Changing Codes: Charting The GCC's Luxury Retail Sector

The global retail landscape has transformed dramatically in the recent past, driven by factors like shifting consumer preferences, technological advancements, and globalization. As such trends flourish, the GCC is emerging as a new magnet for this domain – indeed, the luxury market in the region surpassed global growth rates to reach unprecedented levels in 2023. According to a 2024 analysis by the Dubai-headquartered luxury goods retailer and distributor Chalhoub Group, the personal luxury market in the GCC is expanding at twice the pace of the global industry, reaching a record US$12.5 billion by the end of 2023.

The region’s luxury market is therefore thriving, driven by robust demand for high-end fashion, luxury watches and jewelry, and prestige beauty, which is cementing the GCC’s key role in the global luxury landscape. Besides finding that the UAE has become the leading market in all luxury fashion segments, the Chalhoub Group report also finds that rising disposable income across the region has been enhancing spending on high-end goods, with ultra-high-end and high-end segments making up 86 percent of the total market, growing by 11 percent and 6 percent from 2023. Statista suggests that the GCC luxury market is projected to grow at a compounded annual growth rate of 2.05 percent until 2029, with revenue in the luxury goods market amounting to $12.55 billion in 2024.

Ingie Chalhoub, founder, Etoile Group. Courtesy of Ingie Chalhoub.

According to Ingie Chalhoub, founder of Etoile Group, a UAE-based leading group at the forefront of the luxury fashion retail industry in the Middle East, the GCC luxury market is distinguished by customers who prioritize not only the brand, but also the quality of the shopping experience. “The region’s retail environment is dynamic, with rapid growth driven by ambitious projects, luxurious shopping destinations, and a discerning audience that expects a seamless, exceptional experience,” she states, while also noting that luxury retail in the GCC is driven by high-influx tourism, high-networth individuals, and younger demographics. “These factors are pivotal,” Chalhoub says. “Tourism brings in an international audience that values the region’s world-class retail experiences. Younger demographics are vital; they represent a new generation that is both aspirational and digitally savvy, bringing fresh energy to the luxury market. Combined with high-income levels, these elements create a vibrant ecosystem that not only supports but enhances the growth of luxury retail in the GCC.”

Laith Al-Bazirgan, head of business development, Endava Middle East. Courtesy of Laith Al-Bazirgan. 

Laith Al-Bazirgan, head of business development for the Middle East at Endava, a London-headquartered software and consulting company that works with retail and consumer goods, among other industries, agrees with Chalhoub that tourism is a driver for the GCC’s luxury retail market, with it driving high store activity and spending on luxury goods. “Cities like Dubai and Doha have built reputations as go-to destinations for high-end shopping experiences, where everything from luxury malls to personalized shopping services entices tourists,” Al-Bazirgan says, while also adding that GCC consumers are also driving demand for exclusivity and tailored services. “In the GCC, luxury retail holds an additional allure,” he states. “Here, luxury extends beyond the product itself; it’s a symbol of identity and status, deeply rooted in cultural values around hospitality and distinction.”

Kim Sanzhiev, founder, Get Outfit. Courtesy of Get Outfit. 

Kim Sanzhiev, founder of Get Outfit, a UAE-based personalized fashion discovery app featuring an artificial intelligence (AI)-powered stylist, tells Inc. Arabia that a mixture of economic and cultural factors is boosting the GCC’s luxury retail growth. “Growth is being fueled by a few significant factors,” Sanzhiev says. “First, the rising disposable income across the region, which enhances spending on high-end goods. Second, the Middle East’s unique affinity for luxury — blending both tradition and innovation — is crucial.” There’s also a strong demographic angle, Sanzhiev adds. “Over 68 percent of shoppers in the GCC are aged between 18 and 34, and this generation is gradually maturing and increasing their earnings, stimulating consumption,” he points out. “Notably, more than 46 percent of Gen Z spend more on fashion than on any other category.”

Online shopping has also become increasingly popular in the GCC, driven by the changing preferences of millennial and Gen Z luxury shoppers, who are primarily digital natives and demand modern, personalized services that they can access at their convenience. “Unlike previous generations, Gen Z shoppers often look for unique, personalized experiences and seek brands that offer a sense of community,” Chalhoub points out. “They’re more interested in quality and purpose, than just owning a luxury product for status.” Sanzhiev adds, “The surge in online shopping allows luxury brands to reach a broader audience, catering to the preferences of a tech-savvy consumer base.”

