DUBAI — Can a retail market driven by abundant consumption — and a “build it they shall come” mantra — last for generations? Not unless the Persian Gulf addresses two key challenges: dependency on oil and youth unemployment, according to a report from Chalhoub Group, one of the Middle East’s largest luxury retail conglomerates.
The Gulf economies are still largely reliant on exports of oil and gas, which account for more than 33 percent of the gross domestic product and 84 percent of government revenue across the Gulf Cooperation Council. Those earnings give the region some of the highest GDPs in the world, but it also has a very high youth unemployment rate, with numbers approaching 30 percent in Saudi Arabia.
Those are the questions posed in a new white paper from family-owned Chalhoub, entitled “Luxury in the Gulf: A Sustainable Future?”
“We believe in this region and its potential and we want to make sure that our group is still here in the next 60 years,” said Anthony Chalhoub, co-chief executive officer of the Chalhoub Group, which marks its 60th anniversary this year.
With rapid growth comes inevitable environmental impact. The United Arab Emirates has one of the highest ecological footprints per capita in the world, according to the World Wide Fund for Nature — and this is not going unnoticed.
The region is home to several large-scale sustainability projects. Alongside China and South Korea, two of the largest “eco-city” projects can be found in the United Arab Emirates: Masdar City in Abu Dhabi and Desert Rose in Dubai. According to the report, “these cities are master plans of a new vision of social and environmental harmony, which will reshape social principles of living.”
Creating a culture of sustainability has become a priority for luxury consumers in the region. Emirati teens are spending six times more on average than global teens, according to research by AMRB and TRU.
Research done by Chalhoub Group shows the affluent GCC consumer spends on average $2,400 per month on beauty, fashion and gifts. They also have high expectations of the brands when it comes to corporate social responsibility, with 83 percent of respondents saying they expect the shops they buy from to engage in environmentally friendly activities. Yet 68 of consumers feel brands do not care enough about the environment and the community.
It is rare to find a Gulf national working in retail, dominated by foreigners on work visas. Yet the luxury sector could offer a major outlet for the region’s youth, if they can be prepared to enter the job market, the report suggests.
“We have adopted education as a key channel to facilitate the development process, believing that it is the first and foundational step in understanding how to address today’s social and environmental challenges in the region,” said Patrick Chalhoub, also co-ceo of Chalhoub Group.
The report calls for more educational opportunities for potential employees and insists corporate entities should be held as accountable as governments for creating sustainable employment solutions. Such programs already exist in many sectors from telecom to hospitality in the GCC.
The Chalhoub Group has an Emirati and Saudi graduate program, which offers an accelerated retail learning experience by rotating fresh university graduates through different roles and business activities in the company. The company says it plans to increase recruitment for its Emirati graduate program.
Chalhoub held out hope the report highlights the challenges facing the fast-developing region. “Our sustainable engagement strategy was created to raise awareness, and we believe that by combining our individual efforts, we will be able to contribute to the region’s sustainable future,” added Patrick Chalhoub.