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DUBAI (Reuters) - Sales of luxury goods in Dubai have dropped about 45 percent since the global economic crisis prompted local shoppers to tighten their purse strings and tourists to rethink spending sprees, a top retailer said.
Speaking to the Reuters Global Luxury Summit in Dubai, Tony Jashanmal, a director of the 90-year old Jashanmal Group of Companies, said the worst of the first real downturn in the region's retail sector in about 17 years had passed.
But the repercussions would linger as retailers scramble to sell excess stock and shoppers from recession-hit countries like Russia, who tended to frequent Dubai malls, stay home as they seek ways to weather the crisis.
"The sales of everything dropped a little bit, but more drastic was in the luxury field," said Jashanmal on Monday.
"It's not only people making good money (here), but also a very big number of people who were visitors and saw Dubai as their nearest market for luxury products, such as India, Iran and especially Russia."
The company that Jashanmal's grandfather started in 1919 in Iraq sells everything from household goods to books and has franchise rights to brands including Louis Vuitton, Calvin Klein and Burberry Group (BRBY.L), which it runs as a joint venture.
Jashanmal is among retailers which expanded rapidly as Dubai's economy boomed in recent years as high oil prices supported strong regional growth rates and helped position the emirate as a regional tourism, trade and commerce hub.
Expensive tastes for designer clothes, luxury watches, fancy cars and gold-plated mobile telephones accompanied the boom, and Dubai emerged with more brand name shops than many Western shopping capitals such as London and Paris, Jashanmal said.
Many of these fast-selling luxury brands have witnessed sales falls of about 20 percent in Dubai, while less well-known names had witnessed a "bigger drop," Jashanmal said. Sales across the Gulf region were down 15-20 percent, he said.
"We've reached the bottom," Jashanmal said, adding he expected the market to pick up much faster among local consumers than among tourists, especially from Russia.
"Most people just put off their purchases, so it will come back ... it will rebound."
Dubai has built itself up as a regional fashion capital, boasting more than 40 malls, including one that features a ski slope, another themed on the travels of a Middle Eastern geographer and one described as the world's largest.
The emirate, which attracts more tourists per year than any Arab country outside of Egypt, hosts an annual month-long shopping festival attracting some two million visitors. The retail sector contributes to about a third of the economic output.
"The region will pick up faster than the rest of the world, but I don't think growth will be the 20-30 percent as before, but we will have growth," said Jashanmal. He admits that as an industry veteran, his job has become busier since the crisis hit, as more novice managers have worked only in good times.
"They brought the older dinosaurs back to work because we know how to handle these situations," he said.
Trying to cope with the downturn, shopping mall owners and retailers are negotiating rent reductions, said Jashanmal, who expects most shops will try to weather the downturn to prepare for the next rebound in demand.
In the meantime, Jashanmal is stalling expansion into the Iraq, Syria, Jordan and Lebanon, he said.
(For summit blog: summitnotebook.reuters.com/)
Additional reporting by Daliah Merzaban, Jason Benham and Amena Bakr