Interviewed by Irina Malkova AFTER THREE DECADES OF CONFIDENTIAL AND STABLE GROWTH, THE MARKET OF GOODS AND ITEMS LUXURY IN THE MIDDLE EAST REGION TODAY FACED MORE MODERATE PROFITS. ABOUT WHICH METAMORPHOSIES EXPECT A RETAIL SEGMENT AND HOW IT WILL AFFECT THE END CONSUMER, WE TALKED WITH CHAPTER CHALHOUB GROUP PATRIK SHALHUB. Chalhoub Group today manages over 30% of the Middle East luxury goods market, including brands such as Christian Dior, Carolina Herrera, Max Mara, Ralph Lauren, Louis Vuitton, Level Shoes, Michael Kors, Sephora, Sax Fifth Avenue and others. What are the main challenges facing you right now?
Patrick Shalhoub: There are several. The first is pricing. It is very important for us to keep prices for our products within acceptable limits. This problem is in our hands, since we ourselves control the cost. The second problem is purchasing power.
The crisis that we are witnessing now in Russia, in the world and in the Middle East region due to oil prices has not yet affected our business much, but has significantly affected the psychological side of customer behavior. Therefore, it is very important for us to understand their concerns and worries in order to properly adapt our activities to their needs. The third challenge is competition. It is high, and today it is becoming more difficult to break through to the buyer, since everyone does everything possible to get it. And we need to stay afloat in this difficult time without harming the business and our reputation.
And what steps are you taking to do this?
Patrick Shalhoub: We try to work more directly with our customers. We arrange meetings and events with them. We try to offer them more personalized services and goods that they really need. We are not inclined to lower prices too much, but we are ready to offer something interesting to everyone. Today, people are not so much interested in brilliance and glamor, they more want to get something homely, warm, understandable. All our marketing is now focused on this.
You said that it is important for you to keep prices at an acceptable level. But rental prices, for example in the Dubai Mall, are constantly growing, which affects the final cost of the goods. How do you deal with this?
Patrick Shalhoub: We are constantly negotiating with developers and trying to negotiate with them to keep prices down. This process is not easy, but dialogue is an important means of communication. Today, tenants have increasingly begun to listen to our opinion, which is especially important. But sometimes we have to open our boutiques in other malls so as not to increase the final cost of the goods.
Who is your main customer today?
Patrick Shalhoub: We do not exclude anyone, but most of all we focus on the buyer from the Middle East.
And what products in the luxury market segment are now most in demand?
Patrick Shalhoub: It is important to differentiate consumers by age, gender, nationality and affluence. When it comes to the beauty industry, now the main purchases are in cosmetics. Local consumers are interested in eye and lip makeup. Foreign buyers, for example the Chinese, are more interested in facial skin care products, since for them a healthy skin is more important than makeup. If we talk about watches and jewelry, now we are seeing an increase in sales of jewelry, since people know that investing in stones and precious metals is one of the most reliable. As for accessories, bags and shoes are still leading here. For example, Russians mainly buy clothes, and then accessories. And the Chinese do not buy clothes at all, but they are actively buying bags and watches.
It's no secret that these days the consumer of luxury goods is very young. How do you adapt to his interests?
Patrick Shalhoub: Good question. Firstly, such a consumer is always looking for something new, unusual and brighter than his conservative parents. And what’s interesting is that before exclusive products were always more expensive than ordinary ones. And today, taking into account the new realities, exclusive products must be adapted at a price to a younger buyer. We are forced to release limited collections, but at a more affordable price. This is especially true here in the Middle East, when children are born into wealthy families and from childhood get used to luxury and expensive things. For them it becomes a social norm; they do not seek to surprise anyone with this.
And besides, they are all active users of social networks.
Patrick Shalhoub: Social networks are incredibly important today - they play one of the key roles in sales, as people rely on them when they make their choice. Nowadays, people do not choose using the advice of their elders or parents, and not because the brand says so, but because their friends talked about it on social networks. Friends, acquaintances and bloggers become influencers. Social networks today are the main source of inspiration.
Today, many brands began to call themselves "niche", "luxury" and "exclusive", but not all of them are. Where do you think the border goes?
Patrick Shalhoub: To understand whether a product belongs to the category of luxury, you need to take into account the following indicators. Firstly, these are the roots of the brand - the company should have a history, time-tested. If it is a fake, it can be perceived as a luxury, but in fact it is not. Secondly, this is quality. But quality can be any thing. Therefore, it is very important how much innovation and creativity is invested in a thing, such as in a Lady Dior bag. Well, then this is exclusivity, that is, a limited edition.
Your forecast: what does the market for luxury goods and goods expect in the coming years?
Patrick Shalhoub: The market is entering a new, more mature stage, and in the coming years it will still have some cleansing. Someone will have to leave the race, someone will have to invest more in their brands. Segregation awaits the market, as always in times of crisis.
