Throughout the years, Patrick Chalhoub's name and style have become a metaphor for luxury and elegance. Eager to meet the legendary Patrick Chalhoub, Chief Executive Officer of Chalhoub Group, Capital Business team visited the group premises in Jebel Ali to learn the story behind their success in the Middle East.
As Patrick enters the room, one could immediately feel his positive energy and enthusiasm. At the beginning of our conversation, he took us back in time to 1955, the year his parents started the group in Syria. "My parents noticed a gap in the fashion industry and decided to bring the western art of living to the Middle East," he said. "Thus, they became the ambassador of a number of foreign brands through a representative office helping and supporting their products." Activities- mainly targeting the GCC region- started in Syria and soon moved to Lebanon to continue in Kuwait at a later stage. "At that time, those markets didn't have any organized distribution and weren't prepared to accommodate luxury. Thus, my parents started working on an individual-relation basis with customers who could afford luxury brands."
Eager to engage in his family business and help build a bridge between the East and the West, Patrick started his career in 1979. "I joined the company in Kuwait when my parents were marching towards distribution. My objective was to ensure that the group evolves from being the ambassador and luxury representative of brands to become more engaged in distribution not only in Kuwait but also in other GCC countries. In the early eighties, we felt that the market has become more sophisticated and therefore decided to bring the first franchise store to the market, Louis Vuitton. We quickly noticed that customers in the Middle East were excited about brands. Thus, we developed our operations, started distribution and soon stepped into retail and exponentially grew in this industry."
The particularity of the group is that it preserved it different operation models. "The representation part is a detector to sense new brands, activities and markets. Distribution is where we lead the wave, whereas retail, which accounts for 50% of the group's business, brings us closer to our customers," explains Patrick.
The demand for luxury brands mainly comes from GCC customers, Saudi Arabia in particular, says Patrick. "We have witnessed an increasing demand in the market ever since women started working in Saudi Arabia. Now that they are more independent, they constitute a great share of our customer base, as they can spend their own money on shopping and can even influence their husbands' choice."
Luxury brands & Customers
High-end fashion and luxury brands imply different tastes, which makes catering to different styles more challenging especially in countries with high percentages of expats and tourists. "Every customer aspires to feel unique. The challenge is in the ability to cater to both expats and locals in the same market," says Patrick. "However, the bond we create with our customers in order to understand their demands allows us to overcome these challenges."
Patrick was very keen to share with us results of a study the group had made that reveals three main attitudes of GCC customers. "The horse attitude describes the customer who wants to portray how he looks like and what he stands for. Over 50% of our customers have this attitude," he declares. He continues, "The gazelle attitude describes both men and women engaged in luxury as it is in harmony with their beliefs. 20 to 25% of customers enjoy this attitude." The study also reveals the falcon attitude, which represents customers looking for their own comfort and adopting luxury to please their inner selves rather than pleasing others. "Only 5% of customers in the market have this attitude, the rest are falcons-to-be. This describes the evolution of the market's dynamics. Our role today is to understand this evolution and boost it. We are an active actor in this market. Thus, it is crucial for us to adapt our marketing approach and the way we communicate with our customers according to the evolving customer dynamics."
The industry is witnessing fierce competition from local and global distributors and retailers. Having a competitive advantage is not only about competitive prices and products; it is about the holistic experience. Therefore, the group is focusing on customer's experience, representing three fundamental elements across their retail stores: uniqueness, expertise and passion. "We always assess where we can add value whether to our partners, suppliers or customers. Although it is important to understand the customers' taste, we believe in giving them what they want with a TWIST. Thus, it is not only about answering customers' demand. It is about anticipating and presenting something they wouldn't expect."
The digital revolution
The online revolution and globalization have contributed to the development of the luxury retail segment in recent years. People now are increasingly knowledgeable about luxury; they understand the quality of materials and are aware of the trends. "Luxury portrays people's status. Customers today are more self-confident, and luxury responds to this through the experience and choices it provides," he states. "Even though e-commerce is still in its infancy stage in this part of the world, the group has started investing heavily in digital. Last year, we created an e-commerce site for one of our beauty brands. Recently, we launched e-commerce sites for our beauty stores in Saudi Arabia as well as for Level Shoe District in the UAE. Customers are digital-savvy and connected to social media. Therefore, it is crucial for us to be present on all platforms in order to connect with them."
