Impact of COVID-19 on Luxury Good Prices in UAE

This report analyzes the impact of COVID-19 on luxury good prices in UAE. It covers the challenges faced by the UAE economy, luxury hotels and hospitality sector, jewellery, clothing, branded watches, and luxury beauty brands. It also discusses the necessary recovery measures to meet the requirements and needs of the UAE industry.

Impact of the COVID19 on
luxury good prices in UAE

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................3
Impact of the COVID19 on luxury good prices in UAE............................................................3
REFERENCES..............................................................................................................................13

INTRODUCTION
Due to Covid-19, the world is facing the biggest challenges in terms of business,
economic growth, performance. The economic growth has been slowed down just because of
covid-19 pandemic. Due to shut down of different productions channels, people have faced a lot
of loss. The present report will be based on impact of covid-19 on luxury good prices in UAE.
United Arab emirates is famous country in the world, the economy of UAE is heavily reliant on
revenues from natural gas and petroleum. But during the time of pandemic, UAE also faced
some challenges.
Impact of the COVID19 on luxury good prices in UAE
The luxury market size of UAE reached US$ 3.5 billion in the year 2021 which is quite
good figure. It is expected to reach 5.2 billion by the year 2027, keeping in mind about the
uncertainties of covid-19 pandemic IMARC group is tracking the direct as well as the indirect
impact of the pandemic on UAE economy. As already discussed, the covid-19 has spread with
alarming speed in the year 2019-2020, it has infected many people and bringing economy
activity down. Country like UAE has also faced challenges during pandemic time while doing
international trade, global level production, foreign direct investment and employment (Pang and
et.al., 2021). This pandemic caused significant business disruptions around the world, with
luxurious tourism, hospitality sector and travel being particularly impacted. From small scale
industry to large size industry, covid-19 has impacted all of them. Including, it has also impacted
basic needs of people and basic product price to luxury good price. In economics, necessity
goods are those goods which is a normal type of good such as water, food, clothes and utilities.
Product or services that people will buy regardless of the changes in their income levels is known
as necessity goods. While on the other side, upmarket goods is known as luxury products, refer
to those goods or services which are costlier and quality. luxury goods are opposite of necessity
goods, which are the goods that customers buy regardless of their income level such as jewellery,
high end watches, luggage, branded clothes, home and estates, big properties, wine, expensive
cars, expensive mobile phones and laptops. This type of goods are often bought by people that
have a higher disposable income. This type of luxury goods are highly depended on promotions
and marketing in order to communicate brand values. As of now, UAE represents one of the
most attractive luxurious market amongst the middle eastern countries. The wealthy residents of
UAE spend billions to purchase high end products likes designer clothes, cars, shoes, jewellery,

mobile phone. Not only this, the booming travel and tourism , hospitality industry has helped the
country to become of the largest and well maintained shopping destination in the middle eastern
region.
Every company's in the UAE first priority is to protect the health and safety of
consumers, business partners, employees and other stakeholders. Indeed, luxury companies in
UAE have pivoted to address urgent needs for people who are facing issues for example-
companies or industries that were producing high end products such as perfumes, jewelry,
scarves is now manufacturing hand sanitizer, face masks. Which has somehow impacted their
profitability and performance in the market of UAE. Not only this, luxury companies also have
made monetary donations to hospital where people were facing major issues related to health. In
addition, to ensure the survival of the businesses in UAE, owners of company has provided
support to millions of people relying on the luxury goods' industry, from factory workers to retail
store employee everyone has faced challenges in terms of money and standard of living. During
the time of pandemic, people were also facing some social issues such as feeling helpless,
depression and reduction in work output, the reason behind that is of-course loss due to covid-19.
Government regulations
The constantly changing government regulations on imports and exports, trade policies,
tariffs and interest rate. The luxurious industries have to follow all the rules made by UAE
government. It includes the closing of borders, enforcing social distancing, health and safety
terms, new hygiene practices like wear masks and hand sanitizers.
As luxury products and services are the highly desirable one whose value in terms of
price and quality is comparatively high. The luxury goods market in the UAE is segmented on
the basis of type and distribution channel (Kim and et.al., 2021).
There are some key issues related to particular report which includes:
 Impact of COVID-19 on the UAE economy as a whole and across sectors.
 Impact of pandemic on the luxury good prices in UAE
 Necessary recovery measures to meet the requirements and needs of the UAE industry
Talking about the luxury goods categories, no luxury goods like luxury food items,
leather goods, footwear is likely to benefit from the pandemic crisis. At the time of covid-19
crisis, people were avoiding buying personal luxury goods which includes jewellery, luxury
make-up products. They feel that this is not the right time to buy and wear luxury items. So, the

