of the few gateway cities in the world currently open for travel, Dubai should receive a tourism boom during the six-month expo period, Al Tayer predicts. “I estimate that Dubai will become the number one global tourist city in the world. If you’re looking at capitalising on flow of tourism then no city will be more attractive than Dubai during the expo period.”
Repatriation Is Key to Luxury’s Recovery
Dubai certainly needs it. The emirate relies on tourism more than just about any other destination in the region and the travel industry is nowhere near a full recovery. In the first half of 2019, Dubai attracted 7.2 million visitors, which dropped to just 1.7 million in the same period of 2021, according to the Dubai Department of Tourism and Commerce Marketing (DTCM).
In the luxury retail sector, tourism accounts for as much as 60 percent of spend in the UAE, according to Bain & Company, revenue which was decimated due to the Covid-19 travel restrictions of 2020. The consultancy reported a 17 percent drop in the luxury goods market of the wider GCC region (Gulf Cooperation Council countries comprising Saudi Arabia, Kuwait, Qatar, Oman, Bahrain and the UAE) in 2020 to $7.4 billion, with the tourism-dependent UAE bearing the brunt of the decline and suffering a 25 percent drop in luxury sales over 2019.
However, swift re-opening measures in the GCC and a shift in inbound tourism flows, combined with repatriated spend on luxury as GCC nationals, who usually purchase 30 to 40 percent of their luxury goods outside the region, according to Bain, have prompted a swift bounce back. By May 2021, Bain was reporting promising results in the luxury category in the Middle East, with Dubai outperforming other geographies in the region.
Al Tayer cites an increase in high-value tourists attracted by the country’s stable pandemic track record and luxury real estate. “Dubai has started to attract a lot of very well-travelled, high-end luxury tourists [again]; high net worth individuals and global political leaders.”
Fahed Ghanim, CEO of Majid Al Futtaim Lifestyle, which manages brands including Lululemon, Abercrombie & Fitch, says, “with the opening of expo, one key performance indicator is the tourism inflow, but it’s never about the quantity it’s about the quality. We’ve seen traffic in malls go down during Covid but we’ve seen spending rising.”
According to Majid Al Futtaim data, overall fashion sales in H1 2021 were down 4 percent on the same period in 2019, a relatively modest decline as the UAE emerges from the pandemic. Majid Al Futtaim operates 29 shopping malls in the MENA region (Middle East and North Africa) including Mall of the Emirates in Dubai and Mall of Egypt in Cairo, anchored by a wide range of tenants across price points such as Harvey Nichols and Zara.
“While in 2021 H1 overall retail sales [in the UAE] is just catching up with what it was in H1 2019, the performance of luxury is higher. Most luxury brands are significantly above 2019 [levels], with the possible exception of watches,” says Cyrille Fabre, partner, Bain & Company Middle East.
According to Fabre, the main driver of this growth is the combination of some Emirati spend repatriation due to lower outbound tourism, combined with a significant influx of high net worth individuals (HNWI) — both tourists and new residents. The latter are being drawn by significant growth in the value of luxury properties seen in the first half of the year.
“How much of it is sustainable will depend on the capabilities of the luxury brands to retain a high share of wallet of residents when outbound tourism goes back fully,” he adds.
High-Stakes Local Investments
Dubai has ploughed $8.2 billion into the expo, asking brands and retailers to invest in activity around the event even as the continued uncertainty of Covid-19 poses risks.
In addition to the primary risk of a resurgence of infections or a new variant, “the second is if you don’t reach visitor numbers and perhaps some of the exhibitors don’t invest enough money into it because they say it is not as important as they were expecting it to be,” says Chalhoub. “[But] even if it doesn’t give us the return on investment which we would expect to have, on a longer… sustainable term of creating awareness, it’s extremely important. From my side we [at Chalhoub Group] will be fully engaged, without hesitation in spite of the risk.”
Working closely with the French Pavilion, Chalhoub will host an installation celebrating art de vivre supported by the group’s homewares brands including Tanagra and Christofle. The group is also the regional partner of cosmetics giant L’Oréal, the expo’s official beauty products and services partner. In addition, Chalhoub franchise partner Lacoste will produce an expo capsule collection as will Al Tayer partner Zegna.
With both Armani and Chanel staging fashion shows in Dubai in October and November respectively, appetite to focus on the region is high and localisation is a priority, as brands look to retain the luxury spending that has been redirected to the Gulf countries like the UAE.
“That has really accelerated the brands in their adaptation of local tastes and local cultures and local celebrations by coming up with communication, [events] and merchandising that appeals to them…. They’re really considering the Middle East a lot more seriously than they have in the past,” says Al Tayer.