In addition, the rising influence of e-commerce and social media means that online platforms are increasingly boosting luxury product sales and playing a key role in shaping consumer preferences, especially among younger audiences. Young consumers display brand loyalty differently from previous generations, preferring brands that directly connect with them and cater to their individual needs anytime and anywhere they choose to shop. “Unlike previous generations, this group isn’t content with mere labels; they seek brands with compelling stories, relevance, and innovation,” Sanzhiev says. “We see them gravitating toward more niche brands, particularly those that champion authenticity and diversity.”

Kelly Power, co-founder, Best Kept Shared. Courtesy of Best Kept Shared.

Kelly Power, co-founder of Best Kept Shared, a peer-to-peer fashion rental and resale e-commerce platform based in the UAE, believes that the growth of e-commerce is making luxury retail more accessible. Best Kept Shared, which acquired the peer-to-peer fashion resale platform BAZAARA this October, operates with the aim of helping women in the UAE to access luxury fashion without the designer price tag or the environmental impact. “The rise of luxury e-commerce is making high-end fashion more accessible, convenient, and personalized,” Power points out. “Many retailers are offering digital perks like online stylists and free returns to make it even easier to enjoy luxury on-demand.”

“Phygital" Transformations

Phygital – the blending of physical and digital experiences in retail – is also becoming a trend for global luxury retailers. In the GCC, brands are increasingly leveraging this trend as they create seamless shopping experiences, with retailers integrating both online and offline elements to provide personalized services, exclusive products, and distinctive experiences that align with consumer preferences. “This generation expects luxury brands to embrace digital and social channels in an innovative way that speaks to them directly and transparently,” Al-Bazirgan says.

According to Chalhoub, a successful “phygital” strategy combines the best of both worlds. “It’s about allowing clients to seamlessly transition between digital touchpoints and physical spaces,” she explains. “For instance, brands are now using mobile apps that connect directly to in-store experiences, allowing clients to preview collections or make appointments.” Seamlessly integrating online and in-store experiences has become essential, given how the younger, tech-savvy demographic is emerging as a major segment of luxury retail consumers.

In many cases, this means integrating technologies like artificial intelligence (AI), augmented reality (AR), and virtual reality (VR) in meaningful ways to meet customer expectations and drive sales. “Technology is at the forefront of reimagining luxury retail,” Al-Bazirgan says. “AR and VR provide immersive experiences that bring luxury products closer to the consumer, wherever they may be. These tools give clients an exclusive, hands-on experience with the product.”

Chalhoub adds that such innovations also allow clients to engage with brands in more immersive and interactive ways, whether in-store or online. “Pop-up stores with digital elements or virtual showrooms offer a richer, more versatile shopping experience,” she points out.

One example in this regard is Liht Organics, a beauty brand located in Dubai’s Mall of the Emirates, which launched a VR-enabled stall in 2023 that enabled customers to preview and test products without the need for physical application. Shoppers used cameras to generate an avatar displayed on a screen, which would also showcase a selection of available products.

Nicolas Nath, founder, Aiconic Labs. Courtesy of Nicolas Nath. 

Another tech driving major change in the luxury sector is AI, which is allowing retailers to gather data on customer trends, buying behaviors, and inventory dynamics, with countless innovative applications for this information to improve the customer experience and drive sales. Nicolas Nath, founder of Aiconic Labs, a Dubai-based generative artificial intelligence innovation company that produces content for social media, e-commerce, and campaigns, tells Inc Arabia, “AI technology is moving at a rapid pace and there are so many elements within marketing such as model selection, search, content, data, exclusivity, usage rights, cost, scalability, and more that already is transforming how brands operate."

Nath also points out that another key role of AI is to customize marketing materials that are targeted to specific customers, and thereby enhance their retail experience as a whole. With AI, Nath says that brands can offer tailored recommendations and ads that reflect each client’s tastes and purchasing history, making digital interactions feel bespoke. “AI enables brands to precisely understand customer preferences, helping them shift from broad campaigns to deeply personalized interactions,” Nath explains. “By analyzing buying patterns, luxury brands can determine preferences for limited-edition items or bespoke services, enhancing brand loyalty and driving up conversion rates.” Nath expects advances in AI, especially video, real-time sentiment analysis, and VR, to revolutionize luxury marketing by redefining the essence of exclusivity and personalization. “Through AI, luxury brands can track campaign effectiveness across platforms, tweaking messages on the fly,” he explains. “For example, if a particular image resonates with a certain demographic, brands can instantly adjust targeting to boost engagement, leading to data-driven, agile campaigns.”

