How the Middle East is shaping the future of luxury fashion retail

As the luxury goods market declined during the pandemic, luxury brands were set a new challenge in differentiating themselves and diversifying their distribution channels. As habits and behaviours shifted online, brands needed to move their focus from brick-and-mortar to a more omnichannel and digital approach to reach a wider audience.

And as we move out of a pandemic and into a cost of living crisis in many countries, it seems that brands, particularly luxury brands, are set to face another wave of challenges to maintain loyalty of the post-pandemic consumer.

But this isn’t the case across all markets. The Middle East is bucking the trend with an economy that is shining brighter than those around it and an increase in consumer spending beyond previous levels. In fact, 70 per cent of shoppers in the region have increased their spending on luxury goods.

A result of rising oil prices, economic growth and investment and a burgeoning generation of rich, young shoppers, this is putting luxury brands in the region in a very exciting position. Not only is it an opportunity to drive growth, but it is also a unique chance to push the boundaries of what the luxury shopping experience looks and feels like for a future-forward generation of shoppers by bridging the physical and digital worlds.

But before luxury brands run off to innovate and reach into the pockets of the region’s young generation, it’s critical that they understand their aspirations and cultural needs.The big challenge for luxury brands is to understand how to connect with them emotionally while building an ongoing relationship that meets their needs.

The power of purpose

Unlike ever before, this generation has been  born and raised with tech, and expect digital-driven experiences within most parts of daily lives. This is coupled with the demand for exclusivity while saving time and money, and brands and governments to protect the planet. It’s critical that luxury brands meet these needs equally in order to attract them. We’re already seeing brands in the region do this well by combining convenience with cultural and sustainability-driven purposes. Ounass, a luxury e-tail platform who has been leading the luxury ecommerce for the last three years, provides one of the fasted delivery times in the region-delivering within Dubai in two hours- while The Giving Movement, a sustainable Activewear & Streetwear Clothing made in UAE, donates a portion of every sale to local charities such as Dubai Cares and Harmony House.

As these types of brands continue to differentiate and thrive against a backdrop of ethical consumerism, we’ll begin to see more international brands seek a slice of that pie by expanding into the region.And as they do, we’ll start to see an acceleration in the building of the next world of luxury fashion, one that promises to seamlessly blend the digital and physical worlds to create more personalised and authentic shopping experiences.

The impact of technology
Web 3.0 is the topic on everyone’s lips, and for good reason. We are currently speeding towards new hyper interactive environments where people can work, play, socialise and shop, revolutionising how brands can show up in our lives. For a sector that is defined by 41 per cent of residents in the UAE and Saudi Arabia as an “enriching experience”, integrating immersive experiences is set to only add value to luxury brand experiences.

In this region, we can already see investment into, and opportunity from Web 3.0, Dubai Municipality is creating a virtual city in the metaverse, One Human Reality, offering people a space to meet and share ideas. This is against a backdrop of a growing gaming population which is set to rise from 65.32 million in 2021 to 85.76 million in 2025. There is no better time for a brand to maximise its digital presence and create unique brand experiences that have no limitations to the real world.

But what does this new world of luxury fashion need to look like in the metaverse? Firstly, it will need to be more diverse, inclusive and sustainable. It needs to reach the many and deliver a myriad of options for self-expression. With the fashion industry going on a journey to create a more diverse and inclusive representation, avatars and clothing in the metaverse will need to extend this to cater for the region’s representations of gender, race, religion and disabilities.

Sustainability is key

As well as this, the luxury fashion industry is being challenged to decrease its carbon footprint, so technology will be needed to ensure that products and supply chains become more eco-friendly. For example, 3D renders can be used to showcase designs, with products only produced once orders are confirmed.

We will also need to see experimentation and innovation in experiences that merge the physical and digital. Ellie Saab, for example, launched a virtual boutique in Denctraland. Here the presentation of products through artificial intelligence, which can be termed ‘phygital goods’, creates something unique and rewarding that can excite new shoppers.

Non-fungible tokens or NFTs also allow luxury brands to build ever-lasting connections through loyalty. They can be built as ways to collect points that unlock physical, digital and on-chain rewards.

While the metaverse may be  in early stages of development, it’s clear that it is bringing forth exciting opportunities to connect emotionally with a younger generation in a region that is thriving for change. Those that join in on the action will push a frontier that is inspiring a new way to live our lives, and reap the reward of becoming a founding father of this brave new world.

Zoha Zoya is head of experience design at global innovation agency, R/GA