Where have the fashion investors gone?

Celebrated fashion designer Rami Al Ali lifts the curtain on the Arab world's dazzling fashion industry to expose a local sector thirsty for investors
Where have the fashion investors gone?
By Lubna Hamdan
Sun 20 Jan 2019 02:29 PM

Behind the lush layers of lace and chiffon, and shimmering beads of Swarovski crystals that grace the ravishing $100,000 couture gowns in Rami Al Ali’s Jumeirah boutique, lies the frustration and anguish of a rising star in a slow-moving market.

“It’s getting more difficult by the minute,” he says. “It puts me down and makes me angry, but I’m very stubborn. I keep trying.”

That drive has seen the fashion designer’s dresses in department stores such as Bloomingdale’s and Harvey Nichols in the Gulf, as well as on major international celebrities including Helen Mirren, Kerry Washington and Jennifer Lopez. Name them and Ali has dressed them all – with a team of just five.

“We all produce almost the same product and target almost the same client. But I have five people in my team while the global players have a thousand,” he says.

Dressed in a dark navy suit and sporting a pencil moustache, Ali looks every bit like you’d expect a fashion designer behind his work should. Yet while his tone doesn’t betray a hint of emotion, his mood at times is sombre and his voice is audibly anguished.

It’s not the fashion weeks that will keep the industry alive. It’s the support from banks and investors

There’s a reason. Take the glamour out of the fashion designer’s dreamy world and what is left is a business thirsty for investors. And despite 21 years in the GCC, Ali’s fortunes fare similarly. He hasn’t managed to secure a single physical retail spot beyond the Arab world.

“There are too many designers, too many products and not enough funding,” he says.

“People see the façade: the fashion shows, models, fashion weeks, beautiful features, but they don’t know what’s happening. It’s not the fashion weeks that will keep the industry alive; it’s the support from banks and investors. That’s the biggest issue facing designers in the region.”

Analysts predict that the MENA luxury goods market will be worth over $12bn by 2021, but local designers seldom get a piece of the profit pie. Global brands, on the other hand, continue to lure in investors and customers who are too hesitant to take a risk on local products.

“Why would people pay $500 for a local product if they can pay $600 for an international brand?” Ali says rhetorically.

Banks are particularly cautious due to the novelty nature of the regional fashion industry and its role as an importer of products.

“This region has been an importer since its existence. We’ve been importing everything, including fashion. So it’s very difficult to change the mentality and make them believe in the local product,” he says. “If you’re a fashion business and you want a bank to back you up, what will they compare your business to? How will they trust the business model if there aren’t many successful ones in the market?

If you’re a fashion business and you want a bank to back you up, what will they compare your business to? How will they trust the business model if there aren’t many successful ones in the market?

“Banks look for someone successful to evaluate. But for a person to be successful, they must first be supported. The minute banks smell money, they will come. Show them you’re making money, and they will come.” But it’s not easy to make money in a region haunted by a pool of failed designers-turned-stylists “many of whom I know,” says Ali - and promises of local support that never came to fruition.

According to the MENA Design Outlook 2014-2019 report by the Dubai Design and Fashion Council (DDFC), the region’s fashion industry is expected to total $55bn by 2019, an average growth rate of 6 percent per year. On paper, the numbers are impressive. But in reality, there is no clear statistic on the role of local products in the multi-billion dollar market.

A step backward?

Fashion Forward Dubai (FFWD), a bi-annual event acting as a platform for local designers to showcase their work, announced last year that it would be postponed “until further notice”. The news came less than a year after co-founder Ramzi Nakad told Arabian Business, “Funding is the main issue” for designers in Dubai.

“Every fashion capital became one because the city itself, either the mayor or the municipality, supported the platform. Once the funding is secured from the government, we too will see a lot of momentum. It’s also the big fashion houses who contribute to the growth of the cities and the fashion weeks they host. For example, Cadillac funds the men’s fashion week in New York. The challenge in Dubai is that you don’t have a lot of big home-grown brands who are successful enough to fund anything,” he said at the time.

Mall operators offer little help, with high rents preventing local designers from securing retail space with high footfall.

“[Local designers] should be given more space in the malls, and should not be charged the same rent as other, bigger businesses. The fees should be in line with the size of the business. There should also be certain government funding for small businesses,” Ali says.

Banks look for someone successful to evaluate. But for a person to be successful, they must first be supported

Dubai Design District (D3), which was opened in 2015, aims to, “engage, inspire and enable emerging talent, and educate the next generation about the power and importance of all forms of design… [And] provide a platform to showcase Middle Eastern creative talent to a larger, global audience,” it says on its website.

The district claims to house over 6,000 working individuals occupying 85 percent of the space. Yet, it is home to only two retail stores dedicated to local designers. The majority of the rest are stacked with international products. Rent is also high, averaging $50 per sq ft, according to real estate marketplace Property Finder.

“D3 was great, but what did it add to the creative community except for space? There’s not much to create footfall in that area anyway, so it’s all an individual effort at the end of the day. At the same time, they created the DDFC, but what came out of it? There was a big hype around it when it was established five years ago, but nothing has happened,” says Ali.

