Fashion in the Middle East: Optimism and Transformation

As fashion players scan the globe for growth opportunities in early 2023, it stands to reason that many are now turning their attention to the Middle East. Backed by strong growth in 2022, several markets in the region are increasingly offering both local and international fashion industries more avenues to expand their operations. For brands and retailers with the creative and financial bandwidth, this could translate into entirely new or vastly expanded customer bases.

Many of these customers have increasing spending power, thanks in large part to the strength of their local economies. Specifically, the GDP of the Gulf Cooperation Council (GCC) countries is projected to grow by 3.7 percent compared to 1.5 percent for the overall world economy, according to economists at Oxford Economics.

How this can translate into opportunities for both mass market and luxury players is the latest report from BoF Insights, Fashion in the Middle East: Optimism and Transformation. What is clear from the report’s research is that the tastes and behaviors of fashion buyers in the Middle East are evolving rapidly, driven in part by shifting social norms and heavy investment in public spaces.

In a recent BoF Insights survey of two key GCC economies—the United Arab Emirates and the Kingdom of Saudi Arabia—about half of respondents say they spend an average of $1,000 on fashion annually. The amount rises significantly among high-income respondents with an annual household income of $75,000 or more, with about 30 percent in the UAE and 50 percent in KSA spending $1,000 on average per month.

When asked what they look for when shopping for fashion, these high earners in both countries say quality and elegance are among the most important attributes. Modesty falls in the middle of these considerations, likely due to consumers’ ability to tailor their clothing to their needs. In terms of brands, Nike, Adidas and Zara dominated consumer favourites, while Gucci was the only designer brand to make the top five for respondents. Other designer brands in the top 15 for UAE and KSA consumers surveyed are Louis Vuitton, Chanel and Dior.

Digging a little further, BoF Insights also found that societal changes — such as more women entering the workforce — are influencing fashion choices. While accessories such as handbags and jewelry were once the purchase priorities—in part because of rules about modesty and the ability of accessories to complement traditional attire—consumer preferences are evolving as the variety of life experiences increases. Consumers in nationally representative surveys were highly interested in purchasing footwear, beauty and casual wear in the next 12 months.

Developing a richer, more nuanced understanding of consumers will be key as international brands and retailers look to enter and grow in the Middle East, where fashion industry sales are expected to grow by 11% year-on-year in 2023 , according to data from market research provider Euromonitor International. The region has a projected CAGR of about 7 percent between 2023 and 2027. KSA and the UAE together account for about half of the $89 billion market value.

Meanwhile, BoF Insights research finds that international brands and retailers can find ways to connect with shoppers both inside and outside the Middle East. About 40 percent of total fashion spending takes place outside the region, although significant amounts of overseas spending were repatriated during the Covid-19 pandemic. As such, these consumers are increasingly demanding enhanced shopping experiences and a wider range of products closer to home.

International brands and retailers have a significant opportunity to provide collections that appeal to the well-traveled UAE and KSA customer base by developing flagships in the region, in addition to hosting local brand events and offering products exclusive to the region.

But especially at home, Middle Eastern customers are raising the bar in terms of what they expect from their consumer journeys, whether online or in-store.

“The Middle Eastern customer – especially Millennials and Gen-Zers – expect brands to take a hyper-local and personalized approach to every aspect of their offering,” said Felicity Fidler, head of international marketing at Harrods, adding that because the its clientele in the GCC comprises more than 10 per cent of the London department store’s sales, having an on-the-spot image of the consumer is important to it.

As Fidler and other experts speaking to BoF Insights about the show explained, meeting customer expectations in many ways requires a much greater commitment to localization than ever before, with every customer interaction reflecting its creative and cultural new dynamism. area.

Why this BoF Insights report is essential:

• Analyzes the fashion market in the Middle East with a particular focus on Saudi Arabia and the United Arab Emirates (which together account for around 50 percent of sales in the region)
• It assesses the main trends affecting the Middle East fashion industry, such as the proliferation of joint ventures and changes in the regulatory environment, the evolution of customer preferences and the development of personalized products and offers by international brands and retailers
• Features proprietary research with UAE and KSA consumers, revealing their fashion budgets, local vs. international spend, most in-demand brands, sources of inspiration and categories where customers intend to spend the most
• Highlights case studies of Farfetch’s entry into the Middle East and Majid Al Futtaim’s That Concept Store, as well as strategic analysis of adaptation and local activations of brands such as Prada, Christian Louboutin, Louis Vuitton, Yoox Net-A-Porter and Ounass
• It unpacks tactics for brands and retailers to attract different customer profiles in the region
• It describes the trajectories of e-commerce and social media in the region as complementary channels to malls
• Provides executive perspectives on the range of strategic assortment and pricing in the region

This report is based on proprietary research data:

• Survey panel of approximately 2,000 participants (aged 18+ and demographically balanced) in the UAE and KSA
• 22 interviews with founders, CEOs and other senior executives from brands and retailers as well as consultants and creatives in the region
• Market size data from Euromonitor International, a global market research company
• An analysis of UAE and KSA inventory and US-adjusted average unit prices for selected luxury and mass market brands, powered by data from Edited, a data-driven retail intelligence and AI company
• In-person store inspections and pulse interviews conducted in the area at department stores and single-brand stores in both luxury and mass market segments
• Selected companies include but are not limited to: Adidas, Balenciaga, Bottega Veneta, Chanel, Centrepoint, Dior, Dolce & Gabbana, Farfetch, Fendi, Gucci, H&M, Lacoste, Loro Piana, Louis Vuitton, Max Fashion, Net-a-Porter, Nike, Ounass, Prada, Splash, Zara