From intimate apparel to gowns and fine jewelry, the Middle East is a growth engine for luxury brands, but it takes more than razzle-dazzle to sell in the region.
Understanding Islamic religious practices and cultural traditions, which can vary from country to country, is a necessity and partnerships among Western brands and local companies are the most effective way to surmount obstacles and avoid any misunderstanding.
The relative openness of Lebanon, for example, where Louis Vuitton, Hermès and Christian Louboutin launched boutiques last summer in Beirut, stands in contrast to stringent limits in Saudi Arabia.
“You have to have patience and partnerships,” said Lily Arjomand, former general merchandising manager of Saks Fifth Avenue in Dubai, who is now a brand and merchandising consultant in New York. Citing the religious and cultural variables, she said, “Navigating this maze is difficult for many brands and retailers. Even to do ads for Dolce & Gabbana in Dubai we had to Photoshop long sleeves on evening gowns, and we had to get approval from both D&G and the local government before running the ad.”
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The issues include understanding how to properly convey a brand’s marketing message, limits on the use of mannequins, product display and even restrictions involving the gender of sales associates.
In Dubai, it’s acceptable to show a window display of sleepwear, bodywear or provocative evening wear, and women are permitted to sell lingerie. In Saudi Arabia, however, stores can be closed by the Mutaween (religious police) for showing a mannequin of a female form or marketing images of women in store windows, brochures and hangtags. And only men are permitted to sell lingerie, although they are forbidden to speak with female customers.
The Saudi government also regulates hours of operation during religious periods, often requiring stores to close or dim lights during prayer times.
One of the challenges is ensuring proper attire in marketing campaigns, said Nina Steele, regional coordinator for U.K.-based retailer Monsoon, which has 130 stores in Bahrain, Kuwait, Qatar, Oman, United Arab Emirates, Saudi Arabia, Egypt, Jordan, Lebanon and Libya.
“We often have to amend our campaign images to ensure our models are not showing too much flesh,” she said. “This is particularly difficult in spring and summer when much of our campaign centers around beachwear.”
Steele added that many of Monsoon’s best-selling pieces in the region are the most colorful. “There is little understanding that women like to dress up underneath their burqas, and that in contrast to their black outerwear, it is the brightest and most embellished products that are often bestsellers.”
Jean-François Seznec, a visiting associate professor and director of Arab Studies at Georgetown University, said women in Saudi Arabia wear abayas (black floor-length shawls) in public, but wealthy families may throw private parties for men and women in their homes, where women wear “extremely provocative” eveningwear.
“It’s not about women dressing up among themselves at home,” Seznec said. “On a large scale, it’s widely accepted for women to wear sexy looking gowns at big parties with men in Jeddah and Riyadh.”
With access to the Internet, “Many customers come in with a printout of a gown they saw on the Internet, many times a red carpet gown,” said Arjomand, the former Saks gmm. “And they want it just the way it is shown to wear privately at home or at weddings and special events, which typically take place in private settings.”
Beverly Hill, president of intimate apparel maker Bendon UK, said consumer tastes are “driven by color — rich reds and purples and baubles and diamantés are particularly appealing. Sexy, risqué, lace, push-up bras — the more cleavage the better. Shapewear is not a high requirement, strapless bras are a greater mix of the basic requirements and preferred with clear backs to go with the elaborate beaded gowns they will wear at significant social occasions…It is not unusual for a customer to purchase 10 lingerie sets, along with supporting sleepwear options, in preparation for the nuptials.”
Stefan Preston, former chief executive officer of New Zealand-based parent Bendon Ltd., which has the licenses for intimates by Elle Macpherson and Stella McCartney lingerie, recalled the difficulties of setting up a boutique in Saudi Arabia.
“The store had large windows,” Preston said. “When the Mutaween saw it they demanded that we install a barrier in front of the windows so people could not see anything sinful going on inside. Once we did that, they declared we must take it down because they couldn’t see what was going on in the store. It was very confusing.”
None of this appears to have deterred brand and retail development in the Middle East, where low tariffs, population growth, a rebound in tourism and an appreciation of luxury brands are among the factors that have spurred expansion.
