3 things Middle East luxury businesses should focus on in 2017
We reported last week that the personal luxury goods market in the Middle East will see stagnation rest this year, citing a Bain & Company report.
“For luxury goods companies in the Middle East, the challenge is two-fold. On one hand, the market is difficult with several segments declining for the first time in 10 years. On the other hand, they need to adapt to the rise of the millennials and make sure they cater to the needs of their next generation of consumers,” said Cyrille Fabre, partner and leader of Bain’s Retail and Consumer Products practices in the Middle East.
Meanwhile, global personal luxury goods market growth is on its way for a rebound on the back of a strong demand from Chinese customers.
Here are three things the region’s luxury businesses should focus on to face the challenges in the market:
Digital and off-price are still winning
The momentum of digital transformation continues to reshape the luxury industry. Bain expects online sales to be the leading channel with the highest growth in the coming years, followed by off-price stores. Physical monobrand stores will be the real playground for luxury brands, although their footprint may be approaching the limit.
Big winners vs. strong losers
The polarization trend, which Bain’s research highlights as a feature of the “New Normal” era, is highly evident in the first months of 2017 as the gap between winners and losers widens further.
The Millennial State of Mind
Success in the next decade requires brands to refocus on their customers to better anticipate and cater to their needs. The younger generation will be key as millennials and Gen Z will represent 45 per cent of the global personal luxury goods market by 2025. Still, when analysing behaviours, it is more correct to talk about a “millennial state of mind,” which is increasingly permeating across all generations and is thus more a psychographic phenomenon rather than a purely demographic one.
“While they currently account for 25 per cent of the market, in the Middle East, millennials are of key importance. But, luxury goods companies also need to adapt to the more widespread ‘Millennial State of Mind’ that has influenced a broader set of consumers across older generations. To do this, brands need to engage consumers more actively online in order provide deeper experiences and create a story around the product,” added Fabre.