WHO ARE THE NEW MIDDLE EASTERN LUXURY CONSUMERS?

The Middle East is home to one of the world’s youngest and richest populations. In 2016 Arab consumers spent $320 billion on luxury fashion. For brands to capitalise, an understanding of cultural values is essential. Who is this luxury-loving cohort and what makes a brand a ‘must have’?
Location Western Asia

Highlights & Data

  • The Middle East is home to one of the youngest and largest populations in the world
  • Consumers from this region are wealthy and like to spend their money on clothing and accessories
  • Technology plays a pivotal role in the lives of Arab Gen Yers and they expect luxury brands to be online and easily accessible
  • Modest fashion consumers want clothes that marry the Islamic principles of propriety with their own keen sense of style
  • Muslim consumers spent $243 billion solely on clothing and apparel, while the Modest Fashion market captured a revenue of $44 billion (Thomson Reuters,
    2016/17)
  • In the United Arab Emirates, 88% of the population are internet users but only 15% of businesses in the region have an onlinepresence (The Next Web, 2017)
  • 32% of Gulf nationals choose a luxury brand because they grew up with it and 57% because they trust it (Panworld Education, 2017)
  • The average spend among affluent Gulf Cooperation Council locals on beauty, fashion and gifts is $2,400 per month (Panworld Education, 2017)

Scope
Home to some of the world’s largest deposits of oil and natural gas, the Middle East’s tiniest countries also boast some of the biggest GDPs per capita. In Qatar, this stands at $129,700, the highest in the world. Nearby Kuwait, another nation rich in oil and gas reserves, boasts a GDP per capita of $71,300 , while the United Arab Emirates’ clocks in at $67,700.  To put that into context, the United States’ GDP per capita was recorded as $53, 272 in 2016.  Compared to the Gulf states, American spending power suddenly looks like small fry.

“There is a high concentration of wealth in the Middle East as a whole, with research showing that Emirati teenagers spend six times more than the global average for their peers on clothes and accessories,” says Cassie Owen, the Dubai-based consultant Head of Fashion and Retail at MacKenzie Jones.  Arab consumers spent $320 billion on luxury fashion in 2016, and that number is expected to grow to $490 billion by 2019.  Gulf consumers in particular – notably from
the Emirates, Saudi Arabia, Kuwait and Qatar – are the UK’s biggest shoppers and spend seven times more in Germany than the average European visitor. When Middle Eastern tourists visit France, 50% of them will spend more than $6,000 a day. Couple that with the region’s youthful population and brands have tremendous opportunity to forge a meaningful relationship with these cash-rich consumers. “A young population provides the opportunity to establish brand loyalty early on,” Owen adds.

As this deep-pocketed and globe-trotting consumer has emerged, luxury fashion houses have been forced to rethink their approach – and attitudes towards – this market. In recent years, a spate of significant changes in the fashion world demonstrates this evolution: the much-lauded launch of Vogue Arabia, seasonal abaya collections from European and American fashion brands, and the annual Dubai Fashion Week, which attracts both local and international talent. “There has been a concerted effort to promote the Middle East as a fashion hotspot specifically within luxury retail,” says Owen, whose own clients include Gucci, Fendi, Chanel and some large franchised retailers.

As Middle Eastern shoppers play an increasingly central role in the global fashion market, they are influencing everything from product design to regional flagship store openings. For brands to capitalise, an understanding of the cultural values and specific needs of this young and powerful consumer is essential. Who are they and what do they want from foreign fashion brands?

A population explosion
In the last 60 years, high fertility rates have transformed the Middle East into a dynamic, youthful society. In 1950, the region’s population stood at 100 million; now, it is estimated to reach 600 million by 2025.  This phenomenal population bulge has been closely scrutinised by media outlets, with numerous articles written on the subsequent impact it will have on everything from international politics to employment opportunities for the new generation. The Arab Spring, a series of revolutionary anti-government protests and uprisings that brought down leaders in Tunisia, Egypt, Libya and Yemen, is largely attributed to this burgeoning body of technologically savvy and politically active young people.
As home to one of the youngest and largest populations in the world, the region will face numerous challenges in the years to come. But this youthful demographic, particularly those in the enormously affluent Gulf countries, should not be overlooked by fashion brands. ”More than 350
million people are in the Arab world and, in most countries, more than half of the population is under the age of 26,” says Shashi Menon, publisher of Vogue Arabia and founder/CEO of Nervora.
“There’s an extremely large long-term opportunity here.”

