Continuously as Qatar’s travel restrictions increase and stock market tumbles, the future of the US $ 1.3 billion fashion market is still in the dark. Not just being a favourable retail destination, many luxury European Houses are backed by Qatari funds, such as Balmain, the Paris fashion house, which has been acquired by Mayhoola, which also owns Valentino, highlighting the Middle Eastern investor’s appetite for luxury. The affluent oil-rich residents of the Gulf State have always showcased a huge demand for European luxury, with Qatar having the highest per capita gross domestic product in the world. But the political restriction looms on its future surely for fashion!
As the US $ 1.8 billion Doha Festival City retail development opened in April this year, promising to lure both foreign investments and tourists to the country, little was it known that the country would be the subject of various embargoes. As far as the recent events are concerned, the foreign investors and tourists alike will not be coming down to Qatar due to a new diplomatic fallout, wherein Saudi Arabia, Bahrain, the UAE, Egypt and Yemen have cut ties with Qatar, suspending all land, air and sea travel to and from the country, causing Qatar’s stock market to plummet. This was due to the news impugning that the Qatari Government is paying blacklisted Al-Qaeda affiliates and Iranian security officials up to US $ 1 billion ransom in return for the release of members of its royal family who were captured in Iraq. This latest rift is one in the many that Qatar and its GCC (Gulf Cooperation Council)neighbours have seen over the years but the imposing economic sanctions this time has raised alarm about what this really could mean for the Qatari market and how it will affect the luxury goods industry.
Despite its small size, Qatar has heavily invested in the global luxury sector as the wealth fund, Qatar Investment Authority, is the owner of department store Harrods, while state-backed conglomerate Mayhoola has significant stakes in brands including Valentino, Anya Hindmarch and Balmain and most recently it was rumoured to be eyeing Jimmy Choo as a potential acquisition target. But apart from the foreign investment and the markets they serve, its domestic businesses in Qatar itself that are more vulnerable due to this political fallout. The recent political situation in Qatar may just not only affect the domestic business and retailers but also the tourists spending as well due to various travel restrictions to the Arabian country.
Impact: Tourist Spending
If the situation continues or worsens, then Qatar’s tourism industry which leads to tourists spending on luxury retail goods could suffer a severe impact. While the travel ban has affected Qatar Airways flights, its real implications for consumers in Qatar, are still unclear. Despite the Arabian country being home to luxury brands such as Prada, Dolce & Gabanna, Gucci, etc. still it is far less a global destination against the like of Dubai, a point that is reiterated by Euromonitor International, and for whom Qatar’s luxury market is smaller than most other countries in the Gulf. But this has to change as the country will play host to the 2022 FIFA World Cup and therefore much of the country’s retail development is scheduled to open just before the sports event, which is expected to bring in a million visitors.
According to the Real estate firm DTZ, Qatar’s retail space will grow by 220 per cent by 2019. This is evident as last December saw the opening of the 500,000 square metre Mall of Qatar, the nation’s 15th major retail complex, whereas other retail developments such as the US $ 290 million North Gate Mall, the 57,605 square metre Marina Mall and the outdoor Katara Mall, which will house Qatar’s first Galeries Lafayette, are underway.
Impact: Domestic Market
As per Euromonitor International, Qatar’s apparel and footwear market was worth US $ 1.3 billion in 2015 and it is forecast to grow by 51 per cent by 2019. Another emerging intelligence firm BMI Research expects consumer spending in Qatar to grow by 3.2 per cent in real terms in 2017, which will see consumer spending levels in the country to reach US $ 31 billion. But the concern is rather to do with logistics, as a few fashion and luxury brands distribute to Qatar via UAE, where they have partnerships with Dubai-based operators and Qatari local brand partners to Doha, who also import from Europe via the UAE. But BMI maintains that the ‘gas-exporting Qatar’ still has huge fiscal buffers and mainly trades outside the sub-region, meaning its overall economic stability is not under direct threat from the cooling of GCC ties. But the economic impact of the political situation that Qatar is facing still remains to be seen.
What do we expect in days from now?
Being a subtle political situation and with various counter measures being taken to resolve the same, it’s still unclear what the future holds for Qatar. Though Saudi Arabia and its partners have escalated matters with Qatar significantly, it will take some more time for matters to fizzle down before they come to a consensus. But both Qatar and Saudi-led GCC members will need to find a common ground for these grievances which would result in a negative economic ramification for Qatar. It remains to be seen how the Gulf Crisis will be resolved, or if isn’t than what it would mean for Qatar, which was being considered a new ‘fashion heaven’ for international luxury brands…?
