UAE’s mid-market retailers wrap themselves in luxury
Dubai: ‘Think luxury’ is what UAE mid-market retailers — at least quite a few of them — are rebuilding their strategies on to combat the slackness the sector has been experiencing for seven months now.
By doing so, they get an opportunity to connect with consumers they had never been exposed to in the past and which would also help their bottom-line through the higher margins an upscale exposure can provide.
Abu Dhabi-based Lulu Group, which operates the hyper- and supermarket chain by the same name, took this route by picking up a 40 per cent plus stake in the F&B operations of the UK-based high-end speciality retailer East India Co. (EIC), “With the expansion plans the F&B business of EIC has chalked out, it directly feeds Lulu Group with a higher margin revenue stream, and which we did not have in the past,” said Yusuffali M.A., Managing Director. “All of our traditional business lines have been in the value-for-money space, where only the volumes matter.
“But a time had come when the Group needed to get into areas with a higher net margin as well as return on investments. We partially achieved this on our own by creating our own F&B concepts for the local market.”
Apart from margins, where the EIC stake — acquired for $85 million (Dh312 million) — will help the Lulu Group is raise its international presence. With the supermarkets, the Group has already entered most of the overseas territories where it had a business case to be in. “But the luxury retailing that the EIC creates is not limited to any particular territory — we can go global with it,” said Yusuffali. (Incidentally, there is speculation that the Group is looking to close another major overseas acquisition this week. Yusuffali, however, declined to comment.)
In many ways, the focus on the high-end is a strategy that UAE auto dealerships have used to striking effect in recent years. As per this thinking, the chances are that the UAE’s seriously wealthy are less likely to put off their purchase of the latest sports car or high-end SUV. Selling a few of these can compensate — to some extent — any delay or postponements budget-conscious consumers are likely to show with their next car purchase.
Other retail categories are coming up with their own versions. Rasasi Perfumes has just created a premium fragrance line Boruzz after a two-year development and testing period. “People are looking for greater quality and a unique product experience ... we aim to further strengthen our luxury segment and have a number of propositions under development,” said Salim Kalsekar, Managing Director.
“As a detail-oriented process, it is not every day you can come out with a luxury line. But in coming years, we do envision the segment to make a healthy contribution to our overall revenue mix.”
The Boruzz line — derived from pure oudh — has been priced upwards of Dh400 a bottle against the Dh100 average for Rasasi’s standard offering. As of now, these will be sold through separate counters within the retailer’s own store network. “Moving forward, we are evaluating a number of options and do not rule out the possibility of brand extension and a dedicated store line-up,” said Kalsekar. “Being a capital-intensive exercise, planning is needed in that direction before any decisions are made.”
Retailers on a luxury trip can also take heart from another bit of detail. Analysts reckon the region’s young are more likely than their peers elsewhere to immerse themselves in the trappings of luxury. They are more receptive to new experiences and unlikely to be distracted by a steep price tag.
Retailers can’t ask for a more, can they?
