The UAE has built itself a reputation for being a luxury shopping destination over the last two decades among both local and international visitors, especially from the GCC, Russia, the UK, India and China. Dubai in particular provides visitors with an extensive range of luxury retail offerings, making it one of the most penetrated markets in the world in terms of retail brand presence.
Relatively lower levels of Value Added Tax (VAT) compared to other cities and the provision to claim refund upon departure for tourists makes the UAE lucrative for luxury shopping. For residents, the high discretionary incomes and low tax base make the UAE a shopping haven.
But, is it cheaper to buy luxury goods in the UAE in comparison with other countries?
At a global level, the UAE remains competitive as a luxury shopping destination, particularly in comparison to the rest of the Middle East and North Africa (MENA) region and Asia. Based on research by management consulting firm Kearney, luxury shoppers stand to save money in the UAE. However, such products are 15 per cent more expensive in the UAE than Europe. Prices of UAE luxury goods are more in line with the US. But, it is still 15 to 25 per cent cheaper to purchase luxury goods in the UAE compared to China, South East Asia, the Indian Subcontinent and MENA countries.
This is why Oriana Chams, a French expat in Dubai, always shops for her favourite brands during her holidays back home. She recently purchased a pair of Prada monolith patent leather Derby shoes in Europe for 800 Euros (approximately Dh3250). In Dubai, the coveted shoes sell for Dh3500. Chams also recently splurged on a pair of Gucci loafers costing 400 Euros (Dh1600) in France. In Dubai, the purchase would have cost her Dh2700.
I feel that branded items are more expensive in Dubai than in France. But in terms of choice and collection, Dubai offers more
“I feel that branded items are more expensive in Dubai than in France. But in terms of choice and collection, Dubai offers more. What I do sometimes is shortlist items in Dubai and buy them abroad later. I like to shop at Fashion Avenue in The Dubai Mall because you can visit many stores at once and they have a good selection,” Chams told Gulf News. Being a UAE resident, she also gets a VAT refund when she shops for luxury goods in Europe.
Sales make brands affordable
With Dubai hosting several sales throughout the year, they offer brand-conscious residents a chance to buy designer goods at a discount. Deepa Sasidharan, an Indian expat in Dubai, waits for these sales to splurge on luxury items. She recalls purchasing Ferragamo shoes for Dh2500 and a Coach bag for around Dh1200, both on sale in Dubai.
“I generally buy during the sale and it has worked well so far. I used to shop for branded products once or twice a year. But I have come across some cool homegrown brands while travelling and no longer see the point in spending so much on luxury brands. I am on a saving mission this year,” she added.
Meanwhile, Samer Touma, Head of People at Chalhoub Group, shops for luxury goods almost every month. The Lebanese expat, however, insists that there is an evident difference in prices of luxury goods, sometimes as high as 100 Euros (Dh400), between the UAE and his home country of Lebanon.
“I get very influenced, and really treasure my picks. I do look out for discounts. Considering that I work for one of the biggest luxury retail businesses in the UAE, one of the perks is that we get a reasonable discount,” Touma added.
Price difference for luxury goods between the UAE and Lebanon
Shopping in outlet malls
Although shoppers accept that buying luxury brands at outlet malls is cheaper by at least 30 to 50 per cent, they are concerned about how trendy the products are and also question the quality of the goods.
Items in outlet malls may be irrelevant to the season or not trending currently, which is also very essential when shopping for luxury brands
“What discourages me at times is that the items may be irrelevant to the season or not trending currently, which is also very essential when shopping for luxury brands. However, if and when an iconic item is available at an outlet mall, I will definitely buy it,” Touma pointed out.
Sasidharan added: “Outlet malls may have affordable options but the quality is definitely different - especially for shoes and bags. I don’t consider outlet malls when looking for shoes and bags, but for clothes, they offer value for money.”
The luxury market is a key pillar of Dubai’s retail offering. In further evidence of Dubai’s dominance in the retail and tourism sectors, the city leads the MasterCard global destination cities index, reporting total international visitor spend of $30.8 billion and the highest average visitor daily spend at $553 in 2018.