Giorgio Armani put his stamp on the Dubai skyline in April, opening a 160-room hotel in the Burj Khalifa tower, the world’s tallest building. In March, Louboutin launched a store in Jeddah, Saudi Arabia, with openings on tap in Dubai and Riyadh before the end of the year. Hermès, which operates five stores in the region, is set to open three more units by 2012 in Kuwait; Abu Dhabi, United Arab Emirates, and Saudi Arabia.
Oscar de la Renta will launch three boutiques in the next 18 months in Riyadh, Abu Dhabi and Doha, Qatar, with a shop-in-shop in Riyadh in 2011. And Van Cleef & Arpels, which owns stores in Dubai, Bahrain and Kuwait, opened a shop in Kuwait in July, which is to be followed by units in Doha in October and Jeddah early next year. Bloomingdale’s launched its first overseas store this year in Dubai and Gap Inc. plans to open about 50 stores across the region by 2012.
“We’ve seen luxury business growing nearly 50 percent a year over the past three years,” said Elisabeth Ponsolle des Portes, president of French luxury goods association Comité Colbert.
The Chanel name is so popular in Saudi Arabia that women buy black cocktail dresses by Chanel, remove the signature double-C rhinestone logo, and have it sewn on the exterior of their abayas as a status symbol, she said.
“The women can’t go outside without wearing their abayas, so they make their own Chanel abayas because Chanel is not willing to do this for them,” Ponsolle des Portes explained.
Tiffany & Co. president Jim Quinn said the Middle East has been important to the company’s jewelry and watch business since 1995 when the first store opened in Bahrain. Tiffany has six stores in the U.A.E., four in Saudi Arabia, one unit in both Oman and Bahrain, and two locations each in Kuwait, Jordan, Qatar and Lebanon.
“It’s a different culture and we need to understand local traditions and customs,” he said. “An example is watches, which are a status symbol for men. But in strict compliance with the Koran, a man would never wear a yellow gold bracelet watch. It’s a question of humility. So we make sure we have offerings of white gold.”
Overall, the Middle East and North Africa exhibit the most dynamic retail growth opportunities, according to a 2010 study by global management consulting firm A.T. Kearney. Among the countries ranked in the top 20 for retail development were: Kuwait (2), Saudi Arabia (4), United Arab Emirates (7), Tunisia (11), Egypt (13), Morocco (15) and Turkey (18).
“Local retailers have begun expanding within the region and international names are rushing in as well, many through partnerships using a franchise model due to government regulations,” said Mike Moriarty, an A.T. Kearney partner who helped put together the retail development rankings. “Some local partners have also created retail business models by franchising numerous international brands.”
The split between a brand and a local partner is “usually 50/50…we see companies such as H&M, Ikea and Carrefour doing many big investments,” said Hana Ben-Shabat, a retail consultant and a partner in the retail practice of A.T. Kearney. “There is also a huge appetite for brands, especially luxury brands, and these countries have a certain percentage of a very affluent population — oil money — that can afford luxury.”
H&M has launched seven stores in Kuwait since signing a 2006 franchising agreement with retail giant M.H. Alshaya Co., while Claire’s, which has 118 stores in the Middle East, and The Body Shop, with 49 locations in the region, have each opened almost 30 stores across the Middle East in the last four years.
M.H. Alshaya also operates major retail nameplates in the region, including 24 Debenhams stores, 39 H&M units, nine Miss Selfridge locations, 30 Topshop stores, six Express units, and two American Eagle Outfitters doors.
Some local partners, like the U.A.E.’s Al-Futtaim Group and Chalhoub Group, have created retail business models by franchising international brands. The first Marks & Spencer was unveiled at the Al-Futtaim Centre in Dubai in 1998. The Al-Futtaim Group operates seven more Marks & Spencer stores in Dubai, Abu Dhabi, Bahrain, Kuwait, Qatar, Oman, and Sharjah, U.A.E., with more planned.
Chalhoub Group, a retail and distribution specialist, represents more than 280 luxury brands at more than 350 retail outlets. The group partners with brands including Marc Jacobs, Ralph Lauren, Carolina Herrera, Louis Vuitton, Christian Dior, Lacoste, Céline, Nina Ricci and Dolce & Gabbana.