Middle East retailers hope for a summer rebound

As Arabs adjust to travel restrictions in a post-Covid-19 world, they are expected to spend more at home this summer. That, at least, is the fervent hope of retailers across the Middle East.

Before the Covid-19 crisis, retailers in the GCC (Gulf Cooperation Council) region were anticipating a strong 2020. The Dubai Expo, scheduled to run for six months from October, was expected to boost business and Saudi Arabia had launched new tourist visas and relaxed dress codes for visitors.

Six months into the year, those expectations are old news. The Dubai Expo has been postponed to 2021. Tourism has collapsed. And GCC retailers have seen sales plummet during Ramadan.

The region has a unique cycle of consumerism linked to the Muslim calendar. Spending usually peaks in the week before Ramadan and then stays buoyant right through the month-long observance, concluding with Eid al-Fitr (on 23 May this year). Then the big spenders head abroad for cooler climes during the summer.

The Middle East remains a hugely important market for luxury brands — spending is among the highest in the world on a per capita basis. Luxury brands and retailers are desperate to play catchup, not least to reduce the inventory pile-up following poor trading during Ramadan.

Malls in Dubai are already fully open, while they are partially open in Abu Dhabi and Saudi Arabia. Social distancing measures are being adhered to throughout the region.

Until this year, Arabs have typically spent the summer travelling, heading for London and other global capitals to escape the Middle Eastern heat. That tradition has made for a normally sluggish sales season at home. This year, Covid-19 has changed all that. UAE nationals are currently prohibited from any travel abroad, although travel to certain destinations will be allowed from 23 June.

For retailers, this could present an opportunity. “There will be a captive and restless audience, for sure. I think brands will learn new ways to communicate and build on already existing relationships,” says Nez Gebreel, former CEO of the Dubai Design and Fashion Council and an industry consultant. A spending surge could emerge in the countdown to Eid al-Adha (known as the ‘Big Eid’, when traditionally families wear their best clothes), the date will depend on the moon cycles and is expected to be around 31 July this year.

Using local e-commerce platforms

As in most markets during lockdown, e-commerce has become the go-to shopping option in the Middle East while physical stores have been closed, with customers shopping on local e-commerce specialist platforms.

Montroi, a leather and accessories brand, has reported improved e-commerce sales following the closure of its stores throughout the region. “Since lockdown, we have been seeing a natural rise in sales on platforms such as Ounass,” says co-founder Samir Aghera. Ounass, a key player in luxury e-commerce in the GCC, is owned by Al Tayer Group, which also runs Harvey Nichols Dubai and Bloomingdale’s in Dubai and Kuwait.

Many brands with stores in the giant Dubai Mall, operated by Mohamed Alabbar’s Emaar Properties, have joined Noon.com, an e-tail platform that was launched between Alabbar and Saudi Arabia’s state-owned Public Investment Fund. Louis Vuitton has opened a local website, while Dior debuted a virtual pop-up store with a Ramadan-themed design. Bulgari has also been thinking local, including UAE in its digital plans for the first time with a campaign featuring illustrations of well-known personalities from the region.

Montroi studio in the Dubai Design District.

© Montroi

Mall traffic is now poised to rebound as people look for ways to escape the 50-degree summer heat. “The weather can be inhuman. It’s not possible to survive outside,” says Gebreel. “So malls are really important for families to go out and be entertained.”

New York fine jeweller Maria Tash, who opened a store at The Dubai Mall in late 2018, is optimistic. “We typically see Middle East clients shop in my London stores during the summer months, and that won’t be the case until international travel restrictions lift,” says Tash. “As a result, I do expect more and more clients to stay in the region, and they will want to visit the Mall.”

By late summer, the company will open a second store in the region in Kuwait’s Prestige Mall. “During curfew, when malls were closed, we started doing complimentary home deliveries in the UAE to accommodate [customers’] desires. It is a reassuring indicator of what’s ahead for the summer,” says Tash.

Value shopping

Take a walk around The Dubai Mall, and you will note that many stores holding sales right now. These flash events are being used to clear the backlog of stock. They are also a sign that GCC consumers are watching their finances.

Consumers throughout the Middle East love brands, but Arabs are not immune to the global economic crisis, with unstable oil prices a key subject of concern. A significant 75 per cent of businesses have reported a major negative impact from the pandemic, according to a report in Arabian Business. Some 12 per cent do not see recovery happening soon.

“Luxury is more and more about value. Post-Covid-19, with many consumers hit by financial constraints, I believe [value] will continue to be a necessity — as well as reward or loyalty schemes to draw customers to shop,” says Gebreel.

International e-commerce operators, such as MatchesFashion.com, have held private sales earlier this year, attracting a high volume of shoppers from the Middle East. Sacoor Brothers, a brand with its own well-established local website, held a three-day sale as soon as the Eid al-Fitr holiday ended. “Summer is a time when people are looking for deals — that will not change whether they shop here or abroad,” says Bart Denolf, CEO of the Sacoor Brothers franchise.

For brands, there are already signs that the market will rebound. By Far, an accessory brand known for its seasonless shoes and bags, has seen a 30 per cent surge in sales in the Middle East. The launch of a new capsule collection with Level Shoes has been delayed until September, says Valentina Ignatova, co-founder — “when things are hopefully back to normal, and people are happy to come celebrate with us.”

Temperley London opened a flagship store in The Dubai Mall in January and remains upbeat. “There will be a change in shopping behaviour for the next few months due to the lack of, or cancellation of, social events. We hope to see this not lasting for long as restrictions ease up,” says Luca Donnini, CEO. “Once this crisis will be over, I believe that the Middle East will come back better and stronger than other regions.”