TBY talks to Patrick M. Chalhoub, CEO of Chalhoub Group, on riding the wave of e-commerce, trends to watch for the future, and the importance of trust.

Patrick M. Chalhoub
Patrick M. Chalhoub began his career in 1979, creating regional distribution platform in the Jebel Ali Free zone with Fendi, L’Oreal, Dior Parfum, and Puig. As the director of Christofle and of Bernardaud, he is also involved in the strategic planning for the redeployment of these brands. For nearly 30 years, he has continued to expand the group’s distribution, retail business, marketing, and communication activities. He has also been awarded the medal of Chevalier de l’Ordre National du Merite, and the Chevalier de l’Ordre National de la Legion d’Honneur. Patrick holds two bachelor’s degrees, one in economics and finance, another in political science.

E-commerce is a major trend these days in the region, and not just in the UAE. How has Chalhoub ridden the uptake across the luxury sector?

We have seen a long-time resistance to e-commerce in the luxury market, but that is slowly diminishing and brands are taking up e-commerce. E-commerce now accounts for around 7-8% of the global luxury market, and we have already seen considerable changes in the UK and US, with the introduction of new technologies such as virtual reality. This has improved the e-commerce experience, and people today are involved with their digital devices, socially and in terms of consumer habits, particularly in this region where we have a young population with a high level of mobile phone penetration. Attitudes are changing too; shopping has always been considered a pleasure and a leisure activity for people in this part of the world. Also, in terms of payments, this market has not been keen on using credit cards and prefers cash. Organizing shipping to an address has also been an issue. However, today we are witnessing a greater level of e-commerce adaptability to the local market, with options such as cash payment on delivery. We only started our e-commerce drive three years ago and implemented the solution of payment of cash on delivery. We expected that to account for around 60% of online sales, but found it made up 75%, with a low rate of return. Globally, return is around 12-15%; however, we are below that even with a higher than expected percentage of sales for cash on delivery. We get a lot of repeat customers and their purchases are generally increasing. Another thing that triggered e-commerce for luxury in this part of the world is the exchange rate, which has made prices in the Middle East more expensive than in Europe and the UK.

How are consumer patterns changing in-line with this trend?

Today, consumers think and act differently, and they have different consumer habits and motivations. This is a world with less loyalty and more experience needed, more need for personal connection, but still with a desire for anonymity. E-commerce has provided a lot of answers and solutions for these consumers and the new generation. Of course, it doesn't have the human touch, but it makes things convenient. We still have much to learn from online e-commerce, and from more traditional offline brick and mortar commerce. We want to provide an omni-channel experience at the end of the day; we want people to navigate, whether they engage online or offline, no matter the location. Our customer is our center of interest, and that is who we engage with. We need to make sure we have a seamless experience uniting all our online and offline channels. We want the best of both worlds. We will probably have less stores as we move ahead, but with more experience, more investment, and more choices. We imagine that eventually some physical stores can be showrooms for our online offerings, and provide more meaningful online experiences.

How is Chalhoub's e-commerce platform being connected to your brands?

We put together a platform, and we felt the best way to get through to our clients would be through each one of the brands. The first to be plugged in was L'Occitaine in July 2015, which accounts for 14% of sales today. That's our largest single store of entry in the Middle East, both in Saudi and the UAE. Wojooh and Level Shoes followed in January 2016, and in November 2016 we plugged in Sephora, which we operate as a joint venture. For some of the lesser-known brands, the takeoff has been more difficult, because it is a question of trust and people tend to be wary of brands they do not know as well.