Business

Popular pastimes: getting and spending

Sales of luxury goods in the Middle East will outpace global demand this year as the market for fast cars, watches and jewellery grows a sparkling 15 per cent.

Rory Jones

July 23, 2012

In its latest report, Bain & Company, a global information consultancy, reports that spending on luxury products will grow a steady 15 per cent this year across the Middle East. Here is a look at who and what is driving that spending in the region.

q What are the biggest drivers of growth in luxury sales in the Arabian Gulf?

a Traditionally, the wealth derived from oil has always helped to buoy luxury sales in the region and this is still the case as many countries around the Gulf boast a GDP per capita that is among the highest in the world. In the past 18 months, this oil wealth has been redistributed to local populations in the form of infrastructure spending, wage increases and handouts that quickly made their way into the tills of luxury retailers.

How are luxury brands sold here?

The market here is largely dominated by franchise retailers that take on the naming rights to a brand, open stores and sell the goods. But there are some global brands that sign joint ventures in the Middle East, such as Burberry and Jashanmal Group. Some local retailers also have their own luxury branded stores and sell international goods, such as Paris Gallery and the Rivoli Group. The huge numbers of tourists that visit the UAE each year make up a large portion of spending in the country.

Which retailers are the biggest players?

The Chalhoub Group is one of the biggest players in the region, with 280 prestige brands, including joint ventures with Christian Dior and Louis Vuitton. The group is made up of more than 60 companies and has a presence in 14 countries across the Middle East. Al Tayer Group, through its Insignia company, is also a major player with 36 brands currently in its portfolio, including Bulgari, Boucheron, Bottega Veneta, Dolce & Gabbana, Emilio Pucci, Giorgio Armani, Gucci, Ligne Roset and Yves Saint Laurent. Bin Hendi Enterprises, owned and run by Mohi Din BinHendi, is an Emirati company with a great number of brands in the UAE. Rivoli Group also has 300 own-branded stores throughout the UAE, Oman, Qatar and Bahrain.

Where do car sales fit into forecast growth?

Car sales have accelerated across the UAE and wider Middle East this year, with Porsche, BMW, Bentley, Audi and Mercedes all reporting robust sales figures.

* Rory Jones

Company profile

Company name: Dharma

Date started: 2018

Founders: Charaf El Mansouri, Nisma Benani, Leah Howe

Based: Abu Dhabi

Sector: TravelTech

Funding stage: Pre-series A 

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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.”

Living in...

This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

TOURNAMENT INFO

Women’s World Twenty20 Qualifier

Jul 3- 14, in the Netherlands
The top two teams will qualify to play at the World T20 in the West Indies in November

UAE squad
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Cryopreservation: A timeline
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  2. Ovarian tissue surgically removed
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  4. Tissue re-implanted at a time of the patient’s choosing
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Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal

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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
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Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia

Bookshops: A Reader's History by Jorge Carrión (translated from the Spanish by Peter Bush),
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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
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