The highly fragmented state of the GCC logistics market raises another challenge, with a package transfer within the region costing as much and taking as long as a package transfer to Paris, according to Ali. “This also leads to raising the price tag of the product. I just hope the younger generations have more motivation, because it’s tough,” he says.

It doesn’t help that the designer’s couture line experienced a 15 percent dip in sales in 2016 followed by a 25 percent drop in 2017 (although it adjusted slightly in 2018). But his ready-to-wear line, on the other hand, witnessed a 20 percent boost in 2017 and 2018. Questioned about the possibility of dipping into the lucrative world of fast mass fashion - sales of the fast fashion sector have grown at a rapid pace of over 20 percent in the last three years, according to a report by The Business of Fashion and McKinsey & Company - Ali cautiously admits it would generate the funds needed to expand his business beyond the Arab world. “If we start creating a high street mass line with lower costs that [will] allow the company to grow globally,” he says, adding that it would even lead to an initial public offering (IPO). But there’s one problem in the otherwise ideal scenario. “I know how to make evening dresses,” Ali says, “I don’t know how to make mass fashion.”

There is hope

Ali might not have to resort to fast fashion, as the UAE’s implementation of a 100 percent foreign ownership law and longer visas for professionals and students is expected to be a game changer for business owners in industries including fashion.

Aramex founder and Wamda Capital executive chairman Fadi Ghandour said last year that it would make the lives of UAE entrepreneurs “much easier” while attracting new investments and capital. Jacob Abrian, the CEO of the Arab Fashion Council, said the law will give local designers the chance to be sole owners of their brands, giving them more control in attracting partners interested in investing in company shares.

It’s very important for students to undergo mentorships before graduation because it gives them a glimpse of the real world

But Ali is concerned that the law will not help entrepreneurs as much as it will benefit the bigger players in fashion.

“100 percent ownership is the least of [entrepreneurs’] concerns when starting a business. More support from the government is needed in terms of fees. The commercial obligations [entrepreneurs] go through when starting a business is a big load for someone not earning enough to cover them,” he says.

Part of the wider funding issue in the Arab world lies in the designers’ lack of awareness of the industry, especially when building products on par with those of the global fashion houses. The root of the problem is in the absence of regional world-class education platforms for fashion designers.

Ali’s proposed solution is mentorship. The designer is part of a permanent mentorship programme with the French Fashion Institute Esmod Dubai, where eligible students earn the chance to train under the designer’s guidance.

“It’s very important for students to undergo mentorships before graduation because it gives them a glimpse of the real world. All they do is academic and on paper, but they need to know how to deal with buyers and conduct real transactions,” he says.

One of the most important elements Ali teaches students is in having the right balance between being creative and commercial. “If you’re just creative, you will have difficulties and disappointments when you work in the real world. But if you don’t think outside the box, you might become too commercial. Don’t get me wrong, commercial is not a bad word. It’s very important in our line of work because it connects you to reality. But young designers struggle to find the balance,” he says.

They also give up fast, according to Ali, despite having more sources of education and development at their disposal, including the internet, than previous generations of designers.

“People today give up after two failures. They don’t give a business a third chance. The market is changing so fast that they don’t wait for a third or fourth time to invest more time, effort or finance. Some say that if you’re making effort and there’s no return, it’s a waste to keep trying. I think if you keep trying and you have real, genuine talent, you will get somewhere,” he says.

One of the designer’s own mistakes was fear of failure. He admits being “too scared” to scale the business at a more aggressive pace.

“I should have acted faster and been braver. It would have probably positioned us at a different place in the market right now. Going to Paris was like reaching the moon. And when we got there, it was like, ‘Oh that’s it.’ Why didn’t anyone tell us it would be easy?” he says, referring to the brand’s presentations in Paris at the city’s annual couture fashion weeks.

Opportunity on the horizon

Ali’s showcases in the world’s glitziest fashion hub have offered him access to new markets, including Latin America, Europe and parts of Asia, where he plans to expand next. His presence in the GCC will remain the same. “More presence in the region will become oversupply,” says the designer.

But the bigger question is whether Ali will retain his presence in the region beyond product selling points. Will his headquarters remain in Dubai if banks and investors fail to recognise opportunity in local talent? Ali says younger designers are not patient enough to find out.  “They’re leaving,” he says. “When I talk to young designers, they say, ‘The minute I get money, I’m going to Paris,’ because there isn’t enough support in the region. We need to put more trust in our local talent and product. The problem is that in Dubai, people always look for something fast with an immediate response. They don’t think long term. So after 2-3 years, if something isn’t working, they lose interest. If something was built over 100 years [in Europe], you can’t expect it to happen in your local market in 2-3 years. [The fashion industry] needs at least 20 years of support to grow,” he says.

While only time will tell the fate of the Arab world’s local fashion industry, stubborness is one way Ali has withstood the unfavourable market conditions. As moving as his success may be, however, it doesn’t take away from the fact that there remains a “sad” pool of designers-turned-stylists. It is their abandoned dreams which should be remembered as an example of what is to come should the industry continue on this path.

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