Chalhoub Group puts brick-and-mortar lessons to use

In luxury online retailing, traditional values do matter just as much

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Chalhoub Group’s focus on sticking with luxury is paying off in another way. Its average online transaction is nudging higher than that of the wider market’s.
Gulf News

Dubai

Strategies that serve a brick-and-mortar retailer well can have their uses in the virtual space too. The Chalhoub Group — one of the biggest names in Middle East luxury retail — is finding this to its benefit.

Even as it continues with a phased expansion of its physical presence, most notably through introducing its own department concepts, the Group is staking claims online as well. And doing the same for others — even global names — too.

“Swarovski (the crystal figurines maker) is asking us to handle the brand exclusively — they want us to deploy a new platform for them in the Middle East,” said Anthony Chalhoub, CEO. “Often we see brands represented online by the distributor or sub-distributor and often at reduced prices. This is not something we want to go into.

“Many brands want to come to us to defend their DNA. We will source directly from the brands — it may sound a little bit arrogant, but we don’t see any need to change how we’ve done things.”

Everyone agrees that the region’s retail space is in a transformation phase, But to date, the dynamics of online selling have not totally upended some of the more traditional ways retail has been handled in these markets. This is most notable in the luxury retail space, where physical store selling seems to have struck an accord with the online world.

For the Chalhoub Group, these synergies are opportunities to grow, now and in the future. One of the brands that it represents — and the Group has a sizeable portfolio — is the cosmetics label L’Occitane. “Its sales online are more than at any one shop we have — in fact, we are quite proud of that,” said Chalhoub.

The focus on sticking with luxury is paying off in another way. Its average online transaction is nudging higher than that of the wider market’s. “We certainly are a little bit higher, and with Level Shoes (with its collection of upscale names) much higher. L’Occitane is about Dh450, Wojooh (which is the Group’s in-house fragrance retail platform) would be the same.

“No one can ignore the online — it’s touched $2.3 trillion (Dh8.45 trillion) worldwide and Middle East’s about $5.3 billion last year. But there are issues retailers need to deal with.

“Many (buyers) want cash on delivery. As a vendor you need to find logistics companies who will accept cash on delivery and with it there is always a risk. At the last moment, a customer can change his mind.” (To date, the Group has focused its online retail presence to the UAE and Saudi Arabia. On the physical side, it is significantly more represented — a network of over 650 stores and 150,000 square metres in 14 countries.)

They keep getting added to — with a lot of help from the in-house concept stores the Group has been pushing ahead with of late.

“I think we have been active with new store openings ... but it doesn’t always show,” the CEO said. “We had to consolidate Level Shoes and we opened 18 months ago Tryano (its own department store concept for women and kids) at the Yas Mall,” said Chalhoub. “And we are a year old with Level Kids (another of its own concepts).” (The Group also tested another department store concept in the UAE, in the form of Robinsons, which opened at Dubai Festival City in March. For this, it is in a joint venture with Al-Futtaim.)

For a Group that came into being in the 1950s, it’s never late to assume new roles. That explains its determined push into F&B, through a French bistro franchise.

“We felt we are underweight in F&B, and that gives us a reason to focus and expand,” said Chalhoub. “It can be the fourth leg after beauty, fashion and gift retailing. Those three make up more than 90 per cent. If one day we can reach 15-20 per cent in F&B, that would be a good target to aim for.

“The attraction is to compete with offerings not existing in the market. The French bistro — Aubaine — is famous in the UK and been a success since the day we opened in Dubai (at Citywalk).

“There’s another concept coming soon, It will be Italian. The returns on F&B will take a lot of time — 5-7 years — and we are ready to take the heat for it.”

As for whether there is any chance of the Group ever going public, Chalhoub give a categorical no. “The family convention is not to go public. As such, our debt is so little.”

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