Patrick Chalhoub, cofounder and co-chief executive officer of Chalhoub Group, a leading operator of luxury brands in the Middle East doesn’t fear the reaper, that is, e-commerce.
The Dubai-based group’s retail operations include fashion houses such as Louis Vuitton, Nina Ricci, Marc Jacobs and Carolina Herrera within the United Arab Emirates and Gulf region. The group manages luxury stand-alone retail outlets and department stores. The Chalhoub Group operates through its companies, affiliates and joint ventures over 650 points of sale in the region offering customers unparalleled services in elegant surroundings.
But even with all these brick-and-mortar operations, the Internet and e-commerce, which was slightly slower to arrive and take hold in the region than in other parts of the world such as Asia, isn’t viewed as the enemy.
Speaking on Wednesday, Chalhoub asked rhetorically how to stand out in this extremely competitive environment?
“One of the very positive characteristics of a developing [nation] is we’re a very young nation. Over 50 percent of the population is under 50.”
Of consumers in the region, Chalhoub said, “The new generation is not jaded by labels and fantasies.” He went on to say that shoppers are well-traveled, connected and well-informed.
Rather than being threatened by consumers who know what they want and want it when they want it, Chalhoub embraces the challenge of young, discerning fashion-savvy customers. Their characteristics “bring us more open-minded consumers,” he said, adding that the Middle East’s shoppers “have sufficient incomes.”
Customers’ philosophy dovetails with Chalhoub Group’s guiding principle that retail should be about experiences, which he considers “the new luxury.” The executive pointed to the group’s recent focus on fragrance — a key category in the Middle East — and how it is increasingly developing personalized experiences built around those products.
Other key experiences are built around the group’s groundbreaking Level shoe store, the world’s largest with the largest number of brands — from Manolo Blahnik and Christian Louboutin to Yeezy and Nike. Chalhoub played a video that showed Middle Eastern consumers talking about their love of shoes. One was a teenager who collect sneakers and has over 1 million Instagram followers.
Beyond the breadth of Level’s offerings, its strength lies in its service. The store includes personalization of sneakers and others shoes; a bespoke area for men, and limited edition or capsule collections specifically for Level.
Despite the success of Level, which was followed by Level Kids, Chalhoub said there are no plans for now to open another one. Instead, the group plans to continually focus on improving the operations of its existing Levels to make sure they remain at the forefront of footwear retail.
He said consumers in the region have one of the highest-penetrations of social media.
For these shoppers, social media moves seamlessly through their lives, Chalhoub said. “It’s not just part of their lives, it’s totally integrated into them,” he added. “Today, it’s moving seamlessly through their lives and they expect the same experience” in every other aspect of their lives.
Aside from the social engagement of customers, which Chalhoub said his group observed several years ago, the executive said, “In addition, we see a shift with the new generation to influencers recently.”
Along with transparency, which is key for shoppers in the Middle East, trust is not for the squeamish in that they leave little margin for error.
Chalhoub said he welcomed the challenge online and off-line, saying that shoppers in the region appreciate communications that are “genuine.”
He proudly noted that certain Chalhoub Group properties are approaching full capacity. “The fact that we sustained consumer demand for a developing nation [is impressive].”
Chalhoub believes the group’s retail properties can coexist with e-commerce — at least for now.
“There’s a huge cross-section of consumers,” he said, pointing out that 66 percent of Gulf Cooperation Council consumers now shop online, and that e-commerce in the region is expected to reach $20 billion by 2020.
There also are challenges to the growth of e-commerce in the region, he pointed out. First, 75 percent of transactions in the region are still done in cash, since consumers don’t trust credit cards and many women don’t have credit cards. In addition, there are no actual street addresses in Dubai, making delivery of packages complicated.