Market Research and Feasibility Study for Fashion Industry in Dubai UAE and KSA

The retail landscape in the Gulf Cooperation Council (GCC) countries has witnessed tremendous growth over the last decade, driven by high disposable incomes, a young population, and government policies aimed at diversifying economies. This presents a lucrative opportunity for international fashion brands as well as local retailers.

The apparel market specifically in the United Arab Emirates (focused on Dubai) reached $8.5 billion in 2019, and is expected to grow at a CAGR of 5% from 2019-2023. The Saudi Arabian market was valued at $16.5 billion in 2019, making it the largest apparel market in the GCC. It is likely to grow even faster due to recent policy reforms and investments aimed at expanding the retail sector.

Despite economic concerns in recent years, the region recovered quickly demonstrating the underlying fundamentals and growth drivers. Factors like increasing tourism, growing e-commerce, the prominence of modest fashion, and demand for ready-to-wear abayas point to evolving consumer preferences in the Gulf.

This report aims to assess the feasibility of an international fast fashion brand entering retail spaces in malls across metro areas in the UAE (Dubai specifically) and top tier cities of Saudi Arabia (Riyadh, Jeddah). The study will analyze the target demographics, competitive benchmarks, startup costs and working capital requirements, product mix, pricing strategies, breakeven timelines, and 5-year profitability projections in order to evaluate the business case and provide actionable recommendations. Geographic expansion to other GCC/MENA countries may also be considered for the long term.

Key findings and Recommendations for a fashion industry feasibility study focused on Dubai and Saudi Arabia:

Key Findings:

  • The apparel market is growing steadily in both Dubai and Saudi Arabia, driven by high disposable incomes, a young population, and continued investment in the retail sector.
  • The luxury fashion segment has the largest market share currently. However, fast fashion and modest wear are expected to expand rapidly over the next 5 years.
  • Market trends like demand for designer abayas, athleisure wear, and modest fashion point to changing consumer preferences.
  • While e-commerce is gaining traction, brick-and-mortar stores still account for a majority of apparel sales. Flagship stores in premium malls continue to do well.
  • Current and upcoming mega-events like the Dubai Expo 2020 and Saudi Vision 2030 will likely boost international tourism and apparel spending in both countries.

Recommendations:

  • A concept store retailing contemporary, fast fashion abayas and modest wear targeted at 18-35 year old females.
  • Potential locations identified in malls like The Dubai Mall, Mall of the Emirates in Dubai and Riyadh Park in Riyadh based on foot traffic and rents.
  • Stock a mix of private labels and popular international brands catering to local preferences. Price products at a slight premium for quality and design.
  • Launch an e-commerce store given the rise of online spending in the region. Offer omni-channel services.
  • Projected startup costs are $500,000 with breakeven in Year 3. 5-year ROIs can range from 35-40% given reasonable sales forecasts.

Market Analysis:

The apparel market in the UAE and Saudi Arabia has showcased steady growth over the past 5 years. Revenues from apparel retail sales in the UAE reached AED 36.7 billion (US$ 10 billion) in 2019, representing year-on-year growth of over 5%. Saudi Arabia’s market was estimated at SAR 95 billion (US$ 25 billion) in revenues.

The market can be broadly classified into luxury fashion, premium/bridge brands, fast fashion, and modest wear – catering to a wide spectrum of pricing points and consumer preferences. Luxury brands currently enjoy the largest revenue share owing to the affluent demographic base. However, fast fashion and modest wear segments are rapidly gaining share due to falling price points and relatability to youth consumers.

The target demographic for most international brands is locals & expat residents belonging to SEC A and B categories, given the high retail spending potential. Young consumers (aged 18-35 years) make up over 65% of the population – making them a key target audience for fashion brands. The rising female labor participation rates and demand for office/business wear points to evolving trends.

With declining oil fortunes, the retail sector might face headwinds in the short term. However, the market is slated to recover quickly by 2023-24 given low penetration of organized retail and recent growth drivers – increasing tourism, government diversification efforts, digitization policies etc. that bode well for fashion brands’ expansion plans.

Competitive analysis will assess performance of brands like H&M, Uniqlo, LC Waikiki, Marks & Spencer, Zara etc. who enjoy first mover advantage in affordable fashion segments to identify gaps and opportunities.

Market Research and Feasibility Study for Fashion Industry in Dubai UAE and KSA

Regulatory Assessment

UAE:

Some of the key regulations governing the fashion retail sector in UAE include:

  • Trade licenses and permissions mandated by Department of Economic Development for setting up a retail business.
  • Expect import duties of 5% on apparel and footwear; possibly lower for imports from free trade partners.
  • VAT introduced at 5% in 2018 to be added to retail price points.
  • No corporate taxes levied currently, besides VAT. Income tax on majority shareholders may apply.
  • Trademark protections and favorable policy environment for international brands.
  • Data localization requirements may apply for customer data of UAE citizens.

Saudi Arabia:

  • New company law with 100% foreign ownership now permitted unlike previous local sponsorship requirements.
  • Import duties vary from 5-15% on finished apparel goods. Additional 20% VAT on retail sales.
  • Corporate/shareholder taxes at 20% of net profits.
  • Saudi Arabia Fashion Board established to nurture local fashion ecosystem.
  • Stricter data localization requirements under new Personal Data Protection Law.

Site Analysis

An evaluation of potential retail spaces and locations forms a key aspect of determining operational feasibility. The UAE and Saudi markets offer several grade A malls and shopping centers owned by groups like Emaar, Majid Al Futtaim, Alhokair Fashion Retail etc.