Chalhoub agrees that brands are taking localisation to a deeper level in a bid to hold on to clients on home soil. “The brands are engaging much more and are open to engage,” he says. Adding that, for instance, simply translating text into Arabic is not enough. “You need to think it in Arabic,” he explains, “the pandemic has really put into focus that we need to create local content. For example, using AlUla [the UNESCO World Heritage Site in Saudi Arabia] and not only Paris as a shoot location.”
Al Tayer believes that the increasingly valuable pre-Ramadan shopping period, which coincides with the tail-end of expo in 2022, will also be a major focus for luxury brands. “They are all coming up with Ramadan capsules that will launch with Spring/Summer, which very much is in the heart of expo,” he says. “We’re seeing this adaptation to the local consumer and Dubai is going to be the window for those launches and that’s because of expo as well.”
More National, Less Pan-Arab Marketing
With the UAE celebrating the 50th anniversary of the unification of its seven emirates on December 2, savvy players have identified the timing as a way to reinforce their connection to the nation’s consumers. For example, Loro Piana is expected to hold an event at a national landmark to mark the National Day celebrations during the expo.
Majid Al Futtaim’s Ghanim believes that expo-centric activity has a longer term, strategic role for the retail sector. “Expo positions Dubai and the UAE as a global destination; it will attract people as first-comers. Our focus is not to take their money [then] but to wow them and give them great experiences to build that repeat habit.”
Property and retail giant Emaar, which owns The Dubai Mall and fashion e-tailer Namshi, is offering guests at its hotels in Dubai complimentary tickets to expo as its hospitality business is an official partner to the event.
Other major UAE retailers are doubling down on efforts to service customers via e-commerce, with Bain reporting that almost 70 percent of high-net-worth GCC buyers, who traditionally opt for in-store luxury shopping, now say they are comfortable with online shopping. Al Tayer’s Ounass and Bloomingdale’s, Emaar’s Namshi, Majid Al Futtaim’s That Concept Store and Chalhoub’s Tryano and Level Shoes are all aiming to capture new online consumers ahead of or away from international competitors.
On the expo site itself, brands including Swatch, Cartier and L’Oréal and have taken strategic positions. The latter two are harnessing the event to cement their ties to the region while amplifying their support of female empowerment, which is strongly aligned with cultural development in the GCC.
Among other initiatives, L’Oréal will sponsor one of the France Pavilion’s themes on gender equality in March. Cartier has collaborated on the Women’s Pavilion, with Sophie Doireau, managing director of the brand for the UAE and India, stressing that Cartier’s presence “is not a commercial partnership and Cartier is not participating as a brand. Rather, we are here as a responsible corporate citizen.”
Created around the themes of sustainability, opportunity and mobility, the Dubai Expo provides brands with an opportunity to build on storytelling such as this and pursue other marketing goals. In October, the British Fashion Council will be hosting a series of events at the UK Pavilion looking at building a more sustainable future for the clothing industry and featuring brands including Burberry and Jimmy Choo alongside a fashion show showcasing student and graduate designers from the UK.
Laura Faulkner, UK Commissioner General, Expo 2020 Dubai, says that the UK will support British brands with reaching new buyers in the UAE over the course of the Expo. Stephanie Phair, chief customer officer at Farfetch and chairman of the British Fashion Council, adds, “the style and lifestyle of many of those who live in the region accommodate the statement pieces British designers are known for.”
While the immediate focus within the region is centred on the UAE as Expo 2020 and the UAE’s jubilee celebrations gain momentum, the fashion industry is also looking further afield within the GCC to Saudi Arabia as the country undergoes economic and cultural transformation.
“Saudi is going through a very exciting cultural shift and it’s a very exciting economic transformation as well, so it sets a base for a much more sustainable Saudi Arabia for the future, rather than being hugely dependent on oil. For the luxury goods industry this is only a positive opportunity,” says Al Tayer, adding that Saudi will shortly overtake the UAE as the biggest market for Ounass, Al Tayer’s luxury multibrand online retailer.
It remains to be seen whether a Saudi city will one day challenge Dubai’s position as the regional capital for fashion and retail, but brands looking to capitalise on both markets will need to recognise the distinct consumer bases rather than fall back on a pan-Arab approach.
From the immediacy of Expo 2020 in Dubai to the fast-growing trajectory of Saudi Arabia, authentic localisation strategies are set to be both a challenge and an opportunity for luxury brands who now more than ever need to refocus on their Middle Eastern VIP customers.