Changing Codes of Luxury in The GCC

Home to the GCC (Gulf Cooperation Council), the Persian Gulf is continually heralded as luxury’s next playground. According to data from the Dubai International Financial Centre, the panorama of private wealth across the Middle East, Africa and South Asia is vast – an eye-watering USD 8 trillion. In just the Middle East, luxury market value sits around $15.85bn and by 2030, Boston Consulting Group predicts a doubling in size to $30-$35bn.

Fair to say a veritable theme park for luxury brands, but ‘next’ implies a lack of pre-existing opportunity. When, in actuality, the Gulf has long been synonymous with opulence and luxury; its reputation steeped in centuries of grandeur and affluence. From the pearling industry that flourished in the early 20th century, fuelling the wealth of coastal emirates, to the discovery of oil which transformed modest fishing villages into glittering metropolises, the region's history is a testament to its transformative prosperity.

Today, cities like Dubai and Abu Dhabi stand as towering examples of modern grandeur, boasting internationally-recognisable skylines, artificial archipelagos and sprawling malls. These urban marvels are not merely architectural feats but symbols of the Gulf's enduring legacy of luxury, where tradition meets innovation in the most extravagant manner, with no signs of slowing down.

The GCC is a regional union that consists of Bahrain, Kuwait, Oman, Qatar, the Kingdom of Saudi Arabia and the United Arab Emirates. Founded in 1981, the GCC emerged from a desire to capitalise on the oil-exporting economic potential of its member states against a backdrop of British decolonisation and regional liberation.

For luxury, the appeal ignited in the region’s unique combination of high government spending and low taxes. This is made possible by the huge profits of state-run oil companies, which increase the portion of individual income available to spend on consumer goods. On a per-capita basis, they are among the wealthiest countries in the world. Together, they supply one-third of U.S. oil and own at least $273 billion of U.S. debt. Numbers almost too big to fathom. 

Luxury’s Growing Potential in The GCC

Thanks to geopolitics and the world’s overarching economic turmoil, luxury market forecasting can be a tricky business. Luckily, Chalhoub Group are well versed in The GCC and its scope for luxury – an expertise shared by their Chief Strategy Officer, Jasmina Banda, at Walpole’s British Luxury Summit in April.

As of the end of 2023, the Middle Eastern market for personal luxury is worth $12.5bn USD, having grown nearly 60 per cent over the last four years. Of that market, the largest category is fashion (5.2bn), closely followed by watches and jewellery (5.1bn) and then by beauty (2.2bn).

Though the market is currently smaller than that of Asia, Europe or the United States, its growth is double that of the global industry’s speed (29%) and shows no sign of slowing. Yet overarching sentiment when it comes to foreign luxury brands is that they adopt a lacklustre copy-and-paste approach to the region.

How to win in the Middle East is a far more challenging answer than why brands should win there. The latter spans the region’s:

• Rapid Growth & Demand – Thanks, in large part, to the UAE, Saudi Arabia and Qatar, Middle Eastern markets have experienced remarkable development over the past two decades.
• High Spending Power – Fuelled by oil wealth, young populations and a growing middle class.
• Affluent Preferences – Consumer profiles tend to have a strong affinity for luxury brands and often prioritise status symbols.
• Extensive Tourism – Cities like Dubai and Abu Dhabi have become internationally coveted destinations, with tourists flocking to buy luxury goods due to a combination of lower taxes, brand variety and experiential shopping.

With these motives and more, the secret to how brands can succeed in the GCC is akin to gold dust. However, the key to unlocking the region’s potential is an deep understanding of its landscape, something to swot up on before strategies can be put in place.

Dynamic Demographics

An interactive piece from The New York Times, published in 2023, shows that by 2030 many dominant powers including the UK, France, Germany, Italy, Spain, Portugal and the States will have record old-age populations. These countries’ shrinking workforces (by 2050, people age 65 and older will make up nearly 40 percent of the population in some parts of East Asia and Europe) will be forced to give way to currently overlooked nations.

According to U.N. projections, the best balanced workforces will soon belong to South and Southeast Asia, Africa and the Middle East, while today’s benchmark nations will age off the lists.

While existing wealth divides in these regions are stark, luxury will flourish thanks to Millennial and Gen Z affluents’ desire for it. Globally, luxury brands tend to rely on just 20% of their clientele – the very and ultra-wealthy – for the majority of their sales, but this is set to shift with the sea of change highlighted above. To rely on a singular generation, gender or pay grade would be grave.

