The Middle East is a region that has been associated with wealth, culture and tradition. In recent years, it has also emerged as a diverse market for luxury goods. In this article, we explore why the Middle East is becoming one of the fastest growing luxury markets in the world.
High oil prices and economic growth
One of the main drivers of luxury consumption in the Middle East is the high oil price. It has boosted the income and purchasing power of many consumers in the region. According to the International Monetary Fund, the Middle East and North Africa region is expected to grow by 4.4% in 2023, compared to 2.8% in 2022, thanks to the recovery of oil production and demand. This growth translates into more disposable income and wealth for the affluent segments of the population, who are willing to spend on luxury goods and services that reflect their status and lifestyle.
Demographic changes and young consumers
Another factor that contributes to the growth of the luxury market in the Middle East is the demographic profile of the region. According to the World Bank, the median age in the Middle East and North Africa region was 25.5 years in 2020, compared to 38.6 years in Europe and Central Asia. This means that there is a huge potential for luxury brands to target the young and aspirational consumers, who are more open to new trends, styles and experiences. Moreover, the young consumers in the region are also more digitally savvy and connected, using social media and online platforms to discover, research and purchase luxury products.
Tourism and travel
Tourism and travel are another key driver of luxury spending in the Middle East, as the region attracts millions of visitors every year, both from within and outside the region. Some of the main destinations for tourists in the region are Dubai, Abu Dhabi, Riyadh, Doha and Istanbul, which offer a mix of cultural, historical, entertainment and shopping attractions. These cities also host many events and festivals that attract tourists, such as the Dubai Shopping Festival, the Abu Dhabi Grand Prix, the Qatar Grand Prix, the AFC Asian Cup and the FIFA World Cup. Tourists in the region tend to spend more on luxury goods and services, as they seek to enjoy the local culture, cuisine and hospitality, as well as to buy souvenirs and gifts.
Urban development and retail expansion
The urban development and retail expansions in Middle East, has created more opportunities and channels for luxury brands to reach and engage with consumers. The region is witnessing a rapid transformation of its urban landscape, with many mega-projects and initiatives that aim to diversify the economy, improve the infrastructure, enhance the quality of life and promote innovation. Some of the examples of these projects are the Dubai Expo 2020, the Saudi Vision 2030 and the Qatar National Vision 2030. These projects also involve the development of new and modern retail spaces, such as malls, outlets, boutiques and online platforms, that cater to the needs and preferences of the luxury consumers. According to a report by Boston Consulting Group and Altagamma, the Middle Eastern luxury goods market, estimated at nearly €15 billion in 2023. It is expected to double in size by 2030 and grow to €30-€35 billion, driven by the UAE and especially Saudi Arabia.
Top luxury brands in the Middle East
The Middle East is a diverse and competitive market for luxury brands. According to a report by Launchmetrics, the top 10 luxury fashion brands performing in the MENA region in 2022, ranked by Media Impact Value (MIV), were:
- Dior
- Chanel
- Valentino
- Gucci
- Prada
- Balenciaga
- Versace
- Hermès
- Saint Laurent
- Alexander McQueen
These brands have achieved high levels of awareness, engagement and influence in the region, by leveraging different media channels and voices, such as celebrities, influencers, media outlets and consumers. Some of the factors that have contributed to their success are:
- Their heritage and craftsmanship, which appeal to the consumers who value quality, authenticity and tradition.
- Their innovation and creativity, which appeal to the consumers who seek novelty, diversity and personalization.
- Their social and environmental responsibility, which appeal to the consumers who care about sustainability, ethics and community.
Highest luxury growth in the Middle East
While the luxury market in the Middle East is growing across the board, some countries and cities are outperforming others in terms of growth and potential. According to Barclays analysts, Dubai and Riyadh are expected to lead luxury retail growth in 2023, as they benefit from high oil prices, tourism, urban development and retail expansion. Dubai, in particular, has established itself as a regional hub and a global destination for luxury, thanks to its strategic location, its diversified economy, its world-class infrastructure, its cultural diversity and its attractive events and attractions. Riyadh, on the other hand, is emerging as a new frontier for luxury, as it undergoes a major transformation under the Saudi Vision 2030, which aims to modernize, liberalize and diversify the country’s economy and society. Riyadh is also witnessing the opening of new and exclusive retail spaces, such as the Kingdom Centre, which is set to become the largest luxury mall in the Middle East.
Conclusion
The Middle East is a region that offers many opportunities and challenges for luxury brands, as it is undergoing rapid and profound changes in its economic, social and cultural landscape. The region is becoming one of the fastest growing luxury markets in the world. However, the region is also diverse and complex, requiring luxury brands to understand and adapt to the needs and preferences of the consumers, who are influenced by various factors, such as religion, culture, tradition, lifestyle and values. Luxury brands that can balance their global identity and their local relevance, and that can deliver quality, innovation and responsibility, will be able to succeed and grow in the Middle East.
