Major brands from luxury goods to cars say their businesses are thriving in the Gulf, even as they struggle in Europe and the US. In the US, for example, Goodyear Tire and Rubber Company will close 100 retail outlets and eliminate 600 full- and part-time jobs - moves the company says will save about US$9 million (Dh33m) annually. "In the current economic condition, people are driving less and it obviously affects every facet of the US auto industry, including how often they replace tyres or buy new cars," said Keith Price, a spokesman at Goodyear.
But in the Middle East, especially the Gulf, the reverse is true. Operated out of Dubai, Goodyear Middle East is active in 43 countries in the region. "Here there are many people buying cars, so it makes sense that our business would thrive," said an official at Goodyear Middle East. "There is a major expansion happening in the region, especially in the GCC countries." From Honda to Starbucks, the retail sector has been a driving force behind the Gulf's economic boom. Worth approximately Dh367 billion, the retail sector has become the second-largest non-oil industry in the region, and is forecast to grow to Dh1.8 trillion by 2010 according to Retail International, a Middle East consultancy firm. Like many emerging markets, the GCC is regarded as a fertile territory for retailers - particularly of cars.
The figures for car makers underscore the shift in purchasing power from the West, where consumers are pulling back, to the East, where higher salaries, cheaper petrol and a rosier economic outlook are driving sales. General Motors America reported losses of $8.5bn in revenues in the second quarter of this year compared to the same period last year, while in the Middle East, Africa and Latin America, the company increased second quarter sales by $1.7bn.
Luxury brands have done even better. Lexus UAE reported a 50 per cent increase in year-on-year sales for the first half of this year, while Lexus sales in the US were down by 15 per cent for the same period. Abu Dhabi Motors, whose brands include BMW and Rolls-Royce, reported a 36 per cent sales growth last year, as well as the third-highest sales volume of any Rolls-Royce dealer in the world. "The market is booming with infrastructure development and investments, and there are a lot of people coming into the region, which helps car sales," said Sunil Oommen, the assistant sales and marketing manager for Honda in Dubai, which reported 30 per cent growth last year.
In electronics the world's number three PC maker, Acer, reported regional sales were up more than 54 per cent in the first quarter, while sales slumped 20 per cent in the US for the same period. Alshaya Group, the retailer based in Kuwait, plans to increase its network of stores, which comprise some 40 brands, to more than 3,000 by 2011, from a base now of 1,400. That includes coffee giant Starbucks, which last month announced the closure of 600 stores in the US.
Many retail analysts believe regional growth will continue, although not at the same rate. "I don't think sales are going to decline, but I don't think we will see the kind of increments we've seen over the past few years," said Naeem Ghafoor, the chief executive of Skyline Services Retail Consultancy. Similarly, Saks Fifth Avenue, the New York-based upmarket department store, revealed a worse than expected second quarter yesterday due to cutbacks on shopping sprees by American women.
Losses widened to $31.7m in the three months to the beginning of August, from $24.6m the previous year. But Saks Fifth Avenue has continued its expansion throughout the GCC - the latest location due to open in the Dubai Marina to complement the 80,000 square foot store already in the Burjuman shopping centre. "I see luxury brand shoppers increasing and increasing," said Eisa Adam Ibrahim, the general manager at the Burjuman, a high-end shopping mall in Dubai. Some stores in Burjuman are among the best performing outlets in the world for certain brands.
"The Fendi boutique in Burjuman is the best selling store for Fendi by square foot," said Mr Ibrahim. "Bvlgari [watches] is also the best selling and Cartier [and] Dior are some of the top in the world."
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