Luxury retailers ramping up new store openings in Dubai and Saudi
Despite the continued economic uncertainty, luxury retailers are set to reignite their global expansion over the coming years, with Saudi Arabia playing catch-up on fellow regional hotspot Dubai.
Analysis by strategy consultant Bain & Company shows that the global luxury market has come back stronger than ever following a major blow it was dealt during Covid-19. After seeing over €50 billion wiped off from its market value in 2020, last year the market rebounded to a total spend of €283 billion – a new record.
Now, a new report from Savills has found that on the back of growing demand, luxury brands are ramping up their (re)focus on physical channels, with new store activity in key markets to increase this year vis a vis last year.
However, new store openings will be highly concentrated on a number of key markets, with China miles ahead in the top spot. In 2021, 55% of all new store openings were in China, and this year, the country with a population of $1.4 billion is yet again expected to steal the luxury show, according to Savills.
The Middle East accounted for just 3% of new store openings last year, although the market is considered a key hub for (very) high net worth consumers. Notably, in the region, ultra-luxury brands accounted for 92% of new store openings, with Saudi Arabia increasingly nestling itself as a key market alongside historical luxury capital Dubai.
Kenny Lam, a member of the Retail Advisory practice of Savills in the Middle East, said, “In Dubai, many luxury brands are represented by monobrand stores through local franchises and partners but with the recent change in government policies, we are seeing international brands come in directly looking to take back full control of their stores.”
“The trend of new store openings in the region is expected to remain in focus as brands continue to explore the opportunity for directly owned stores. Alongside Dubai, Egypt, Saudi Arabia and Bahrain present growth opportunities for luxury retailers.”
Globally, over 4 in 10 new luxury stores are launched by three brands: LVMH (known for brands as Louis Vuitton, Dior, Tiffany & Co., Fendi), Kering (known for brands as Balenciaga, Bottega Veneta, Gucci, Yves Saint Laurent) and Richemont (known for brands as Cartier, Piaget, Purdey, Mr Porter) – up on their 2019 share of 33%.
Lam: “The three players dominating the share of retail openings last year comes as no surprise considering their brand acquisitions prior to the pandemic. Given that they have accelerated their M&A and funding activity over the last 12-18 months, it certainly suggests that their dominance is likely to increase.”
The top cities
From a city perspective, New York and London remain the world’s top markets for luxury brands to be based in, followed by Tokyo, Los Angeles and Shanghai. Four of the other top ten cities are in Asia ((Hong Kong, Seoul, Beijing and Singapore) with the French capital of Paris ranking sixth.
In the Middle East, Dubai remains the highest ranking city, followed by Riyadh in Saudi Arabia.
Saudi Arabia is however considered to be the region’s fastest growing market. Lam explained: “The Kingdom’s luxury market continues to grow rapidly with forecasts suggesting luxury sales could reach $22.2 billion by 2024, reflecting an average annual growth rate of 7.2% between 2019 to 2024.”
“As a result, we are seeing many luxury brands buying back their businesses. Many are setting up offices with full teams in Saudi, thus becoming independent from the offices in Dubai and becoming country headquarters. As a result, there is an increased amount of activity that’s happening on the ground, brands are now able to activate.”