Women’s Heightened Influence

In perhaps the best shift of all, women – particularly in Saudi Arabia – are beginning to take their rightful place in Gulf economies, gaining both independence and influence (33% of luxury consumers in the Gulf are women in the workforce) with progress notable in several areas according to U.N Women, UNICEF and the World Economic Forum.

Though it remains lower than global averages, women's participation in the workforce in the Middle East and North Africa (MENA) region has seen improvements with many entering sectors such as education, healthcare and entrepreneurship. Figures from WealthBriefing show that one out of three new businesses in the KSA region are now founded by women.

In tandem, several Middle Eastern countries have implemented legal reforms aimed at improving women's economic participation including amendments to labour laws, enhanced maternity leave policies and initiatives to reduce workplace discrimination. Educational reforms have also be introduced in UAE and Saudi Arabia.

Despite these positive trends, challenges remain. Women in the region still face significant obstacles such as cultural norms, legal restrictions, and limited access to economic resources. The pace of change varies widely among countries, with some making faster progress than others. Moreover, conflict and political instability in certain areas continue to exacerbate gender inequalities​ – hardships that shouldn’t be overlooked in blind pursuit of optimism. In fact, according to a study by FuturePoll, 88% of affluent KSA nationals also believe it is important that luxury brands contribute to the empowerment of women in the region.

Changing Codes of Luxury

It is against these shifting social dynamics that the GCC luxury market is attempting to both internationalise and localise. At once appealing to its own fast growing high net worth audience and a steady stream of international tourists. Providing social liberalisation is continually realised, the GCC is poised to not only be the next great wealth capital, but luxury’s next locale. And with these moves comes a ripple effect – one that is already changing the shape of luxury in the Gulf.

Like the rest of the world, convenience is table stakes for luxury in the region with 91% of affluents in KSA specifically highlighting its importance when considering a luxury purchase.

According to the same survey, also conducted by FuturePoll, on the defining elements of modern luxury, audiences are most likely to opt for innovation and cutting-edge design (51%), along with customisation and personalisation (44%), seamless integration of technology (41%), and exclusivity and limited availability (39%). All important parameters for luxury products, but brands should consider the slightly less tangible codes of luxury too: including concepts around placemaking, especially in such a rapidly developing part of the world.

Cultural shifts, although challenging to navigate, present spaces for clever brands to play in – opportunities to steep themselves in relevance without necessarily compromising on brand spirit.

Localised Luxury

In our work, especially with clients in hospitality and retail, we’re consistently battling the sea of sameness that has defined markets because of globalisation. Though they themselves are becoming increasingly international and interconnected, modern luxurians across the GCC, perhaps ironically, are craving the hyper-local. They want authentic brand interactions that speak to the values, culture and sense of place relative to their geography.

According to the Chalhoub Group, local consumers in the GCC spend 60% of their luxury spending in-country, a significant increase pre-COVID not due to lifted travel restrictions but rather the heightened availability of brands, elevated customer service and strong emphasis on clienteling that has bolstered the luxury market.

Whilst there are a set of shared expectations across the GCC as a common market, brands looking to enter the space should be wary of making sweeping – often lazy – generalisations. Localisation means knowing the distinct cultures and approaches to luxury in each country.

The UAE primarily platform international brands, given the high population of expats. Conversely, regional brands maintain dominance in Saudi Arabia where there is a large native population. As Saudi’s ambitions grow, the nation aims to  advance sustainable development, preserve heritage and promote culture. Its Vision 2030 giga-project acts as a roadmap for economic diversification, global engagement, and enhanced quality of life – balancing international interests with local focus.

The GCC is also inheriting thriving cultural hotspots. In 2022, Qatar hosted the FIFA World Cup while there’s a growing presence of F1 hype within the region, Bahrain in particular having hosted the first-ever Middle Eastern Grand Prix in 2004. NEOM’s Trojena – a world-class outdoor pursuits destination, designed by architectural heavyweights including MOF client, Zaha Hadid Architects – has secured the bid for the 2029 Asian Winter Games, further putting Saudi Arabia on the map.

Becoming part of the cultural fabric of the region means also understanding the local calendar; Ramadan and Eid being key periods. French fine jewellery house Van Cleef & Arpels collaborated with Emirati creative marvel, graphic designer and calligrapher Fatima Alketbi to honour the holy month with a series of artworks. Calligraphic in nature, the pieces use palm fronds – an ode to Alketbi’s Emirati heritage – to encapsulate the spirit of Ramadan by enmeshing “heritage and contemporary elegance”.

