The region's largest luxury retailer and distributor, Chalhoub Group, is spending US$30 million (Dh110.2m) to reshape the organisation and adjust to what has suddenly become a "mature" retail environment, a senior executive says.
Having spent years struggling to keep up "irrational" sales growth of between 20 and 25 per cent, profits from carrying brands such as Chanel and Louis Vuitton in its home market of Dubai fell dramatically this year.
Now Chalhoub is cutting costs and investing in consumer research, employee training and marketing, said Patrick Chalhoub, the co-chief executive of the group.
"It is a year where we had to reassess the way we have been doing business up until now," Mr Chalhoub said.
"Over the last five years, we have had totally irrational, 20 or 25 per cent growth.
"You were in a mood of growing and of spending, which is totally different than the consolidation phase we are living in now."
Chalhoub Group, which has 350 stores in 14 countries across the Middle East, will spend $30m in a major review of its operating costs.
The money will be spent on initiatives including new information technology and management consultants over the next three to five years to reduce annual expenses, Mr Chalhoub said.
"People are saying, 'Are you crazy? You are making now an investment to review your process?'" he said. "And I say, 'The aim is to reduce our costs by as much'."
This year has been a wake-up call for retailers the world over but especially in the UAE, where many merchants had enjoyed years of double-digit sales growth.
After the economic crisis began to hit the Emirates this year, consumers became more cautious with their cash and sales fell by as much as 40 per cent.
Although consumer confidence has started to return, retailers such as Chalhoub are adjusting their strategies to stay competitive.
Chalhoub was hit by the dramatic fall in Dubai sales this year just as it was making investments in additional stores in new shopping centres, such as Dubai Mall.
For the group, the brands of which also include Fendi and L'Oreal cosmetics, UAE turnover this year stayed level with last year at about Dh1 billion, but profitability fell by between 40 and 60 per cent, Mr Chalhoub said.
Stores that were flush with inventory ordered last year were forced to have bigger and more frequent sales, even as shoppers were carefully considering each purchase and no longer buying on impulse.
"When sales were expanding like crazy, we could buy and buy, and if it doesn't sell today it will sell tomorrow," Mr Chalhoub said. "Now, we have to analyse our processes more."
The opening of Dubai Mall and other shopping centres across the emirate, as well as a drop in the number of Eastern European tourists, also cut into revenues, he said. Although sales are up between about 7 and 12 per cent in Abu Dhabi, sales in Dubai have dropped by as much as 50 per cent, depending on location and store brand, Mr Chalhoub said.
Shopping activity also became more dependent on events such as Eid and Christmas.
"We are more hammered with up and downs, which really happens more often in mature markets," he said. "The market is becoming much more mature."
Naeem Ghafoor, the chief executive of the consultancy Skyline Retail Services in Dubai, said cutting costs was a good move, as many luxury retailers in the Emirates had grown excessively.
"Dubai was booming for such a long time and every business in Dubai was doing well," Mr Ghafoor. "But the economy, in every country, kind of collapsed. And lot of economists say that we're not out of it yet, not by a long shot."
If it is spent in the right way, such as buying a system to monitor and direct inventory among its stores, Chalhoub's investment could lead to big savings, Mr Ghafoor said.
Chalhoub will continue to spend on marketing, training and consumer research.
It has maintained its marketing budgets this year and has increased spending on employee training from 3 per cent of salaries to 5 per cent this year. It has also opened a new retail academy in Jeddah, in addition to its Dubai campus.
The group is also doubling its investment in consumer research from between Dh2m and Dh3m to between Dh5m and Dh6m, Mr Chalhoub said.
Next year, the firm plans to open more than 30 stores across the Middle East, including the region's first Christian Louboutin and Michael Kors shops, and close about 10 underperforming outlets.
This is down from the 47 stores it opened and 15 it closed across the region this year.
Mr Chalhoub expects a sales growth of between 5 and 7 per cent next year. The group also plans to shift its focus towards new regional markets.
"Today, if we look at the growing cities in the Middle East, I would say it is Doha and Abu Dhabi," he said. "The cities that had been counting on more visitors, like Bahrain, like Jeddah, or Dubai, have been more affected than those which count on the local population."
@Email:aligaya@thenational.ae
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
The biog
Family: Parents and four sisters
Education: Bachelor’s degree in business management and marketing at American University of Sharjah
A self-confessed foodie, she enjoys trying out new cuisines, her current favourite is the poke superfood bowls
Likes reading: autobiographies and fiction
Favourite holiday destination: Italy
Posts information about challenges, events, runs in other emirates on the group's Instagram account @Anagowrunning
Has created a database of Emirati and GCC sportspeople on Instagram @abeermk, highlight: Athletes
Apart from training, also talks to women about nutrition, healthy lifestyle, diabetes, cholesterol, blood pressure
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
MATCH INFO
Uefa Champioons League semi-final:
First leg: Liverpool 5 Roma 2
Second leg: Wednesday, May 2, Stadio Olimpico, Rome
TV: BeIN Sports, 10.45pm (UAE)
Killing of Qassem Suleimani
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
JUDAS AND THE BLACK MESSIAH
Directed by: Shaka King
Starring: Daniel Kaluuya, Lakeith Stanfield, Jesse Plemons
Four stars
Padmaavat
Director: Sanjay Leela Bhansali
Starring: Ranveer Singh, Deepika Padukone, Shahid Kapoor, Jim Sarbh
3.5/5
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
COMPANY PROFILE
Name: Qyubic
Started: October 2023
Founder: Namrata Raina
Based: Dubai
Sector: E-commerce
Current number of staff: 10
Investment stage: Pre-seed
Initial investment: Undisclosed
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
COMPANY%20PROFILE
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Killing of Qassem Suleimani
Company profile
Name: Infinite8
Based: Dubai
Launch year: 2017
Number of employees: 90
Sector: Online gaming industry
Funding: $1.2m from a UAE angel investor
First Person
Richard Flanagan
Chatto & Windus
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
PAKISTAN v SRI LANKA
Twenty20 International series
Thu Oct 26, 1st T20I, Abu Dhabi
Fri Oct 27, 2nd T20I, Abu Dhabi
Sun Oct 29, 3rd T20I, Lahore
Tickets are available at www.q-tickets.com
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Scream%20VI
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