At first glance, it might not seem like wallets are tight inside Riyadh’s Centria Mall. On a weekday afternoon, women with covered faces stroll the halls, drifting in and out of Dior and Burberry outlets.
But they’re not buying like they did last year, says Mohammed Fahmawi, a manager at the Saudi Arabian mall’s Gucci store. A year ago, more than 100 customers would come through his doors daily, Fahmawi said. Now, it gets 20 on a good day. Traffic’s also down at the Cartier store nearby.
“People are afraid,” he said, citing the economic slowdown brought on by the oil price slump. “They don’t want to spend their money.”
“We’ve experienced a fairly strong drop in traffic in the Middle East,” said Hermes Chief Executive Officer Axel Dumas.
Middle-East luxury sales rose just 1 percent to 8.1 billion euros ($9.2 billion) in 2015, slowing from the region’s 4 percent gain in 2014, Bain estimates. A fifth of respondents in a survey of Persian Gulf countries published last month, said they cut luxury consumption in 2015, compared with 13 percent a year earlier.
The slowdown adds to the problems luxury-goods makers are facing as weak demand in parts of Asia, the strong dollar as well as terrorist attacks in Europe have crimped sales. The global luxury sector will expand just 2 percent in 2016, making it the industry’s second weakest year since 2009, estimates Italian luxury association Fondazione Altagamma.
The Middle East hasn’t lost all its luster. Yoox Net-a-Porter recently agreed to sell a stake to the founder of Dubai’s Emaar Properties PJSC to help the online distributor of brands like Armani expand in the region. In Qatar, the world’s richest country per capita, residents and citizens spent an average of $4,000 per month on luxury goods and services in 2015, up from $2,500 a year earlier, according to a study for American Express Co. and Mawarid Group.
Mauricio Manrique, a salesman for Richemont’s Montblanc brand at the Dubai Mall, says the downturn is probably just another blip. In his six years working there, whenever sales looked like they were weakening, Russians would arrive and snatch up $460 ballpoint pens or wallets.
Moving his hand up and down like a wave to illustrate how business rises and falls, the salesman says, “I cannot say this is a trend.”
adapted from Bloomberg
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