demands were really less during the pandemic time, due to this, companies that manufacture
luxury items were loosing consumer confidence. Hence, consumer confidence hit, whilst fear of
contagion rises. After the covid-19 also, customer confidence has been hit hard and spending on
essentials has been put on hold which has impacted the selling of luxurious products or services.
LUXURY HOTELS AND HOSPITALITY SECTOR
Speaking about the economy of UAE, due to change in the demand of luxury food-
service it was highly impacted. Due to this luxury food-service operates faced mandated
shutdown and disturbed by loss. To mitigate this challenges many operators of food-service in
UAE and luxury hotels are now focused on home delivery services because people are more
attracted towards those hotels who provide online delivery. Some of them provides online
tutorials on how to replicate luxury hotel services at home (Kim and et.al., 2021).
The ongoing Covid-19 outbreak is hitting hard the luxury travel market as well. Due to
changes in the policies and rules, luxury hotels, high end travel retailers and hospitality services
have already suffered from heavy losses. The reason behind that is people were not allowed to

travel from one place to another. International travel was dramatically curtailed, So, there were
fewer people coming to UAE, due to falling global demand with the long term outlook looking
uncertain as customer spending on all services relating to travel and tourism is pulling back
dramatically. Moreover, there were some changes in supply chain in Dubai and Abu Dhabi
because of changes in demand of luxury products. It was noted that hotels in UAE faced 46.3%
of drop in occupancy, 59.3% decrease in RevPAR and reduction in the average room rate is
24.2%. Because of this situation, many leading brands in UAE seeing their sales figures
rebounding relatively rapidly to pre pandemic levels (Topolko Herceg, 2021).
source: (Topolko Herceg, 2021)
From the above figure it has been noted that sale of new passenger cars in the UAE
dropped in the year 2020 because of economic impact of pandemic.
Increasing travel and tourism is proportionately driving the luxury goods sales

everyone knows that Dubai and other areas of UAE is the most visited in the world.
Tourism in the UAE is increasing day by day, so the sustained growth of emirati luxury industry
can be attributed to the continuing rise in the tourism sector. After the opening of lockdown by
the year 2022 the travellers visit is also increasing due to this the chances of purchasing luxury
goods is also more because some brands are only available in UAE only. UAE is famous for
products like leather and perfumes. With the continuous increase in tourism and travel, the
increasing trend is seen in purchase of luxury goods in the country. These goods market is likely
to grow at a healthy rate, enhancing opportunities for the new players also to introduce their
products in the domestic market as well as international (Del Valle, 2020).
The above figure shows that there is an increasing trend seen in spending in tourism, in the year
2019-2020, the figure is getting higher. The reason behind that is e-commerce sales, due to
increasing trend in online shopping and use of digital platform people are able to get new growth
opportunities for single and multi brand luxury goods stores in the UAE. It has provided easy
access to product related information and prices to the customers which helps them to achieve
good economic growth in the country's luxury goods market. To deal with situation of covid-19,
the brand named prada stepped up its digital campaign in the UAE by redesigning its website.

Impact on jewellery, clothing and branded watches
The covid-19 pandemic has left every industry affected globally one way or the other. It
has caused huge disruptions in terms of economic activity as well as the loss of human lives.
Gems and jewellery is one of those many industries that have suffered majorly just because of
covid-19. The reason behind that is domestic demand and exports sharply crashed in branded
things. One wave after the other is not letting jewellery industry, clothing industry and watches
industry recover properly which has also impacted the sales and revenue.
Already discussed that covid-19 lockdown consumers in UAE spent the most on
jewellery, shoes, accessories, clothing and watches. When it is asked to consumers of luxury
goods they said that after the covid-19 they have faced a little change in spending patterns and
buying behaviours. Consumers added that gems and jewellery industry generates large scale of
foreign exchange earning, employment and business opportunities. During covid-19 labours and
employees were not even getting salary on time. This has impacted their living standards and
most of them were forced to leave the jobs.
However, festive season last year gave hope to these industry as things started getting
back on track for them. During that time a jump in sales was noted in the year 2021 end months
which helps luxurious companies to achieve their goals in competitive market. As of now
everything is going fine but the impact is still there. However, another covid wave during the
wedding season made it again a bit challenging for luxurious industry. Therefore, The owners of
brands keep moving forward with strategic directions and a positive thought and giving back to
society to the highest possible extent.
Talking about luxurious clothing and watches industry, it has also gone through a lot due
to covid-19 pandemic. Last year, a jump in sales was observed when there was wedding season
going on people went for shopping and willingly paying amount. But in some areas of UAE and
other nearby locations wedding season went for a toss due to another surge in covid-19 cases.
From the above discussion it has been noted that due to pandemic, people faced problems
because it has bought a sense of fear among them. This was the only reason behind huge loss
happens to industries. A fear of uncertainty has declined the sales and revenue in the market. Due
to this fear people were buying necessities or saving money instead of buying luxurious items.
During the initial months people were so scared they think twice or more than that before

