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Diversification during regional instability

DUBAI, UAE - NOVEMBER 27: Burj Al Arab hotel on Nov 27, 2011 in

During ongoing economic and security-related turbulence, luxury brands engage in different risk-management solutions.

In the Middle East, diversification has been essential for many family-owned business groups – they have diversified their business activities across different segments of the industry, tapped into different economic sectors, or expanded across different countries.

“Diversification has been the natural solution to managing risks in this part of the world and it has provided benefits until today,” Cyrille Fabre, a partner at Bain & Company, says at arab luxury world.

In the Middle East, Dubai has been a hub, attracting international brands that chose the emirate as the centre of their regional presence for the past ten years. It all seemed fine until very recently, when the tourism-driven market of the emirate dropped because of the lower influx of Chinese and Russian tourists.

“Today, what we’ve seen is the impact of volatile tourism in Dubai, but in other GCC countries it is still grey,” Fabre explains.

However, brands are going into these so-called grey areas of other GCC countries, where market research and expectations are not as clear as those in the relatively mature Dubai market.

In line with Dubai’s drop in tourism, brands began expanding into other regional markets, such as Saudi Arabia, Qatar and Kuwait, where markets are more static and less tourist-driven.

However, according to Andrew Williamson, head of retail and Jones Lang LaSalle, there is another reason behind the expansion.

“Global instability is good news for the region…all those [newcomers] only come to Dubai Mall or MOE, but the brands that have been here for 12 years are the ones expanding to other countries in the region,” Williamson says.

When it comes to retail, it is all about long-term planning, where – according to Williamson – new malls and projects being planned now would only deliver in ten years’ time.

It is primarily for this reason, among others, that brands are maintaining their stability in the face of the regional instability.

 

 

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