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Forget Dubai, Abu Dhabi’s the future of luxury. Or is it?
Chalhoub Group pins hopes on Abu Dhabi’s retail landscape. But Precious de Leon asks at what costs.
May 12, 2011 2:17 by Precious de Leon
So the Chalhoub Group is going to open more than 40 stores in Abu Dhabi over the next two years, according a report in The National.
The company name may not be so familiar to you but Kipp is sure you know these names: Chanel, Fendi, Saks Fifth Avenue, Lacoste, Marc by Marc Jacobs and Michael Kors. That’s right. Chalhoub Group is the company responsible for bringing these brands to Dubai.
Premium brands like these have made Dubai a unique must-visit destination for any upmarket shopper—from the Chinese, Russian and European tourists down to the Arab and Asian expatriates and in particular the UAE nationals that drive into town to get their latest luxury fix.
But it may just be that what Chalhoub Group giveth to Dubai, Chalhoub Group taketh away.
It seems that the favoured customers right now are those living in Abu Dhabi, with the company citing that in some of their brands a significant portion of sales come from Abu Dhabi residents travelling to Dubai. Brands like Carolina Herrera, for example, see more than 30 per cent of its sales from Abu Dhabi residents.
“There is a most noticeable difference between the consumer of Abu Dhabi and the consumer of Dubai,” Mansour Hajjar, MD of Allied Enterprises, Chalhoub’s trading name in the UAE, was quoted in the article. “We see in Abu Dhabi today a young generation with high aspirations for luxury products and a higher purchasing power than Dubai.”
In the same breath, Hajjar also says that while Dubai is deemed “saturated”, there is still a surge of tourism that sustains the high end retail sector.
RETAIL CANNIBALS AND MORE
And with that a few things come to mind. First, there is also the matter of cannibalising sales from its Dubai stores. Could their shops in Dubai stand to lose this portion of sales? Are the fluctuating streams of tourists and the more cautious Dubai shoppers enough to sustain these stores?
Forget about closing the stores in Dubai. This, we deduce, is out of the question, at least for now, since tourism in the UAE is largely funneled through Dubai and shopping tourists generate for more retail revenue for these brands then resident purchases.
The second point is that in the years that Kipp has been in the UAE, it’s evident that residents and families—local and expats alike—from Abu Dhabi and most other emirates, tend to drive routinely to Dubai anyway to spend their weekends and to shop. It’s a long standing routine, that Kipp supposes, the Chalhoub Group is hoping to help break.
A third thing to consider is the current trend (or so Kipp thought) of retail space reduction in Abu Dhabi. Back in March, we talked about the Yas Mall announcing the reduction of its retail space. By our calculations it was close to half of the originally planned size.
Back then, Kipp was readily welcoming what seemed like to coming of the age of posterity to the Emirates…finally. It was a fresh angle, away from the magnanimous adjectives that we have come to associate with the UAE.
Maybe the Chalhoub Group missed that memo? (A little out of the loop, Mr, Chalhoub? I guess you ought to start reading Kipp then.)
Even if there is enough retail space, is there really enough customer base in the capital to justify spreading out your sales revenue and more than doubling your costs in terms of store leasing, staff and marketing costs?
The Chalhoub Group must be expecting a massive surge in local and expatriate population growth in Abu Dhabi for it to consider long-term retail commitments in the capital, enough to sustain the 50 stores it plans to open throughout the emirate in the next two years.
DARING TO BE DIFFERENT. NOT.
It just seems to Kipp that there are more innovative ways for bring your product closer to a small but loyal and, let’s not forget, wealthy set of customers without the costs of replicating stores. Correct us if we’re wrong but it seems like merely bringing stores two hours closer to customers is not as much value to customers who are going to continue to do the drive anyway. How about better CRM? Exclusive events? Product sneak previews?
We’re just wondering if the costs of opening a massive amount of stores is worth not having to think about daring to offer something different to high net worth customers who are always seeking the next big experience, anyway.