The region is home to a tech savvy demographic of young shoppers
Meutia Widodo, Creative Commons (2015) ©

Online and interested
Technology plays a pivotal role in the lives of this youthful consumer. From Facebook to Instagram, Arab Gen Yers expect luxury brands to be online and easily accessible. “You are seeing the general consumer taking to the internet a lot more,” says Alia Khan, Chairwoman of the Islamic Fashion Design Council.  “It’s much easier to catch their eye when they’re on their Facebook feed or their Instagram than anything else. I believe that billboards and conventional advertising is
only 4% effective now – someone is more likely to listen to their mother how to dress than a billboard.” Owen describes the Gen Y luxury Middle Eastern consumer as increasingly knowledgeable, demanding, and promiscuous in their brand loyalty. Mobile use is almost 100% in the region among Yers who use it to discover brands, engage with content and purchase things. As a result, a strong social media presence is absolutely key for luxury brands to connect with existing customers and new potential.

There is a high concentration of wealth in the Middle East as a whole, with research showing that Emirati teenagers spend six times more than the global average for their peers on clothes and accessories

Cassie Owen, Dubai-based consultant Head of Fashion and Retail at MacKenzie Jones

The launch of Vogue Arabia’s website – which featured native and display campaigns from brands that included Chanel, Fendi, Dolce & Gabbana, Burberry and many more – proved brands’ hunger to connect with consumers on the most suitable channels. Gucci has been particularly successful with social media, generating high volumes of engagement on colourful Instagram posts that feature celebrities on the red carpet, product shots and creative collaborations. As a result, Owen says, it has managed to maintain great spend in the region. “Luxury brands need to offer a real experience with real knowledge and storytelling to the brand,” she explains. “As well as in-store customer experiences, there is an absolute need to be digitally enhanced.”

A report on the Middle East’s e-commerce market revealed it as one of the fastest growing in the world. In the United Arab Emirates alone, 88% of the population are internet users but only 15% of businesses in the region have an online presence.  This untapped potential is quickly being realised by big business. In November 2016, NET-A-PORTER struck a £110.9 million deal with local mogul Mohamed Alabar to bring its hugely influential luxury e-commerce site to the Middle East; a month later, Dubai-based conglomerate Al Tayer launched its first retail business, Ounass, another luxury e-commerce site that serves customers in the Gulf.

They want to be equally beautiful, elegant and stylish as mainstream fashion
people… it’s very doable for any designer and I think that’s what people are
realising

Alia Khan, Chairwoman of the Islamic Fashion Design Council

Since the e-commerce market is still relatively new, Owen describes reluctance from consumers who enjoy the experience of going into stores and feel nervous about online shopping’s delivery logistics. The popularity of bricks-and-mortar stores remains at an all-time high in the Gulf, where malls are open until late in the evening and are regularly frequented by locals who view shopping as a pastime. Further proof of its enduring success in the region can be seen at the 12-millionsquare-foot Dubai Mall, which is currently building an extension for a number of luxury brands’ flagship stores. But while she acknowledges that it will take time for consumers’ shopping behaviour to evolve, Owen sees the shift from retail to e-tail as essential for brands to succeed.
“The evolution of e-commerce is reshaping the luxury market – the growth of it in the Middle Eastwill increase in double-digit figures in the coming years,” she notes.

E-commerce is growing in the Middle East, but brick-and-mortar is still king Junhan Foong, Creative Commons (2017) ©

Understanding the modest fashion consumer
According to Thomson Reuters, the Islamic Economy was estimated to be worth $1.9 trillion in 2015. Within that, Muslim consumers spent $243 billion solely on clothing and apparel, while the Modest Fashion market captured a revenue of $44 billion. This economy is predicted to continue gaining momentum: by 2021, Thomson Reuters predicts that Muslim shoppers’ spend on clothing and apparel will reach $368 billion. [10] Keen to court this lucrative demographic, fashion houses have started to develop collections tailored to the specific requirements of Muslim consumers. Known as ‘Modest Fashion,’ followers of this growing movement marry Islamic principles of propriety with their own keen sense of style.
“They require clothing to meet the modest guidelines of coverage,” explains Khan. “Full sleeves, full to the ankles, no cleavage, no sheer fabrics. Those are simple guidelines, it’s not brain surgery. They try to avoid anything too tight.”
Khan is quick to point out that a conservative approach to clothing does not mean that these consumers are lacking in style. “They want to be equally beautiful, elegant and stylish as mainstream fashion people,” she adds. “It’s not that big of a learning curve – it’s very doable for any designer and I think that’s what people are realising.”

