Middle East: Luxury in the age of digitalisation

"Internet is instrumental in transforming GCC luxury consumers who now are very aware of labels, prices, trends and products, and can find almost any item on the web. Faced with this level of volatility and exigence, we shouldn’t push these consumers, but instead let them pull,” explains Anthony Chalhoub, Co-CEO of the Chalhoub Group, one of the main distributors of luxury products in the region.

Indeed, regional prospects are exciting: although e-commerce in the region has been lagging at 2.6% of total retail sales vs 7% globally in 2015, with luxury products’ online sales amounting to only US$200-US$230 million and 2.5% of the segment’s total sales in the GCC, the e-commerce contribution to the Gulf high-end market is expected to reach a total value of US$1.5 billion within four years, driven by young demographics, more value-conscious consumers and ambitious digital pure players.

The GCC is at a demographic turning point. People under 30 - Generation Y (also known as millennials, born between 1975 and 2000) and Generation Z (born in 2000 and onwards) - now form half of the population. However, despite their young age, GCC millennials and Gen-Zers have a high disposable income, and live in some of the world’s richest countries.

These generations are extremely digital savvy, digital tools and media are part of their way of life. Many young consumers have never known any other type of interaction with brands but through digital channels. Mobile apps, websites and social media are their first and most important touchpoints.

This digital inclination fuses with higher levels of education and frequent travels to give GCC millennials, in particular, sophistication, assurance and voice. Their knowledge of international trends, pricing and labels, allows them to pass quick and confident judgement - which they readily share. Like their peers all around the globe, Arab youth want to make an impact. For example, beyond quality, heritage or status, young Arabs now look at brands from different perspectives, such as social responsibility.

“Regional luxury players have no choice but to affirm their presence, speak and interact with their audience in a very honest and transparent manner - and almost in real time. Modern Arab clients also expect us to have e-commerce and omnichannel capabilities, and we have to give them what they are looking for. We all have a lot to do, from adapting our websites so that they are user-friendly and accessible, to training our teams to be fully involved in the omnichannel, as the store and the digital properties now must complement one another - all the while protecting the brand’s DNA. It’s a learning curve, but in one way or another, we are all moving forward in that direction,” adds Anthony Chalhoub.

For the Chalhoub Group, the omnicanal seems to be the only alternative to satisfy the consumer. Retailers must offer a unique and extraordinary experience in the shop, allowing consumers to touch and test, exactly what the online media cannot offer. In parallel, they must redouble efforts on the net. For brands, full-fledged social media strategies, influencer marketing and content/context marketing should help offer customers the complete, seamless experience that they seek.

“Our strategy is to get a better knowledge of our audience, avoiding the ‘spray and pay’ habit to rather initiate a real dialogue with them, both physically and digitally - because the future of luxury cannot be one of the two: consumers’ experience must seamlessly connect offline and online. To be truly omnichannel means to stop focusing on the way to deliver products and services, and to put customers at the centre instead. We are at the beginning of this digital disruption of the luxury retail industry. To be truly omnichannel means to stop focusing on the way to deliver products and services, and to put customers at the centre instead. We are at the beginning of this digital disruption of the luxury retail industry. Tomorrow, there will be fewer flagship stores, offering a uniquew, outstanding, and better customer experience; and probably more community stores, offering simultaneously a personal contact with the consumers and a digital connection - which will allow the customer to access a broad choice and navigate solid, relevant e-commerce and m-commerce platforms,” concludes Patrick Chalhoub - Co-CEO, Chalhoub Group.