According to a study conducted by Boston Consulting Group (BCG) and Altagamma, the luxury market in the Middle East is expected to double in size by 2030, reaching €30-€35 billion. The growth of this market will mainly be driven by the United Arab Emirates (UAE) and Saudi Arabia. The Middle East has become an appealing region for luxury brands due to geopolitical tensions and shifting consumer behaviors. Additionally, the region has benefited from the lockdowns in China and has become a refuge for wealthy Russians affected by sanctions.
Saudi Arabia, in particular, offers significant opportunities for luxury brands. Although the country has been slow in developing luxury retail spaces in the past, it is now aiming to modernize and diversify its national income by promoting luxury tourism. Sales of luxury goods in Saudi Arabia are projected to have an annual growth rate between 10% and 12%, with expenditure expected to increase from €6 billion to €12 billion by 2030. To attract more foreign tourists, Saudi Arabia plans to build eight large shopping mall complexes and invest over €1 billion in the industry, with a goal of attracting 30 million foreign tourists by 2030.
The rise of a young, affluent, and digitally-savvy population also contributes to the potential of the luxury market in the Middle East. With over 60% of the population under the age of 30, these consumers are increasingly shopping online, creating opportunities for e-commerce growth. Additionally, the influx of pilgrims during the hajj and luxury shopping during Ramadan further drives the demand for luxury goods in the country.
Many Western luxury brands are eager to enter the lucrative Saudi market as a way to reduce their dependency on China. Some brands, including Kering and Richemont, have already established a presence in Saudi Arabia. The majority of luxury labels entering the market are partnering with the Chalhoub group, one of the leading distributors of luxury brands in the Middle East. However, entering the Saudi market requires a dedicated strategy that includes finding the right local partner and adapting to local preferences and cultural norms.
In conclusion, the luxury market in the Middle East is expected to experience significant growth, with Saudi Arabia leading the way. The country’s efforts to modernize and diversify its economy, along with its young and affluent population, make it an attractive market for luxury brands. As the region emerges as a new frontier for luxury, brands must navigate the unique challenges and opportunities it presents in order to establish a successful presence.
Useful links:
– Boston Consulting Group website
– Altagamma website
