Luxury retailer Chalhoub Group’s four pillared growth strategy will focus on investments in brands and technology, new business models and geographic expansion, shared Chief Investment Officer Sharmila Murat during an exclusive interview with RetailME.
By 2023 the GCC luxury market is projected to reach $11 billion, indicated Chalhoub Group’s “GCC Personal Luxury in 2021: A Story of Early Recovery and Growth” report that was created in collaboration with the Fashion Commission of Saudi Arabia. Despite headwinds such as inflationary pressures, currency volatility and continued supply chain disruption the outlook for the GCC luxury market is positive.
As the GCC luxury market continues to gain momentum Chalhoub Group has developed a strategic growth plan to keep pace with changing market dynamics, evolving customer expectations & shopping behaviours and accelerated digital transformation.
In 2020 Chalhoub Group saw a major change as key third generation family members joined the business. “It meant changing the way we were organised and rethinking how we would grow going forward. One element of that growth involved strategic investments. So, we laid out four pillars to accelerate growth through investments,” Murat shared.
“Alongside the four pillars we also laid out ways of investing. On one hand, we could invest as venture capitalists do in early-stage high growth business getting minority stake. On the other hand, we could also consider more traditional buyouts, mergers and acquisitions and own majority stake,” Murat explained.
“So, in 2021 we built a team structure and started out with certain investments. We invested in a sustainable French beauty brand La Bouche Rouge, skincare brand FRÉ and a payment solutions business called Tabby,” Murat added.
Asked how Tabby is solving pain points for consumers, Murat said, “Tabby is solving pain points for customers and brands. It has eased the entire process of financing and making a purchase. With cash on delivery being the preferred payment method in many geographies in our region Tabby has reduced the chance of lost sale for the retailer. We did a proof of concept by rolling out Tabby on Level Shoes’ e-commerce website that gained tremendous traction.”
In addition, Chalhoub Group has also grown its investment in a chat commerce platform called Zbooni.
The Group has focused on “getting ready” to make larger transactions which by nature takes a longer time to evaluate and do the necessary due diligence.
Towards the latter half of 2022 Chalhoub Group successfully acquired a majority stake in Threads Styling, a London based digital luxury retailer and personal shopping platform. Going beyond traditional retail experience Threads Styling offers a unique social-first personal shopping service through social platforms and chat-based commerce. The platform creates cool content to inspire Millennials and Gen Zs across its channels including Instagram, Snap and TikTok.
The partnership with Threads Styling reinforced Chalhoub Group’s digital acceleration drive and investment in digital platforms to expand its existing online ecosystem and bring new capabilities and opportunities for customer engagement and personalisation.
“Although currently it is an independently managed business with Chalhoub Group sitting on the board perhaps at a certain point, we will work to unlock more synergies,” Murat revealed.
Adding more, she said, “We are also considering increasing our stake in certain existing businesses such as Panama-based Latin American business Saint-Honoré Group that we invested in five years ago and are looking to increase our stake for geographic expansion to grow in a new part of the world.”
In fact, Chalhoub Group has also invested in a Sub-Saharan African business that’s into beauty distribution and will look to grow that over time.
However, not all investment decisions materialise. For instance, the Group seriously considered investing in a large marketplace business in the region, but the fit wasn’t right. “Our goal is to unlock synergies through investments therein adding strategic value to our business,” Murat observed.
Looking ahead Chalhoub Group plans to “heavily” explore three key themes:
“We will continue to invest in our people, create a balance between growth while investing in businesses of the future and stay obsessed with our consumers,” Murat stated.
A look ahead: GCC luxury market
“We’ve seen clear growth and resilience in the regional and global luxury retail market. That said there is always a movement of some brands that are more resilient than others. What we’ve seen is brands under absolute luxury has shown maximum resilience in terms growth and development. Whereas there has been some weakness in the aspirational luxury segment. The luxury consumer has focused on pieces that are rare, exclusive and will retain their value. While we see continuation of these trends, we must continue delivering exceptional and unique experiences for our consumers – who are well informed, aware and well-travelled – to win their hearts and minds and retain their loyalty,” Murat concluded.
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