Luxury Industry in Gulf Countries: Time to Go Digital

Luxury retailer Chalhoub Group has published its fifth white paper entitled ‘The Luxury Industry in Gulf Countries: Time to Go Digital?’. The survey paints the picture of a new generation of consumers who are well-off, expert in social media and on the brink of a digital transformation.

In the last few years, the luxury industry has boomed in the six countries making up the Gulf Cooperation Council (GCC) – Saudi Arabia, Oman, Kuwait, Bahrain, Qatar and the UAEs – enjoying yearly growth rates between 6% and 8%. But the trend has now changed: the rate for 2015 slowed down to 1-2%, and it is expected to be negative for 2016.

According to the Chalhoub group, the industry must find a way to reinvent itself in the region, harnessing young consumers and relying on new growth drivers such as e-commerce.

Nowadays, Generation Y, aka the Millennials, and Generation Z (people between the ages of 15 and 25) make up more than half of the Gulf countries’ population. They are a generation of consumers who grew up with digital technology and/or are keen to learn how to use it, and above all they are social media addicts. On average, they spend 3.5 hours a day on social media, one hour more than consumers from other countries, a type of behaviour that sets them apart from previous generations.

Social media is their primary source of information. 42% of 18 to 26-year-olds have discovered luxury products on social media, compared to 17% of consumers aged 35 and above, who instead prefer word-of-mouth. This represents a sizeable opportunity for luxury labels. According to 90% of 18 to 26-year-olds, Instagram is also the best digital channel to promote luxury products, as it is for 68% of 27 to 34-year-olds.

Social media-savvy consumers have a more in-depth knowledge of the market, of prices and sector trends. They are relatively high earners (with an annual income between $20,000 and $40,000 from now to 2019), well-educated and they travel frequently. Influenced by these factors, theirs is a generation of consumers with low brand loyalty, on the look-out for an advanced customer experience and concerned about the environment.

Their behavior is also helped by the high level of digitalisation within their countries: the rate of internet access in 2015 was 84%, compared to 49.5% in the rest of the world, and smartphone penetration was 126%, compared to 71% in developed countries. It is far from rare for citizens of Gulf countries to own more than one mobile phone.

These are encouraging figures for the expansion of e-tailing, though this type of distribution has met with some scepticism on the part of customers. Data and payment security issues have limited the number of online consumers, and 60% of payments for online purchases are made in cash on delivery, putting a sizeable brake on the growth of luxury e-tail.

Also, in 2014 only 3% of online content was available in Arabic, and in 2016 only half of the region’s web users had heard of existing local e-tail websites. It is therefore hardly surprising that the Gulf countries’ online luxury goods market struggled to reach a value of $200-230 million, while it was worth in total an estimated $17.73 billion in 2015.

But the luxury sector’s transition to digital is under way, triggered by the loosening of restrictions on commercial transactions, the social media boom and the introduction of the ‘buy now’ button, as well as by the local launch of websites whose reputation consumers are willing to trust, such as Ebay, Groupon, Farfetch, Yoox and The Outnet in 2018, and Net à Porter and Mr Porter in 2019.

As a result, the e-tail market is expected to post an annual growth rate of 30% on average between 2015 and 2020, reaching $19.8 billion.

Dubai Mall

The post Luxury Industry in Gulf Countries: Time to Go Digital appeared first on CPP-LUXURY.

from CPP-LUXURY http://www.cpp-luxury.com/luxury-industry-in-gulf-countries-time-to-go-digital/?utm_source=rss&utm_medium=rss&utm_campaign=luxury-industry-in-gulf-countries-time-to-go-digital
via Your #1 Source to Finding Luxury & Designer Goods, Handbags & Clothes at or Below Wholesale: Click Here