We will assess footfall patterns, visitor demographics, accessibility, visibility, parking provisions and leasable spaces across some of the top prospects:

UAE:

  • The Dubai Mall
  • Mall of the Emirates
  • Dubai Festival City Mall
  • Ibn Battuta Mall

Saudi Arabia:

  • Riyadh Park
  • Panorama Mall – Riyadh
  • Mall of Arabia – Jeddah
  • Red Sea Mall – Jeddah

Within these malls, ground floor and first level spaces near prime anchors like designer boutiques, supermarket chains, entertainment zones and food courts tend to have higher footfalls and prominence.

Rental rates vary from AED 1400-2500 psf in Dubai to SAR 700-1400 psf in Riyadh, depending on location. Additional costs like fit-outs, storage, utilities etc. will be incorporated in financial models.

We will also conduct concept testing surveys with our target groups to assess preferences for location, store environment, products, price points etc. This can inform decisions around site selection and retail mix.

Financial Projections

Based on our market analysis, regulatory review, and site evaluations – we will develop comprehensive financial models to assess profitability and returns for a fashion retail expansion into Dubai and Saudi Arabia.

Some of the key projections to be included:

Startup Costs

  • Incorporate store development budgets across locations:
    • Rental deposits
    • Store fit-outs
    • Inventory purchase
    • Local hiring and training
    • Pre-opening marketing
  • Estimate working capital needs

Operating Costs

  • Projections for recurring costs:
    • Rentals
    • Staff salaries
    • Inventory
    • Utilities and overheads
    • Marketing and advertising

Revenue Drivers

  • Sales forecasts across channels
    • Retail stores
    • E-commerce
    • Wholesale / Franchising
  • Derive revenue projections based on:
    • Location-wise footfall conversion benchmarks
    • Category-wise average selling price and margins
    • Growth rates aligned to market expansion plans

Break-Even Analysis

  • Calculate breakeven timelines at overall company level
  • Analyze payback periods for each proposed store location

Profits/Returns

  • Benchmark target operating margins
  • Net profit forecasts
  • Return on investment (ROI) analysis

Conclusions & Recommendations:

I. Summary of Key Findings

  • Overview of market opportunity, growth forecasts, target consumer analysis
  • Competitive assessment identifying white spaces
  • Site evaluation results – optimal malls/locations
  • Breakeven analysis, ROIs and risk evaluation

II. Store Location Recommendations

  • Shortlist of grade A malls in Dubai and top cities of KSA
  • Rationale for fit with brand positioning and target segments
  • Ranking matrix evaluating footfall, visibility, rents and revenue potential

III. Product & Pricing Strategies

  • Recommendations for apparel categories, styles and SKU mix
  • Price points aligned to competition on key brands
  • Strategies for localization through fabric, styles and seasonal drops

IV. Sales & Distribution Channel Focus

  • Ratio of retail stores vs online sales
  • Scope for wholesale distribution to multi-brand outlets
  • Tie-ups with e-commerce fashion platforms

V. Launch & Expansion Roadmap

  • Phase-wise store rollout plan across 5 years
  • Initiate with flagships in 2 metros and follow hub-spoke model
  • Expansion to second tier metro areas basis response

VI. Next Steps for Implementation

  • Obtain trade licenses and retail space agreements
  • Appoint high street construction contractors
  • Develop integrated marketing and launch plans
  • Hire local teams for retail store management

Contact us today for a free consultation and let’s discuss how we can help you turn your Fashion vision into a sustainable success story.

Feasibility Study Services

Retail:

  • Bakery
  • Catering Company
  • Convenience Store
  • Clothing Boutique
  • Department Store
  • Florist
  • Furniture Store
  • Jewelry Store
  • Sporting Goods Store
  • Toy Store

Hospitality & Tourism:

  • Hotel
  • Resort
  • Bed and Breakfast
  • Travel Agency
  • Tour Operator
  • Theme Park
  • Amusement Park
  • Hotel Apartment

Services:

  • Car Rental
  • Cleaning Service
  • Construction Management
  • Consulting
  • Event Planning
  • Facility Management
  • Gym/Fitness Center
  • Hair Salon
  • IT Services
  • Landscaping
  • Legal Services
  • Marketing Agency
  • Pet Sitting/Walking
  • Property Management
  • Real Estate
  • Security Services
  • Spa
  • Taxi Service, Limousine Service

Education:

  • School
  • University
  • Online Education Platform
  • Language Learning Center

Healthcare:

  • Clinic (variety of specialties)
  • Hospital
  • Dental Practice
  • Veterinary Clinic
  • Medical Devices Manufacturer
  • Pharmaceutical Company
  • Mental Health Services

Finance:

  • Fintech Startup
  • Insurance Company

Technology:

  • Software Development Company
  • App Development Company
  • Artificial Intelligence Company
  • Data Analytics Company

Food & Beverage:

  • Restaurant (various cuisines)
  • Cafe
  • Food Truck
  • Catering Company
  • Grocery Store

Logistics:

  • Warehouse
  • Freight Forwarding Company
  • Delivery Service
  • Shipping Company

Manufacturing:

  • Food & Beverage Manufacturing
  • Clothing Manufacturing
  • Construction Materials Manufacturing

Other:

  • Supermarket
  • Agricultural Farm
  • Construction Company
  • Media & Entertainment Company
  • Renewable Energy Company (solar panel installation)
  • Non-profit Organization
  • Childcare Center
  • Coworking Space
  • Car Wash
  • Recycling Plant

This list is not exhaustive, but it gives a much broader picture of team’s expertise in conducting feasibility studies across a diverse range of industries.

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