The city’s luxury brick-and-mortar stores are increasingly facing competition from e-commerce channels due to the changing behaviour of younger, cost-conscious and more digitally savvy shoppers.
“In Dubai, although tourist volumes and footfalls have seen a rise, the retail market continues to face headwinds due to increasing levels of supply and vacancy coupled with a stronger dollar impacting the purchasing power of non-dollar pegged currencies from traditional source markets. This is leading many retailers to consolidate footprint and operations in better-performing malls that offer higher footfall and conversion rates,” said Robert Thomas – Head of Agency at CORE, a real estate advisory firm.
Demand source markets
According to Kearney research, the region’s luxury market has seen a diverse customer base (beyond Chinese and including tourists from the Indian Subcontinent and Africa – as well as sustained levels from Saudi Arabia). The Saudi consumer is expected to be a key driver of the luxury goods sector, in particular as disposable incomes rise and shopping takes on a larger share of wallet.
“Recent developments related to the Coronavirus certainly present some headwinds in the near term, in particular with tourism traffic into the UAE; in the medium term, supply chain challenges must be addressed to ensure that UAE retailers have access to product. However, in the long term, we do not see this as a large threat to UAE’s luxury retail market,” explained Debashish Mukherjee - Partner, Consumer Industries & Retail practice, Kearney.
Luxury second-hand market
Brand-conscious UAE residents also shop second-hand designer products from vintage stores such as VestiaireCollective.com, luxurycloset, Riot, etc. There are several reasons why people opt to buy pre-owned items. Many are attracted to the pre-owned category because it affords access – through a more affordable entry point; the availability of a coveted item; or the confidence to invest in more expensive items, knowing that there will be a market for them should they wish to sell these items in the future.
UAE residents, especially expats, are very familiar with circular fashion and regularly purchase pre-loved fashion. Our target audience includes everyone from fashion enthusiasts to the regular shopper interested in grabbing a great luxury item at a fraction of its original retail price.
Lebanese expat Chams told Gulf News: “I buy a lot of luxury second-hand products in Dubai from authentic stores. People who own luxury bags, clothes and other items sell them to this store and you can buy it. They are not brand new. Some of them can even be a bit damaged but you can find rare pieces and do good deals.”
Majority of the time, the cost of a pre-loved item is a fraction of the original price tag. For example, you can buy the classic Lady Dior bag for up to 70 per cent off its original retail price.
“UAE residents, especially expats, are very familiar with circular fashion and regularly purchase pre-loved fashion. Our target audience includes everyone from fashion enthusiasts to the regular shopper interested in grabbing a great luxury item at a fraction of its original retail price,” said Kunal Kapoor, Founder and CEO, Luxury Closet.
Pre-owned not frowned upon
Pre-loved shopping offers the opportunity to shop sustainably. Millennials care about sustainability, so repurposing goods, such as buying pre-owned, is considered a good thing. In this generation, pre-owned is no longer frowned upon. A lot of people with high incomes and even celebrities enjoy buying pre-loved designer and vintage pieces.
WatchBox, a retailer for luxury pre-owned watches, believes the appetite for pre-owned watches in the UAE is changing.
According to Amanda Ellison, Global President and COO, WatchBox: “Overall, the pre-owned market in the Middle East has not existed in an organised marketplace, but rather among small second-hand dealers, or between collectors where watches have been privately traded. In many instances, the average consumer has not had the necessary level of trust to enter into the pre-owned market.
However, with more legitimate players entering the marketplace, the attitude towards pre-owned has begun to shift.”
There are several factors that influence the price of a pre-owned watch in the secondary market.
These include: Brand recognition; demand for the model; initial access on the primary market and subsequent availability on the secondary market; whether the watch is currently in production or not; the aesthetic and mechanical condition of the watch; and whether the original box and paperwork are available.
In some cases, some pre-owned watch models even trade above the retail price while others trade at significant discounts. For instance, a pre-owned Panerai Luminor GMT Power Reserve; PAM 1321 trades around 25 percent below the original retail price; but a pre-owned Rolex Datejust 41; M126334-0021 trades right around the original retail price.