spending on luxurious brands. In order to mitigate these challenges, people focusing on virtual
shopping, they prefer to buy jewellery, clothes and watches online only. The reason behind that
is it is safe and even convenient for customers. It also allows them to explore more types of
designs, varieties and options in the comfort of their homes. To conclude, With things getting
back to normal along with some ease on rules, policies and restrictions on luxurious items price
people can again see demand on watches, jewellery, accessories and hoping for things to get
normal and better from this year onwards (Xie, and Youn, 2020).
Impact on Luxury beauty brands
The evolution of leading brands revenues clearly states that the lockdown impacted
luxury consumers buying behaviours. In the skincare space, huda beauty, herbal essentials,
wishful, lash Dubai and kayali was impacted in the year 2019. but they recovered quickly from
the initial hit because they move towards e-commerce platform. Which means that from 2020
onwards all the products of Huda beauty were easily available online beauty applications such as
Nykaa, amazon, flip kart and even on its original website from where people can purchase it.
Meanwhile, Shirley Conlon organics suffered a slight decline in its sales than its competitors and
is now taking longer time to get recovered from the loss in luxurious items market as the sales of
products is less than other brands by 2021. People were not getting any kind of discounts on
beauty products after the opening of lockdown as beauty brands were also focusing on earning
profits (Galhotra and Dewan, 2020).
Luxury industry's big players saw sales plummet at the start of the covid-19 pandemic
For almost Two years, pandemic has created huge challenges for luxury companies
across the globe in which UAE was on top list. The demand for luxury services and items
dropped sharply as customer changes their purchasing behaviours, buying habits, tastes and
preferences were changes. As there was 10.1L cases reported in the UAE and almost there were
2341 deaths happens (Roggeveen and Sethuraman, 2020) , this has highly Impacted the market
situation of UAE. Physical stores of luxury industry closed under lockdown regulations. As
compared to 2019, in the year 2020, there was 36% slump in sales but by using various strategies
afterwards those luxurious brand have been quick to recover. For example- Burj Al Arab is a
luxury hotel in UAE which was impacted due to pandemic as there were changes in price of
accommodations, food-service. Another example from which one can understand about the
impact of COVID-19 on luxurious item is Huda beauty. It is the UAE based luxury make-up and

beauty brand provides various types of make-up products to high end customers who only prefer
to buy classy make-up items. When it is asked owner of Huda beauty, Huda kattan she says that
coronavirus has fundamentally changed the way they work, team won't be the same as it was
before. People were changing their demand and taste as at that time there was decline in the sales
of beauty products. The reason behind that is lockdown no products were allowed to move as
home delivery were stopped. The brand sees drastic shift to e-commerce sales after covid-19
pandemic.
Some economic growth challenges that UAE people have faced during the covid-19 pandemic
Unemployment rate
In the year 2021, the unemployment rate in the UAE was at 3.36% of the total labor
force. As many people forced to leave jobs the unemployment rate keep increasing from the year
2019. in the year 2019 it was 2.23%, in the year 2020 it was 3.19% while 3.36% has been noted
in the year 2021.

if we understand percentage wise, there were changes happens from the year 2018, the
unemployment rate in the UAE increased to 5% in the year 2020 from 2.64% in the year 2019.
To conclude, Thanks to technology, retailers are using AR technologies and AI to help
online customers improve their e-commerce experiences after during and after pandemic so that
they can easily buy luxurious products without visiting stores (D’Arpizio and et.al., 2020).

REFERENCES
Books and Journals
D’Arpizio, C. and et.al., 2020. Luxury after Covid-19: changed for (the) good. Bain & Company.
Del Valle, A. S., 2020. The tourism industry and the impact of Covid-19, scenarios and
proposals. Global Journey Consulting Madrid.
Galhotra, B. and Dewan, A., 2020, October. Impact of COVID-19 on digital platforms and
change in E-commerce shopping trends. In 2020 Fourth International Conference on
I-SMAC (IoT in Social, Mobile, Analytics and Cloud)(I-SMAC) (pp. 861-866). IEEE.
Kim, J. and et.al., 2021. The impact of the COVID-19 threat on the preference for high versus
low quality/price options. Journal of Hospitality Marketing & Management. 30(6).
pp.699-716.
Pang, W. and et.al., 2021. Impact of COVID-19 pandemic upon fashion consumer behavior:
focus on mass and luxury products. Asia Pacific Journal of Marketing and Logistics.
Roggeveen, A. L. and Sethuraman, R., 2020. How the COVID-19 pandemic may change the
world of retailing. Journal of retailing. 96(2). p.169.
Topolko Herceg, K., 2021. Impact of COVID-19 pandemic on online consumer behavior in
Croatia. CroDiM: International Journal of Marketing Science. 4(1). pp.131-140.
Xie, J. and Youn, C., 2020. How the luxury fashion brand adjust to deal with the COVID-
19. International Journal of Costume and Fashion. 20(2). pp.50-60.