Will family businesses still dominate the retail landscape in the GCC

This article is published in the June Edition of Luxuryfacts www.luxuryfacts.com

By Alexandra Orloff

©Sacha Orloff - Jeddah | 2011

Presently, the GCC retail industry is on a renewal pathway, with the market and industry expanding and growing outstandingly. With a shifting political environment, an extremely high per capita income, and top-of-the-line infrastructure makes the GCC region all the more attractive for retail investors, as evidenced by the dramatic increase in the number of international and regional retails and brands in the region.

This growth has lead to amplified rivalry, and retailers must constantly apply themselves to guarantee that they stay ahead of the game and keep up with the latest economical and market trends that could potentially affect their businesses, as well as the latest practices and technologies that could improve their operations and competitiveness.

While the financial crisis has had an impact globally, manufacturers of luxury goods and high-end service providers did not face problem in finding clients, especially in the UAE and the gulf region. The Middle East is a home of nearly 400,000 millionaires that indicate towards the immense growth potential. Consumers in the Middle East command huge amount of wealth, with some regions like, Abu Dhabi and Qatar having the highest per capita income. As a result, people spent lavishly on luxury brands and up-market offerings.

The luxury goods business is anticipated to outperform the average global trade and has an extremely bright future. The luxury retail market is anticipated to show a CAGR of around 8% during 2011-2013.

The key players in the GCC retail market are in majority Family owned businesses. In this time in age, family businesses in the Gulf region find the twofold challenges of functioning in a difficult global economic environment. Most of them, as a third generation have a difficult transition of the business from the second generation to the third generation of family control. In order to stay alive, grow, and take their places along with the many family-run firms that have kept their momentum and achieved enduring success in the global economy. These firms must discipline the new generation of entrepreneurs within the family, thus in expanding a new strategy to manage both the family and the business.

These same families also need to enlist outsiders, new talents, giving in the right time control when necessary. The selection of a change agent, has to be in-line with the interests of the families and aligned for the success, the implementation and handing over time the rains in the best manner possible, to ensure success and changes are achieved.

Some of the big groups and family run businesses in the retail sectors are:

The Rivoli Group is a private company known for its diverse portfolio of international luxury brands and for its vast network of retail outlets within the United Arab Emirates and the lower Gulf States. Since its inception in 1988, the Rivoli Group has been building its strong position in the fast growing retail environment of the region. In the process, the Group has become one of the largest importers and retailers of luxury brands in the Middle East and offers a wide range of product categories from watches and writing instruments to menswear, accessories, gift items and eyewear.

As the largest luxury retailer in the Middle East, Al Tayer Insigniahosts a remarkable portfolio of some the world’s best luxury brands in the fashion, jewellery and home categories. Headquartered in the UAE, Al Tayer Insignia has successfully expanded operations to Bahrain, the Kingdom of Saudi Arabia, Lebanon and Qatar and currently operates over 85 stores across the region. 

 

The Chalhoub Group merits its place as a major player in the luxury business within the Middle East due to its creators Mr. And Mrs Chalhoub. The group has been created in 1955. Now the Group is run closely by the family second generation, it will be highly interesting to see the third generation involvement. Within the next two years, the Chalhoub Group is going to open more than 40 stores in Abu Dhabi.

Majid Al Futtaim retail

Since 1992 Al Futtaim is a fast growing retail and wholesale company, catering for high street and middle upper brands. Al-Futtaim Group, one of the Middle East’s largest conglomerates, is expecting to sign acquisitions worth more than US$500 million in the coming weeks as it expands in Saudi Arabia and in the Middle East

Swatch Group, with its second generation is settled in the Middle East with a very strong link to the Rivoli Group. Yet, last week the same Swatch Group said it was buying a 33% stake in Alzouman General Trading Co, a Saudi Arabian-based firm which distributes the watch company’s Swatch and Flik Flak brands. International family businesses see that their stake is linked to the growth of other markets, demonstrating that distribution loyalty is no longer a viable option for international expansion.

Since decades, these majors player represent a heavy competition in terms of large supply and infiltration of luxury retail market landscape in the Middle East, their role is to distribute in terms of franchises, or joined ventures high profile brands in the MENA region, where at the contrary of major European groups such as LVMH, PPR and Richemont, who own in totality or part of their portfolio of luxury brands. 

With the rich retail landscape in the area, one can only enjoy the changes occurring at the present time, the major players have to be aware of the new entrepreneurs belonging to the old family businesses, the ones who are already putting foot in the retail business, yet with new rules, new blood and new strategies. For the settled groups, the danger is to stay put even if they invest heavily in opening new stores, getting new acquisitions, adjusting new joint-ventures. These groups benefit of their infrastructure, the knowledge of the market, and their large network, which is lacking with the new players. Knowledge has to be nurtured, and not being taken for a non changing factor. As for the new faces in the industry, their weaknesses is being young, impetuous and thinking that their assets can buy experience. A new cycle of growth has to be focused on stronger care for the client, value for money, quality and customer service.

 More on: http://www.luxuryfacts.com/index.php/pages/1931/1945

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3 Comments

Filed under Luxury Middle East

3 responses to “Will family businesses still dominate the retail landscape in the GCC

  1. Thanks for the info, we connected on Twitter and which led me to your blog. Nice article!

  2. Pingback: 7-10-2009 Dream Fragments The French Inspired City, And The Family Business « John Jr's WordPress Blog

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