Gulf states top global list for biggest retail potential

Qatar, the UAE and Saudi take top 3 places in new Luxury Opportunity Index, part of Knight Frank's Wealth Report
Gulf states top global list for biggest retail potential
By Andy Sambidge
Sat 08 Mar 2014 10:40 AM

Retail markets in the Gulf have dominated a new global index listing the top 10 locations with the greatest potential for luxury retail growth.

Qatar, the UAE and Saudi Arabia were named as the top three countries in the new Luxury Opportunity Index, which forms part of Knight Frank's latest Wealth Report.

The study said spending of ultra high net worth individuals (UHNWIs) is predicted to increase in 2014, with over a third of the wealth advisors surveyed saying that they expect their clients’ spending on luxury goods to rise this year.

Only seven percent of those polls said they are predicting a fall in expenditure.

The report follows an EC Harris study in December which also highlighted the rise of retail markets in Qatar, UAE and Saudi Arabia.

Its Retail International Programme Expansion Index, which ranks 48 major international retail markets, placed the three Gulf states among the top 13 positions in the list.

Respondents in Africa were the most bullish about their clients spending activity with almost half anticipating higher levels of luxury purchasing activity. Europeans were the most cautious – 31 percent expect an upturn in spending.

The new Luxury Opportunity Index, compiled by luxury analyst Ledbury Research, showed that the Middle East and Africa dominated the locations for growth potential.

Andrew Shirley, editor of the Wealth Report, said: “Africa is clearly an exciting growth story at the moment. In many parts of the continent a growing middle class with increasing levels of disposable income is creating new demand for luxury goods and a higher-quality retail experience."

Ledbury Research director James Lawson added: “In absolute terms, Asia still has the largest proportion of the world’s luxury brand outlets, but growth is slowing. Many CEOs of global luxury brands are pointing to North America as the most important market for growth over the next five years.”

However, he added that a significant proportion of luxury spending in the US, as in Europe, is now being driven by the growing number of Chinese tourists visiting the country.

“A lot of brands expanded too quickly in China. What they have now realised is that many Chinese consumers like to shop abroad. Prices are cheaper and there is more cachet attached to buying, say, a Gucci handbag in Milan than in Shanghai.”

The report also showed that investments of passion such as art and classic cars are also growing in popularity around the world. For example, 49 percent of the survey’s respondents said their clients were becoming more interested in art.

In terms of the performance of Investments of Passions, the latest results from the Knight Frank Luxury Investment Index show that classic cars have grown in value the most (up 456 percent) over the past 10 years.

Overall, the index, which tracks nine asset classes including cars, art, wine, watches and stamps, grew by eight percent in 2013 and 179 percent over a 10-year period.

Shirley said: “This performance shows that objects that are beautiful to look at can also make good investments, but markets such as art can be very volatile and the performance of an index will not necessarily be reflected by individual works.”

A UHNWI is defined as somebody with $30m or more in net assets excluding their main residence.

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