Nath also points to AI influencers as an opportunity for brands to reach a broader pool of consumers. “Basically, brands can create their own influencers tailored to a specific target group which allows them total control and exclusivity of this persona,” adds Nath. Here, he gives the example of German sportswear brand Puma’s collaboration with AI influencer Laila Khadraa, who has over 12,000 followers on Instagram.

Driven By Values 

The GCC has also seen luxury brands increasingly focused on localizing their content, where they align their branding and marketing efforts with regional culture and traditions. By integrating luxury into traditional celebrations in the region, brands can connect with and attract a broader audience, including the upcoming generation of luxury consumers. “Unique to the region is a clientele that combines an appreciation for global luxury brands with a preference for personalized service and a genuine connection to their heritage,” Al-Bazirgan points out. “Understanding these cultural nuances is key to helping luxury brands find success in this market.” Chalhoub agrees, adding, “What sets the GCC’s luxury market apart from others is a sophisticated clientele that values both tradition and modernity – seeking timeless elegance, but also highly responsive to innovation and trendsetting.”

One example in this regard is French luxury brand Van Cleef & Arpels’ collaboration with Emirati designer and artist Fatima Alketbi for Ramadan this year, with it resulting in calligraphic artworks using palm fronds that blended “heritage and contemporary elegance.” Similarly, the storied Italian brand Gucci staged its #GucciGameNight series in March this year, which highlighted its Ramadan fashion capsule collection, Nojum, which, in Arabic, means “stars.” Pop-up experiences are also being used by luxury brands to capture attention and engage audiences – for instance, French luxury brand Louis Vuitton collaborated with Dubai’s Atlantis The Royal to unveil a series of three-meter-high statues dotted around the resort, depicting the fashion house’s playful mascot, Vivienne.

In addition to localization, luxury retail is also emphasizing personalization to drive customer satisfaction and build loyalty. “Personalization has become central to the luxury experience,” Chalhoub points out. “It’s about crafting a unique journey that reflects each client’s individuality. From custom products to tailored shopping experiences, personalization fosters a deeper connection between brands and their clients.” Plus, by utilizing analytics and data gathered from smartphone apps designed to improve shopping experience, brands can predict fashion trends which match the consumer’s preferences. “Through predictive analytics and customer data, brands can anticipate clients’ needs, tailor recommendations, and offer exclusive suggestions,” Al-Barzigan says.

Luxury brands are also trying to adopt sustainable practices, transparent supply chains, and eco-friendly products to appeal to the region’s younger generations. “Gen Z is distinctly different in their approach,” Chalhoub states. “They’re purpose-driven, and they prioritize authenticity and brand values. They gravitate towards brands that resonate with their beliefs, including sustainability, inclusivity, and social responsibility.”

Another key element is brand reputation and image, with growing expectations for brands to openly share their sustainability efforts as luxury consumers and environmental groups closely monitor their actions. “Consumers, especially younger ones, are increasingly scrutinizing brand ethics and sustainability practices,” Al-Bazirgan says. “We are seeing brands adopt transparent, eco-friendly practices, such as ethical sourcing and sustainable packaging, which resonates strongly with local luxury consumers who care about their purchases’ environmental impact.”

New business models like fashion rentals have also been introduced in the region to broaden the industry’s circular options. According to a 2023 report by Chalhoub Group, such options allow customers the chance to rent fashion items for a limited time, enabling them to explore different brands and select items for specific events, with the aim of extending products’ lifecycles. The rising trend indicates that customers are embracing rentals and used luxury fashion as eco-friendly alternatives. “Consumers are increasingly seeking environmentally friendly and socially responsible alternatives to traditional retail and our platform provides the opportunity to access luxury fashion without the burden or environmental impact of constantly buying new pieces,” Power says.

The Road Ahead 

According to Sanzhiev, the GCC is well-positioned to play a significant role in luxury retail as it embraces digital transformation. “With tech-savvy consumers and a preference for high-end brands, the region is likely to influence how luxury is defined and experienced globally,” he says. “Moving forward, we can expect a seamless integration of digital and physical experiences, with sustainability becoming a standard expectation and advancements in areas like augmented reality and virtual try-ons.”

Al-Bazirgan adds that with its high-profile clientele and cutting-edge approach to retail, the region is well-positioned to lead in experiential, tech-enhanced luxury shopping. “The road ahead is promising, marked by more immersive, sustainable, and tech-integrated luxury experiences that will shape the future of retail in this region,” he states. As for Chalhoub, she is confident that the GCC will continue to be a significant player in the global luxury market. “This is a region that embraces change while honoring tradition, and I believe it will lead the way in defining the future of luxury retail,” she concludes.

This article first appeared in the November issue of Inc. Arabia magazine. To read the full issue online, click here.