The evolution of e-commerce is reshaping the luxury market – the growth of
it in the Middle East will increase in double-digit figures in the coming years

Cassie Owen, Dubai-based consultant Head of Fashion and Retail at MacKenzie Jones

In 2016, Dolce & Gabbana launched its first foray into modest fashion with an abaya and hijab collection. Blending the extravagant detailing and bold prints of the Italian fashion label with practical coverage, the collection was met with a mixed reaction from Muslims worldwide. Some lauded the fashion house for finally creating designs that catered to Muslim women; others were more critical, particularly the decision to use a white, non-Muslim model in the campaign. “I wouldn’t say that D&G was necessarily successful with the first launch of its abaya line, but I’d say it was a good call because it told this market, ‘We’re interested in you and we’d like to serve you,’” says Khan. “There was a learning curve and due diligence that would have served them
better… but it got the momentum going and so the discussion became very interesting after that.”

The emergence of Ramadan collections is another indicator that foreign fashion brands are starting to take the spending power of Muslim shoppers seriously. DKNY was the first Western brand to debut the idea in 2014, releasing an exclusive collection of modest clothing in muted shades one week before the holy month of daily fasting began. Since then, everyone from high-street brand Mango to Tommy Hilfiger and Oscar de la Renta has unveiled seasonal Ramadan collections aimed specifically at fashion-conscious Muslim women.

For Khan, these developments are part of the emerging symbiotic relationship between foreign fashion brands and a generation of sophisticated Muslim Yers. “You’re seeing this need for stylish, modest clothing a lot more than ever before as a result of this growing youth population. They’re the ones who are getting more educated, developing their careers. They’re the ones who have this new lifestyle that everyone finds very valuable for their own brands,” she says.

Middle Eastern Muslim Yers want conservative, yet stylish fashion
Junhan Foong, Creative Commons (2017) ©

Insights and opportunities
The huge spending power, jet-setting lifestyle and tech-savvy habits of this new generation mean they are simultaneously internationalists and traditionalists. While they shop and travel around the world, their cultural and faith-based values remain firmly entrenched in a long history of customs being passed down from one generation to the next. This same attitude is applied to brands: 32% of Gulf nationals choose a luxury brand because they grew up with it and 57% because they trust it.

In the Gulf alone, 55% of the overall population is under 30 years old, raised during a period of tremendous economic ascendancy and equipped with a habit of luxury consumption. For fashion brands setting up shop in the Middle East, there are huge financial rewards to reap from this young, cash-rich and image-conscious population. Extravagant material spending is entrenched in the values of Arab society, which prizes generosity over frugality. It is also used as a highly visible indicator of one’s social standing. High levels of spending reflect these attitudes – the average spend among affluent Gulf Cooperation Council locals on beauty, fashion and gifts is $2,400 per month.

The need for stylish, modest clothing… is a result of this growing youth
population. They’re the ones who are getting more educated, developing
their careers

Alia Khan, Chairwoman of the Islamic Fashion Design Council

However, it’s essential that brands understand the societal codes, cultural requirements and behavioural habits of these customers. On an emotional level, this means driving a deep connection between consumer and brand through a strong social media presence and high-impact regional events. Chanel, which presented its Cruise collection in Dubai in 2014, and Stella McCartney, who showed her Spring 2016 collection in Dubai after its debut in Paris, used fashion
shows as proof of their commitment to Middle Eastern clientele. The success of Gucci – a fashion house famed for its savvy approach to social media – also demonstrates the importance of connecting online and often.

In a practical capacity, luxury brands can make consumers feel understood and appreciated through regional investment in VIP management, client services and in-store experiences. Because they are jet-setting, HNWI clientele are used to visiting Europe and the US to enjoy that shopping experience in person, and so luxury brands must foster an environment of exclusivity within the Middle Eastern markets to retain spend in the region.

“Foreign brands do very well in pleasing their customers and so this is just another category of customer that I believe they can easily please,” says Khan. “If they went through some collaborations or consulting and allowed us to help them to learn the market a little better, I think it would be huge in the results that they would see.”

Pip Usher is a journalist by trade, writing fashion and culture pieces for Vogue.com, Kinfolk and more. She was based in Beirut for three years and has traveled the Middle East extensively.

Sources
1. The Richest And Poorest Economies In The Middle East, WorldAtlas (August 2017)
2. Gulf luxury consumers: a world apart?, Chalhoub White Paper (2014)
3. United States GDP per capita PPP, Trading Economics (2017)
4. Interview with Cassie Owen by the author
5. How the Middle East can make the most of their youth bulge using educational technology, Panworld Education (March
2017)
6. Dubai is quickly and quietly becoming the world’s next great retail capital , Fashionista (February 2017)
7. Interview with Alia Khan by the author
8. Ecommerce in the Middle East: Amazon’s entrance and difficult legislation , The Next Web (July 2017)
9. Yoox Net-a-Porter strikes Middle-Eastern joint venture, The Telegraph (November 2016)
10. State of the Global Islamic Economy Report, Thomson Reuters (2016/17)
11. What 5 Muslim Women Think About Dolce & Gabbana’s New Hijab Line, Cosmopolitan (January 2016)

 

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