New rules of luxury retailing in a digital environment

After almost three decades of rapid growth, luxury in the Gulf is now confronted with what’s called ‘the digital revolution’ sweeping across the Middle East, and the world. Digital has massively disrupted and transformed the way business is conducted. From marketing strategies to return on investment measurement, it has infiltrated all aspects of the work, across all kinds of companies – luxury included.

The current era is characterised by a shift of power from brands to consumers who master their preferences and choices pressing the brands to review their strategies. Add to that technological innovations prompting shifts in consumption habits and even societal (r)evolutions, all of which brands have to keep up with. To remain relevant in the face of this dramatic, steady and rapid change, luxury has to reinvent itself digitally and tell a new story for the modern consumers.

“Internet is instrumental in transforming GCC luxury consumers who now are very aware of labels, prices, trends and products and can find almost any item on the web. Faced with this level of volatility and exigency, we all have a lot to do, from adapting our websites so that they are user-friendly and accessible, to training our teams to be fully involved in the omnichannel, as the store and the digital properties now must complement one another – all the while protecting the brand’s DNA. It’s a learning curve, but in one way or another, we are all moving forward in that direction,” says Anthony Chalhoub, co-CEO, Chalhoub Group.

Digital momentum building in the Gulf

The Chalhoub Group sees a clear digital impact on luxury retailing in the region; and therefore chose to focus this fifth white paper on GCC digital luxury – its challenges and promises.

The group’s research in the GCC has found the following:

  • Although e-commerce in the region has been lagging at 2.6% of total retail sales versus 7% globally in 2015, with luxury products’ online sales amounting to only $200-$230 million and 2.5% of the segment’s total sales in the GCC, the e-commerce contribution to the Gulf high-end market is expected to reach a total value of $1.5 billion within four years
  • The Gulf luxury world is transforming. People under 30 years now form half of its population and are informed, educated, tech-savvy and digitally connected. The region boasts some of the highest internet, smartphone and social media penetration rates in the world.
  • These modern consumers have new expectations and care about experiences more than brands. They also expect a highly personalised and streamlined path to purchase, regardless of channel or device. They extensively research products and trends on the internet, readily taking advice from online influencers, whose clout is ever increasing.
  • The young and creative entrepreneurs are remodelling the GCC luxury scene.
  • Acutely aware of the need to address this new retail landscape, international and regional pure players, along with luxury specialists and large retail groups are actively establishing digital platforms across the GCC.

“Our strategy is to get better knowledge of our audience and initiate a real dialogue with them, both physically and digitally – because the future of luxury cannot be one of the two: consumers’ experience must seamlessly connect offline and online. It’s a major transformation for the retail scene, which will have to restructure itself accordingly. Those who want to endure have to get ready, and get ready now, or risk being left out,” adds Patrick Chalhoub, co-CEO Chalhoub Group.

The way ahead

In this shifting environment, Chalhoub Group’s white paper identifies key steps that GCC luxury players should undertake to prepare for the future:

Luxury brands need first to figure out the digital luxury paradox – how to protect their luxury fundamentals in a digital environment. They also have to devise and implement long-term, comprehensive and genuine digital strategies in order to remain relevant

Finally, the omnichannel – including cross-platforms e-commerce capabilities – is the road forward, offering to the new generation of Arab consumers the unique experience they seek.

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