June in Dubai bring two things: Scorching hot weather, and a month-long shopping festival offering discounts on even haute couture fashion brands. Known as the Dubai Shopping Festival, the event has been an annual tourist draw to this glitzy sheikhdom. But this year, Dubai’s public relations machine has been promoting its shopping malls months in advance, and to a very specific clientele — well-heeled tourists from China and Eastern Europe.
According to property firm Jones Lang Lasalle, 214,000 Chinese tourists visited Dubai in 2011, a 50% increase from the previous year. They opened their wallets too — up to 25% of luxury goods sold in the Mall of the Emirates were bought by Chinese tourists, according to Iyad Malas, chief executive officer of the Majid Al Futtaim group, in the International Herald Tribune.
Repeat visitors will find even more offerings. The Mall of The Emirates, best known for its indoor ski slope, recently went through an expansion to add more of the world’s leading high end fashion brands, including Dior, Louboutin and Brioni boutiques. And in time for the shopping festival, the mall added a new Prada boutique — one that happens to be the third-largest Prada boutique in the world.
Despite fears of eurozone instability and continued Arab unrest, the Middle East is a robust market for luxury retailers, and Dubai acts a regional hub, possessing a local market of wealthy Emiratis and expatriates, and a regular churn of free-spending, deep-pocketed tourists. Dubai is now second only to London as the most attractive city for international retailers, according to property adviser CBRE. The metropolis is home to over 25 shopping malls, including the world’s largest shopping center in terms of total area, and retail accounts for 30% of its GDP.
“Luxury has been growing at a rate between 10% and 12% in the Middle East in recent years,” according to Frank Pinto, spokesperson for Bain & Company. Many analysts predict the luxury retail industry in the Middle East will remain strong for the foreseeable future. Market experts expect the healthy growth rate to be maintained until at least 2014 in the Middle East. Retail research company Verdict goes so far as to project the amount of spending on luxury goods to actually double by 2015.
Wharton marketing professor Jonah Berger is not surprised. “Regardless of the economy, buying luxury goods has always been a way for consumers to distinguish themselves,” he notes. “To show that they are wealthy, to show that they have taste, and to show that they are fashionable. In the Middle East, it is a way for consumers to show that they are worldly and connected to fashion movements around the world.”
Originally published in Universia Knowledge@Wharton July 11, 2012