Luxury brands prefer opening their own stores in Middle East rather than a franchise

luxury brands

Luxury brands prefer opening their own stores in the Middle East rather than franchises, according to a report into the retail property sector by Savills.

In 2021, Savills found that there was a very marked increase in the dominance of ultra-luxury with such brands accounting for 92 percent of new store openings in the region.

Whereas historically Dubai was the focus for new store openings, Savills found there was increased activity in Saudi Arabia.

The commercial property expert also found a new trend among international luxury brands.

Retail Advisory at Savills Middle East, Kenny Lam, explained: “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.

The top three luxury houses, LVMH, Kering and Richemont, continued to expand their share of new openings. Together they accounted for 41 percent of all new openings globally in 2021, up on their 2019 share of 33 percent. 

“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,” added Savills. 

This year, luxury retailers are likely to continue expanding their global footprints with new store activity in large domestic markets in China, the Middle East and North America, according to Savills.

Following on from the spending patterns of the past few years, China is expected to become the world’s largest luxury market by 2025, according to Bain & Company. 

In recent years, new store activity globally has largely followed the Chinese luxury consumer into destination markets.  However, with the pandemic restricting international travel, the firm recorded that 21 percent of the total luxury goods spend last year took place inside of China.

While China was the only market to increase its share of new openings last year, in quantum terms, there was also a reported bounce in new store activity in the Middle East, the report found.

While the Middle East’s global share held at 3 percent, it did highlight the under-tapped potential of the region. 

As with China, activity last year was also focussed on those markets with large and relatively affluent domestic populations. Egypt, Saudi Arabia and Bahrain all currently represent such opportunities for luxury retailers.

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