We’ve touched on many of the macroeconomic factors impacting the luxury market – currency swings, travel patterns, security issues, among many others. But one that hasn’t gotten a lot of attention is the price of oil. Over the last few decades, luxury spending in oil-rich nations like Saudia Arabia and the UAE has been pivotal to global revenue growth. But in troubling news for the industry, the price of oil is down – that means sales are too. The price of crude has fallen over 50% since 2014. This slump has consequences for all of the biggest names. Hermes CEO Axel Dumas was blunt in his comments to Bloomberg: “We’ve experienced a fairly strong drop in traffic in the Middle East.”
Middle-East luxury sales growth was stagnant in 2015 after growing 4% in 2014, and a fifth of respondents in a recent Bain survey of Persian Gulf countries said they deliberately cut luxury spending. According to Global Blue, duty free spending by shoppers from the UAE, Qatar, Saudi Arabia and Kuwait was flat in March after growing for seven straight months. This is bad news for an industry already struggling in critical regions like Europe and China. There was some expectation that the declining euro would make shopping abroad more attractive for Middle East tourists, but retailers aren’t seeing the type of boost they expected.
Are you in one of these countries? What are you seeing on the ground? Are the stores less full than in years previous? Join the conversation on BopTalk.
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