Cutting-Edge Tech & Innovation

Old and new is a balancing act that defines GCC luxury today. A region so steeped in culture and heritage should undoubtedly celebrate its lineage and heritage, but often such a concentration on what has come before can obscure what’s next. Not for the GCC.

KSA and UAE are investing deeply in new technologies and innovation. The Emirates’ Ministry of Economy have built innovation into their corporate vision, with hotspots like Dubai and Abu Dhabi driving the tourism boom.

Simultaneously, KSA are developing their international reputation for cutting-edge tech. Think sci-fi inspired infrastructural development. Consider NEOM’s The Line (a modular city connecting sea to desert with ‘zero cars, zero streets and zero carbon emissions’), Trojena (previously mentioned) and Oxagon (a living, floating laboratory home to an advanced and clean industrial ecosystem) projects or the Red Sea Global development. All of which are huge parts of KSA’s Vision 2030, a similarly ambitious campaign to that of UAE’s Vision 2021.

Part of this prioritisation of technology and innovation as core pillars for economic diversification has been the establishment of UAE’s numerous technology parks, such as Dubai Internet City and Abu Dhabi's Hub71, attracting global tech firms and startups to the metropolises. NEOM’s smart cities aim to integrate advanced technologies like blockchain, IoT (Internet of Things) and renewable energy​ while AI and robotics continue to grow in usage and popularity. The UAE has appointed a Minister of State for Artificial Intelligence and launched the UAE Strategy for Artificial Intelligence 2031, which aims to position the country as a leader in AI. Saudi Arabia is similarly committed, evidenced by its Global AI Summit and the establishment of the Saudi Data and Artificial Intelligence Authority (SDAIA).

From a retail point of view, Korean beauty brand Lululab debuted its AI-powered mixed-reality beauty boutique at Dubai Mall. Using its LUMINI kiosk, the unmanned semi-virtual store offers customers individualised skincare advice. Once a multispectral camera on the kiosk takes an image of the customers, the lab’s system renders the facial image to identify skin issues and make cosmetic recommendations based on skin tone and type.

It’s one thing to be open to new technologies and entirely another to be their pioneers. To be indifferent is to be irrelevant. Modern luxurians in the GCC are experimental and ambitious, discerning yet intrigued – and they want the same of the brands who want their loyalty. For those keen to succeed, this shouldn’t be too big of an ask.

Quality & Craft

The Gulf is the birthplace of many decorative arts from marbling and ceramics to embroidery, weaving, calligraphy and illumination. The importance placed on craft has historically been paramount – a sentiment that endures in 2024. GCC consumers view luxury items not merely as status symbols, but as investments that promise durability and timeless appeal. They therefore prioritise superior materials and exceptional artistry in the things they buy. While brand recognition has pull in the minds of these cohorts, the preference for quality underscores a wider shift towards provenance and the intrinsic value placed on items – the soul of a thing – being significant, if not deciding, factors in purchasing decisions.

For true luxury brands, high-quality material products should be as table stakes as convenience. What they may come up against is the GCC’s critical nature when it comes to the experiential aspects of luxury. 

During her Walpole briefing, Jasmina Banda revealed how expectations are heightened among affluent consumers across the GCC when it comes to service. Same-day delivery is a major deciding factor for purchase in the UAE, more so than in the rest of the world. And these kinds of requests are especially high in-store. Though Jasmina herself doesn’t think the standard of service is any less than in Europe or the States, GCC buyers demand more.

Retailing in the GCC is closely tied to social habits. Malls dominate the retail landscape because they provide a source of entertainment and air conditioning – in many GCC countries, an inclement climate makes outdoor activity unpopular for much of the year (unless you’re in Trojena). To meet lofty expectations, store experiences must be as well-crafted and designed as the products themselves. Bespoke, concierge-style service makes sense for these consumers – consider membership or loyalty programmes, they not only bolster exclusivity but allow for curation as well.

Though e-commerce is the fastest growing channel in high-end fashion, nearly 80% of the market is held by monobrand stores, remaining dynamic through new luxury retail openings, pop ups and events. The boldest of which is perhaps Layali Diriyah. Located on the outskirts of Riyadh, KSA, Layali Diriyah, or "Diriyah Nights," is a sprawling outdoor cultural centre for retail, dining, art, architecture and entertainment surrounded by palm trees and dazzling lighting effects.

Matter Of Form is a design consultancy specialising in brand strategy, CX and digital innovation for timeless brands on an international scale. Get in touch with one of our consultants via hello@matterofform.com to design what's next.