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Galeries Lafayette (France) Plans to Expand in the Middle East

07 Feb 2019 - The French high-end department store Galeries Lafayette plans to expand in the Middle East with up to 10 stores in the region by 2025, and tap the growing e-commerce market with a multilingual website, its chief executive said.

“We have seen continued revenue growth across our Middle East stores [in Dubai and Lebanon] despite global macroeconomic challenges in recent years, and customers really like our offering,” Nicolas Houze told The National on Tuesday, ahead of a visit to Dubai to mark the retailer’s 10th anniversary and the opening of its revamped boutiques in Dubai Mall.

Paris-headquartered Galeries Lafayette is opening a store in Doha this year and Kuwait City in 2020, Mr Houze said. It is also in talks with prospective franchise partners in Saudi Arabia and elsewhere in the GCC. International expansion is one of the company’s three strategic goals for the next five years, along with digitalisation of its retail offering and modernisation of the store network and 125-year-old Galeries Lafayette brand.

The retail sector is one of the fastest growing segments of Middle East economies. In the oil-rich Arabian Gulf, consumers have high levels of disposable income and upmarket department stores have targeted the region through joint ventures, franchising and e-commerce. Aside from Galeries Lafayette, the UK’s Harvey Nichols and Debenhams and US-based Bloomingdales and France's Le BHV Marais have a presence in the region.

The 126-year old Galeries Lafayette, synonymous with upmarket French fashion, food and accessories, was slow to expand outside its home country, but now has branches in Beijing, Beirut, Dubai, Istanbul and Jakarta, and plans additional stories across major cities in Europe and Asia. Roughly 10 per cent of the retailer's total revenues are generated internationally, but the company wants to increase this to 25 per cent by 2025. Much of the growth will come from the Middle East, the chief executive said, as well as China, where it plans to open between five and 10 stores in the coming years.

In the Arabian Gulf, the retail sector slowed as a result of a three-year oil price slump that began in 2014 and is now recovering. The slowdown dented consumer spending, and the acceleration of e-commerce disrupted the conventional brick and mortar model of retail. However, many retailers have responded positively by implementing ‘omnichannel’ strategies incorporating a mix of traditional bricks-and-mortar stores, digital retail offerings and an element of experiential shopping in physical stores, to lure shoppers and stave off competition.

The UAE is among the fastest-growing retail markets in the world, with Dubai ranked number one for international retailer presence in a report by real estate consultancy CBRE last May. More than two-thirds (62 per cent) of the 334 international retailers in the study are present in Dubai, CBRE said.

As part of the Dubai Mall refurbishment, the retailer added three high-end brands – Christian Dior, Louis Vuitton and Gucci – to its store “to address local needs”, Mr Houzé said.

The next phase of expansion, along with the openings in Doha and Kuwait, will come from online shopping, as Galeries Lafayette transforms its exclusively French-language website into a multilingual e-commerce venture by 2020.

“We are a strong believer in having a combination of digital and physical stores to address the modern customer’s needs, and are investing heavily in,” the chief executive said. The GCC e-commerce market is forecast to reach $20bn by 2020, according to AT Kearney.

All retail categories are performing well in the Middle East, he added, but declined to reveal financials because Galeries Lafayette is a private company.

The only product category that is “quite challenging” is beauty and cosmetics, due to fierce competition from regional rivals such as Sephora and Bloomingdale’s. However, there are no plans to scale back this part of the business, Mr Houzé said.

At home, Galeries Lafayette has 56 stores across France and is also opening a 65,000 square feet concept store on Paris’ Champs-Elysees, to accompany its flagship on Boulevard Haussmann. The new store will feature art installations, a green walk and other experiential offerings to drive footfall.

The National Business