The market is projected to reach $11 billion in 2023 from $9.7bn in 2021, growing at a compound annual rate of 7 per cent, said the report, which was prepared in collaboration with the Fashion Commission of Saudi Arabia’s Ministry of Culture.
Growth in GCC luxury sales will be fuelled by factors such as increasing demand in Saudi Arabia, return of international tourists in the UAE, including Chinese and African travellers, the emergence of new luxury consumers with growing appetite to purchase locally and the acceleration of e-commerce, Chalhoub Group said.
“Today’s GCC luxury customers are young, digital natives and hyper informed. They are in search of meaningful brands and personalised experiences, and like experimentation, newness and uniqueness,” Patrick Chalhoub, group president of Chalhoub Group, said.
“We are seeing the rise of local creative talents and passionate designers from the region with disruptive and innovative ideas. To resonate with local consumers, international brands are creating capsule collections, exclusives and GCC-first launches with localisation in mind.”
The GCC luxury goods market dropped to $7.4bn in 2020, with different country dynamics depending on exposure to tourism and repatriation of spending, research by management consultancy Bain & Company showed last year.
Although the decline in tourism hurt the market, GCC nationals (who usually purchase 30 to 40 per cent of their luxury goods from outside the region) repatriated spending in their own countries, the research found.
High-end fashion sales outperformed 2019 by 39 per cent, with performance driven mainly by the absolute luxury segment at 55 per cent, the Chalhoub Group report said.
The GCC’s prestige beauty market (which is separate from mass market beauty) is worth $1.58bn, growing at 6 per cent compared with 2019, while the watches and jewellery sector is worth $3.9bn and outperformed 2019 sales by 16 per cent, Chalhoub Group said.
Make-up is the only segment that didn’t recover in 2021 compared with 2019, the retailer added.
A number of factors drove GCC luxury sales last year: the emergence of new luxury consumers who were well-informed and comfortable with e-commerce; spend repatriation, with local consumers doing 60 per cent of their luxury spending in country; global brands focusing on the region through dedicated collections and local events; tourism recovery; and the e-commerce market more than doubling, Chalhoub Group said.
“Consumers are becoming more comfortable with shopping luxury online. Prestige beauty and high-end fashion e-commerce [shares] remain strong at 11 per cent and 15 per cent, respectively, in the GCC,” the report found.
However, the GCC high-end sales market faces certain risks such as consumer focus on experiences as opposed to goods, inflationary pressures, global geopolitical uncertainty and supply chain challenges, Chalhoub Group said.
Saudi Arabia recorded growth in personal luxury, with sales reaching $2.2bn last year and growing at 19 per cent, driven by spend repatriation, female empowerment, events and activities, and an e-commerce boom, the report said.