Luxury days are over

The arrival of H&M in the Gulf shows customers are voting with their wallets. I have often been criticized for being too negative in this column. It isn’t by choice: most of what I see and hear in life is a disappointment. And so when I attended the launch party of Swedish fashion retailer H&M last week, I expected even more disappointment.

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By  Anil Bhoyrul Published  September 10, 2006

|~||~||~|The arrival of H&M in the Gulf shows customers are voting with their wallets. I have often been criticized for being too negative in this column. It isn’t by choice: most of what I see and hear in life is a disappointment. And so when I attended the launch party of Swedish fashion retailer H&M last week, I expected even more disappointment. How wrong I was. H&M boss Stefan Persson, one of the richest men in the world, has teamed up with Mohammed Al Shaya – one of the smartest men in the world. By combining Al Shaya’s fabulous local expertise with Persson’s global skills, the Middle East is being treated to a revolution in cut-price clothing. And about time. H&M – full name Hennes and Mauritz – has over 1200 stores worldwide and annual sales topping the US$8bn mark. Persson observed over the past years how many Arab tourists rushed into his European stores to purchase designer garments – backed by the likes of Madonna – at affordable prices. His production, distribution and storage schemes are similar to that of Ikea, allowing for huge savings without impinging on quality. The question is not so much will H&M succeed – in a way it already has – but who next? In this region, especially in the past six months, there appears to be a growing trend towards ‘cut-price living’, European style. Take low-cost airlines, take budget hotels, cheap car rentals, and now – alongside seven star hotels – cheap and cheerful clothing. In places like Dubai, where the population is expected to double in the next five years, the cut-price living trend is only likely to grow. It just isn’t possible for that many people to live so well. I predict H&M will be followed by other cut-price retailers. Which means the strength of the luxury sector may be dwindling. Earlier this year Tommy Hilfiger was in Dubai to open his first store in the region. He told me he would be opening twenty more. Since then, sales at Hilfiger, after an initial surge, have fallen. The quality is good, but the price is high. Hilfiger’s fortunes have quickly reversed. It would appear, after several years, that customers in the Middle East are finally voting with their wallets. Which is why Stefan Persson will, I expect, become even richer this year. ||**||Keep on rising|~||~||~|A colleague of mine asked me three weeks ago whether he should invest in Emaar. I told him yes, and do it now. He laughed, explaining: “But you’ve been saying that all year.” I am glad to say that for once at least, I was right. Emaar’s shares have risen nearly 5% in the past two weeks. And it isn’t just Emaar – right across the Gulf, stock markets are bouncing back after a tough start to the year. Dubai lead the way with the DMF index peaking at 12.6%. Trading volumes and gains were very much concentrated in market leader Emaar, which represented some 70% of total trading volumes on some days. The largest GCC market, Saudi Arabia, was up 2.4% during the month of August. In fact, apart from Qatar, everywhere you look in August the picture is rosy. What is going on? One theory is that the lack of trading in the summer meant no great falls. The other, more likely scenario, is that the big guns such as Emaar have come back fighting. Now is the time to buy. ||**||Sad but true|~||~||~|I wasn’t sure whether to feel sorry or laugh at UN Secretary General Kofi Annan during his latest Middle East tour. As he wondered through the streets of Beirut, this one-time giant of a statesman, respected by billions across the globe, was roundly booed. The people of Lebanon will never forget how the UN deserted them in their hour of need, refusing to call for an immediate ceasefire. Annan is himself a decent man. I had the ‘privilege’ of meeting him briefly in New York in 1998. He was kind, polite, interesting and friendly. What you might want to term a ‘nice fellow’ or ‘good bloke’. Which is where it all went wrong for him. The UN needs a tough-talking, hard-acting man at the helm. Annan’s bumbling has brought the UN virtually to its knees, and he will be remembered as one of the UN’s most ineffective Secretary Generals ever. He has become a laughing stock. The sooner he goes, the better. ||**||

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