It isn’t a secret that the luxury sector can generally be more crisis-proof than most sectors in any open market economies. That fact wasn’t tainted during the COVID-19 pandemic, which can easily be considered as one of the worst global crises of this modern era, if only in terms of its worldwide economic impact. According to various expert reports, 2020cannot be really branded as the darkest year for luxury retail, despite the “unprecedented fall” in global luxury market size.

Last January, a Bain & Company study developed for the Fondazione Altagamma observed a 20% to 22% annual drop worldwide in 2020, bringing the market back “to its 2015 levels.” It also noted that the Middle East performed a tad better thanks to “shorter” lockdowns, and to the “repatriation of previous spending made abroad.” In April, the company published another study, “Assessing the impact of 2020 on the GCC Luxury good market,” in which it noticed that “both the emergence of some positive shopping trends and the ongoing recovery, offer some hope for a return to relative normalcy in 2021 and into 2022, following a 17% decline in the region’s luxury market in 2020.”

In some countries where luxury retail is usually resilient, the drop was however way sharper due to special circumstances. In Lebanon for instance, the unprecedented economic and financial crisis caused a decline of over 80% of the number of buyers, reveals Nadim Amm, the owner of Milord, a high-end retail store chain dedicated to luxury accessories brands, as well as the official distributor of ST Dupont in Lebanon, which has dedicated points of sales in different stores.

“There is some hope for a return to relative normalcy
in 2021 and into 2022, following a 17% decline
in the region’s luxury market in 2020″

Expanding on these numbers, Fida Baddour, who has 20 years of experience in the luxury retail business around the world and in the Mena region, states that “brands’ entry price items suffered the most because this segment relies heavily on tourism, while high-end products fared better. The former relies on tourism and average income clients who seek these brands when they can financially afford them. The high-end items target a wealthier and more resilient clientele.” He underlines the fact that “the pandemic pushed brands to start creating loyalty with local customers in each country rather than depending on tourists.” “A fine example would be the business growth in China, both locally and internationally. The market in GCC countries was also fueled by local resident and clients,” he adds.

The rise of Omnichannels platforms
Experts also noticed another fact: the pandemic gave the sector the push it needed to develop its online presence – a field in which it was notoriously late in using in 2018. “The luxury business took its time to embrace the online market, because physical experience was and still is a major factor for buyers. It wouldn’t be wrong to say that the pandemic accelerated the whole process,” confirms Baddour. Starting from 2020, media reported that several luxury brands like Bulgari, Dior and Louis Vuitton launched their online platform in the Mena region. For Dior Beauty, this step was initially planned for 2022, according to what the head of the Franco-Saudi family-owned group Al Malki said last year. The company represents more than 50 luxury brands in the GCC.

“Going online is a game changer, because it allows brands to extend their reach beyond their physical limits, whether in terms of geography (reaching other countries) or time (extending the time during which the brand can connect with its clients),” explains Fouad Zmokhol, a Lebanese entrepreneur and Dean of the School of Business and Management at Saint-Joseph University of Beirut.

Going online also allows brands to use innovative technologies – like augmented reality or mobile interaction – or hire pertinent influencers to hook customers during the discovery phase. In 2018, a Hall & Partner report on the future of luxury in Saudi Arabia and in the UAE indicated that 41% of residents in the UAE and Saudi Arabia defined luxury as an “enriching experience,” thus giving indication that buyers of the GCC countries, where the shopping mall experience is prominent, would probably be very receptive to this new way of experiencing luxury retail.

“It wouldn’t be wrong to say that the pandemic
accelerated the whole process”

Does this mean that physical retail stores face extinction? “I both agree and disagree,” answers Fida Baddour. “Brands will of course invest more and more money in their online development, where everything is fast and at the service of the customer. But the uniqueness of physical experience and the immersion it offers will remain a vital factor for buyers. The answer to this riddle is the omnichannel commerce,” he adds. In the world of retail, this term defines an integrated approach that bets on transacting across numerous channels, both physical and digital. “The process is still in its early stages in GCC’s luxury retail sector, but everyone is working hard to catch up,” he adds, anticipating major improvements in the next twelve months.

In a nutshell, the strategy allows the brand to bring its shop content to its customers, arrange a personalized visit to the physical shop and even revel in a virtual visit of it, which can offer a fair share of enjoyable experiences even during lockdown, according to both experts. “The physical store will remain an important part of the experience but it will transform over time to serve its new purposes,” says Baddour. While Zmokhol believes that on the long term, investment on physical stores will only decrease in favor of online development, Baddour expects that the level of investment will not drastically diminish but will focus more on human resources, which in general are the essential links between the buyer and the goods.