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Sun 22 Jan 2006 04:00 AM

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Dubai wakes up to designer dreams

The Sunday Times’ John Arlidge reports on why Europe’s top labels are beating their US counterparts in the rush to cash in on Dubai’s drive to become a chic shopping capital.

|~|56485262_10-200.jpg|~|Chic capital: Dubai is attempting to shift the fashion industry’s focus away from Europe and the US.|~|The party looked like just another store opening on Rodeo Drive. Hair was big but the rocks were bigger. Women compared breast enhancements and browsed the latest knits, while men with beards trimmed to stubbly perfection picked out US$2000 watches. Rose Marie Bravo, chief executive of Burberry, shook hands with all her guests before raising a glass to celebrate the latest outpost of her fast-expanding beige-check empire.

But the Burberry opening party last month was not on Rodeo Drive, Beverly Hills — it was on Rodeo Drive, Emirates Hills, where the iconic English retailer is spearheading the US$200 billion luxury-goods industry’s latest gold rush. Luxury brands and posh retailers are swapping the edgy urban cool of London and New York for the climate-controlled cool of Dubai.

In the past two months Burberry, Paul Smith, Jimmy Choo, Asprey and Emporio Armani have opened stores in the emirate. Harvey Nichols will bring a bit of Sloane Street to the souk next month when it opens its biggest department store outside London in Dubai's gigantic Mall of the Emirates.

France’s Louis Vuitton has announced plans for two new boutiques. The American retailer Saks Fifth Avenue is expanding its department store in the Bur Juman mall. And two Italian superbrands, Versace and Armani, have signed deals worth US$2.7 billion to build two five-star branded hotels and more than 100 luxury branded villas. Giorgio Armani, who made his first visit to Dubai last month, says the emerging Dubai luxury-goods market is “as exciting as Shanghai”.

The retail revolution is the latest step in Dubai’s effort to transform itself from a one-camel town into the California of the Middle East — a culture-free pleasure zone for wealthy Middle-Easterners and international tourists.

After luring holidaymakers and investors by building seven-star hotels and islands in the shape of giant palm trees in the Gulf, the country is turning to shop tactics. “In Dubai black is the new black gold,” jokes Ingie Chalhoub, president and managing director of Etoile Group, which sells Dior, John Galliano, Ralph Lauren, Valentino and Dolce & Gabbana brands in the emirate.

The fast-talking fashionista, who has just opened Dubai’s first multi-brand boutique in the Mall of the Emirates, reckons that the local luxury market will at least double in size in the next three to five years and triple in the next decade.

“Our boutiques and shopping malls are becoming the Madison Avenue of the Middle East,” she says.

Dubai’s retailers are having a very happy new year. But a country where most women still wear the traditional long, black abaya, men sport white dishdasha robes and the only fizz you can serve at parties is Perrier, is an unlikely place for a designer-goods revolution. Why are Armani, Versace and Bravo building boutiques in the sand?

Like all emerging sectors in the oil-rich sheikhdom, the retail boom is being driven by hard cash.

Dubai’s new ruler, Sheikh Mohammed Bin Rashid al Maktoum, is making the most of record oil prices to throw money at a sector that he believes will make Dubai the world’s most popular tourist destination by 2020, safeguarding its economy when the country’s oil reserves are expected to run out in 20 years.

As one local entrepreneur puts it: “Sheikh Mohammed is buying up the best brands — money no object — to shift the fashion retail focus away from old-money European and US cities towards the Middle East. It’s a bit like the Queen offering Asprey and Burberry grants to open stores in Windsor to attract American tourists.”

The terms of recent deals reveal the scale of the emir’s largesse. In return for agreeing to open his second branded hotel in the Burj Dubai, the world’s tallest building under construction in downtown Dubai, Armani has received more than US$1.2 million from government-backed Dubai property developer, Emaar, to open another dozen Armani hotels and resorts around the world.

Generous construction grants have helped to persuade Versace Group to open its second Palazzo Versace resort on Dubai Creek. A government-backed local engineering firm is installing an underground refrigeration system that will cool the sand on the beach to prevent fashionistas burning their perfectly manicured toes in summer. Steam, generated by a specially created tropical forest with giant lagoons, will ensure that the air temperature does not exceed 30C.

Sheikh Mohammed has sizeable stakes in all the new malls and has granted luxury brands vast, air-conditioned spaces for low rent. Investment in the government-owned airline, Emirates, is helping to provide brands with a steady stream of well-heeled international customers.

More than six million tourists a year visit Dubai and that figure is expected to reach 15 million by 2010.

The sheikh’s pro-western economic liberalisation programme has created a laissez-faire business environment.

Joseph Wan, chief executive of Harvey Nichols, who will travel to Dubai next month to open his new department store, where shoppers will enjoy a private concierge service provided by the UK-based firm Quintessentially, said: “We can do everything here exactly as we do in our stores in London and Hong Kong, without local religious, legal or trade constraints.”

In contrast to other Middle Eastern markets, notably Saudi Arabia, men and women can shop together in Dubai.

And women, not just men, can work as sales assistants. Clothes can be displayed on shapely, modern western-style female mannequins.

Throw in a young population, with one of the world’s highest per-capita income levels, a market of some 1.5 billion people within two hours’ flying time, a tax-free, duty-free economy and low local labour costs and it’s hard to see how any luxury retailer could resist.

The expansion has not been without hiccups, however. On the day Italian jeweller Bulgari opened its first shop, it was inundated with telephone calls from locals wanting to buy cheap flights to Sofia.

What locals jokingly call the “al-Bling!” boom could not have come at a better time for luxury-goods firms, many of which are still struggling to boost sales after the years of stagnation that followed the 9/11 terrorist attacks in New York and the Iraq war. “We’re delighted with our performance,” Armani says. “The products that are moving the fastest are those that are the more expensive. The real luxury end of the market is performing the best.”

European brands are the market leaders so far. With the exception of Saks Fifth Avenue, American luxury-goods businesses such as DKNY, Calvin Klein, Coach — and US luxury retailers like Neiman Marcus and Barneys — are conspicuous by their absence.

Privately, many US retailers concede that politics makes it hard for them to operate in the Middle East.

US brands in Saudi Arabia suffered a crippling consumer boycott during the Iraq war. Glitzy, upmarket European brands, notably Dolce & Gabbana, Gucci, Roberto Cavalli, Valentino and Versace, are top sellers. Giancarlo Di Risio, managing director of Versace Group, said: “This is a place for tourists and for holidaymakers, not for businessmen.”

Many local women enjoy designer labels as much as western holidaymakers but they wear them underneath their abayas, obscuring the all-important logo. In response, leading brands, notably Burberry, are working on producing a “Gulf chic” range of branded abayas, head scarves and sandals.

A decade ago the only shops anybody had heard of in Dubai were the ones in the airport selling cheap gold Rolexes and offering the chance to win gaudy white sports cars in $10 raffles. Today, the entire country is one giant luxury duty-free. As she packed up the last of her signature beige-check scarves and headed out into the soupy Arabian night after her store-opening party, Burberry’s Bravo said: “The Middle East is key to the future of luxury. People here love quality and they love ‘Made in Europe’. They’re so happy we are here. And, so, naturally, are we.”||**||

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