Even though e-commerce marks the beginning of a new era, Patrick believes that it will never replace the physical act of shopping. "Shopping in the Middle East is a pleasure, it is a social activity," he confirms. "Even if people are captivated by the digital word, but they still want to touch, feel and discuss with their friends the products they are buying."
"We need to stop thinking about e-commerce only, but instead focus on a multi-channel where a customer could order on digital platforms and buy from physical stores and vice versa. Thus, if supply chain is being streamlined and the experience is being developed, I think we would enter a new era. We have to get prepared and invest into all those aspects - the supply chain, experience, and technology," adds Patrick.
Scope of growth
Chalhoub group is strongly supporting Dubai Design District (d3) as it will be relocating its head office operations there, by taking two buildings at the site.
"I love the project," admits Patrick. "I was very committed to d3 from an early stage. For me, it is about the vision and how we can make from Dubai one of the world's most vibrant design and fashion places. Creating a cluster of fashion and design will make Dubai a leading destination after Paris, Milan, New York and London."
The most essential aspect within this cluster is to create vibrancy of innovative young designers, explains the luxury veteran. "It is about establishing a cluster, which is perhaps less business oriented but creative, where people who love design and fashion could get inspired, trade and make business. On the other hand, when looking at young generation, we notice that they really want to prove themselves, create and design. I met a large number of young talents who have put the effort to attend workshops, learn and create their own fashion or accessories brands. Thus, d3 is the location where we can bring those talents together."
Moreover, Chalhoub Group has recently announced its new concept store TRYANO in Yas Mall, Abu Dhabi. Designed to make shopping entertaining, the new anchor store will cater to the desires of local customers and tourists.
At the beginning of 2016, the group will also open a store for children in Dubai in City walk. "We are focusing on developing what we have, while providing a great experience."
Patrick expects to see scope of growth for luxury brands in countries with a higher middle class population such as Saudi Arabia. Moreover, he also sees opportunities for growth in Egypt and Iran. "The development speed depends on the economical evolution of a country. For example, in Egypt, it depends of political issues; whereas in Iran, it is mostly dependent on the sanction issues."
Giving further details on the significance of the middle class to their business, he says, "Middle class is the key for us in luxury. High Net Worth Individuals are extremely important, they have to be really pampered and looked after one by one. The rich people as well, but the middle class is what really matters. We feel that this class is "into the making". It is like someone who is dreaming and aspiring and our role is to accomplish their dreams and fulfill their aspirations."
The way forward
"We are lucky enough and grateful for where we stand today, and I hope we will be able to maintain this. As a family run business, it is important to remain a sustainable group, and we consider our 12,000 team members as stakeholders."
The other thing, he says is about working in luxury. "When I speak about luxury, it's not only about the revenue and profit we gain today. What is important is how to build, nurture, and grow the brand. Thus, for me, planning is definitely about understanding the market we get into, and the market share, more than the gross net profit because the market could either shrink or develop. As a group, we would measure ourselves in terms of those qualitative elements and obviously set an outlook to benefit as the market evolves, rather than putting a specific target. So, will we grow to 24,000 people in 5 years or remain 12,000? It does not matter, but each person here should be happy and passionate about his or her work. This is more important than what the number will be. As long as we have our sizable market share and we are trusted, the rest will follow," he states.
When talking to Patrick, one cannot but notice the passion he has for his business and this industry. "I love what I do and I enjoy it," he confesses. "I have been lucky enough to inherit some of our business along with my brother, and I think that part of what I have is to take over what has been given to me, develop it, and pass it on to future generations. Therefore, this keeps me very driven. I have been given a certain mission, I have to make sure that I accomplish it well and pass it not only to my children, but also to the people and stakeholders working with me. Thus, I owe this to them and to their families. In addition, we have been an active actor in the luxury market in the Middle East; therefore, we became one of the leaders. As leaders, I believe we have a mission and the difficulty of a leader is that we don't look at what others are doing, but we look forward and further."
This unique leadership role and go-getting mindset are what keeps Patrick growing and moving forward. "I keep questioning myself about how we can develop our business in a better and more efficient way, rather than looking at it from a follower's perspective."
© Capital Business 2015
