Qatar will become a regional hub for luxury fashion over the coming years due to high incomes and rising investment into the luxury fashion sector, BMI Research has said in a report.
High incomes will support consumer spending in the luxury fashion segment, enabling consumers to spend considerable amounts on luxury fashion with every fashion cycle.
“We forecast Qatar’s GDP per capita for 2016 to be $62,474 compared to global GDP per capita of $10,254 – underpinning the significant spending power in the country,” the Fitch Group company said. “Over the past four years, we have seen rising investment from Qatar into the luxury fashion industry, indicating the profitability of the sector in the Middle East region.”
According to BMI Research, the Middle East is poised to experience strong growth in the clothing and footwear segment. It forecasts the growth rate for clothing and footwear spending to average 5% between 2015 and 2020, compared to -0.1% in North America; 0.3% in Europe and 3.3% globally. Furthermore, selected markets in the Middle East will experience robust growth in private consumption per capita, namely, Qatar, Saudi Arabia and the UAE – growing at a five-year compounded annual growth rate of 5.1%, 4.5% and 5.3% respectively.
In comparison, key luxury markets, Hong Kong, France and the US will grow at 4.2%; 0.9% and 3.6% over the same period. The Middle East will present strong growth opportunities in the luxury segment over the coming years, driven by high incomes and growing demand for luxury modest fashion.
BMI expects luxury fashion brands to increasingly invest in modest fashion lines over the coming years in a bid to appeal to Middle East consumers. It holds the view that luxury fashion brands will reposition their value proposition through innovation in order to boost sales. It believes that four key strategies will be adopted by luxury fashion brands: Reduce exposure to department stores; slow luxury; fast luxury and product innovation.
Luxury fashion brands will increasingly reduce their product offerings in department stores as continued deep discounting in these stores diminishes brand value. It believes that luxury brands will sell products through brand owned retail outlets and online channels.
“We expect luxury fashion producers to reduce product turnaround time for their ready-to-wear product lines in order to effectively compete with the fast fashion sector. Luxury brands have been affected by the rapid pace at which fast fashion brands produce runway looks for retail, effectively rendering ready-to-wear luxury brands laggards in the sector. We expect this trend to play out over the near term as luxury fashion companies are already implementing the strategy for their ready-to-wear segment,” BMI Research said.
Producers of luxury clothing and footwear will reposition some of their high-end couture product lines to appeal to ethical consumption trends through the adoption of ‘slow luxury’. Slow luxury encompasses environmentally friendly production which is socially and economically responsible throughout the supply chain.
“This emergent trend will appeal to the millennial demographic, justifying a higher price point for apparel to this cohort. This fashion segment emphasises craftsmanship and quality, which will appeal to rising demand for authenticity among this demographic,” BMI said and noted that this trend was still nascent and would gain momentum over the next ten years.