LEBANON. In Beirut a large number of luxury boutiques are located in the upmarket suburb of Kaslik and retailers there include Gianfranco Ferre, Maria Rinaldi, Cartier, Carel, Louis Feraud, Iceberg, MaxMara and Harley Davidson. Other known brands are Nina Ricci, Fil à Fil, French Connection, Promod, Oilily, Guess, Crabtree & Evelyn, Valentino, Betty Barclay and Mondi who are all present in the upmarket malls such as Verdun 730 and Verdun Plaza 2 in downtown Beirut.
The newly-refurbished Beirut Duty Free at Beirut International Airport, operated by the Phoenicia Trading/Aer Rianta International-Middle East joint venture, became a major luxury shopping destination after 2003.
In 2005 Beirut is riding a new wave of investment from the Gulf and some high-profile French retail entrants but behind the scenes, the government's finances remain close to crisis point. Lebanon’s gross foreign currency reserves have been falling and as of 2005 Lebanon is carrying US$35 billion of public debt. It has been struggling to reform public sector institutions and cut the wage bill (which accounts for 30% of the government budget). The country has a distinct affluent class but retailer confidence in high-end brands will continue to be influenced by wavering confidence in the government, and in the new era for Lebanon after 2005.
Comparisons with Argentina, which was plunged into chaos after defaulting on US$155 billion of debt, and the threat of currency devaluation, are unavoidable. Beirut retailers also had to tackle the impact on sales of the 10% VAT introduced in February 2002. But in a virtuous circle of reform, government revenues from VAT amounted to US$500 million in 2002, underpinning an ambitious budget and partially answering critics of the public finances.
Lebanon has a total population of just four million (including 300,000 Palestinian refugees). The main cities are around Beirut, Tripoli, Zahle, Jounieh, Sidon and Tyre. The majority of urban areas are located along the coastal plain. Age structure is distorted by the war and the population is young with 49% aged under 24 years and 29% under 15 years. Average household size is 4.66 persons which is very high compared to Western countries. Lebanese consumers are highly polarized between the poor and the rich.
Since the end of the civil war, the standard of living initially deteriorated for many as high taxes have been levied to pay for reconstruction. In real terms average GDP per capita has risen steadily. Measured in purchasing power parity in US Dollars it has jumped sharply from US$3,976 in 2000 to over US$4,500 in the current year. Food spending accounts for almost one third of all consumer expenditure.
Local and overseas players carve the middle market
The largest Beirut mixed retailer, ABC has repositioned itself as an upmarket department store with modern instore concessions, from its discount store origins. Until recently local operators had begun making new real estate investments but progress was slow and they could always blame the situation on high duties and taxes. Unlike the Gulf, Lebanon has more of its own retail brands, particularly in the apparel sector where there are some local fashion labels and local production.
International names are certainly contributing to improving the experience of shopping in Lebanon. The first Monoprix store opening in March 1999 was accompanied by mime artists, caricaturists and accordion players to give a French flavour to the event.
The 4,000 square Monoprix unit in Beirut was adapted to local needs and tastes but with a clear French twist. This complimented the 8,000 square metre sister store of BHV (Bazaar de l'Hotel de Ville ) located below on the ground floor. BHV opened its only overseas store (up to that time) in December 1998 and it concentrates on DIY and household items, although some apparel is also stocked. With separate entrances, the two stores are linked from the inside with escalators. The synergy of the two stores is significant, given that although the immediate street environment in Jnah is good, but the location is remote and is only recently being joined by other retailers. Initially seen as a retail failure, sales at BHV picked up as soon as Monoprix opened, apparently rising by 50%.
The combined depth of range and sophisticated merchandising has clearly been targeted at areas where there is a defined gap in the local market. Monoprix has translated itself into a more upmarket supermarket than its home market, France. Meanwhile, nearly half the BHV store is devoted to DIY home improvement items like woodwork, self-assembly furniture and paint. The DIY ranges occupy more than 30 aisles in the store. Given Lebanon’s emphasis on renewal and rebuilding, BHV is well placed to carve out a strong market share in this area.
ADMIC, the local franchisee has stated that it is targeting a 25% profit margin with the BHV/Monoprix venture and a quality-value rather than discount market positioning. The launch year was not without its problems however. The squeeze of the recession at that time forced BHV to make a mid-year price cut on some stock and ADMIC had to convince suppliers to lower their margins to suit the Lebanese market. But the strategy has clearly paid off for ADMIC as its recent expansion, and the future potential for its Galeries Lafayette contract, demonstrates.
But locals still dominate overall
Although the number of international franchises is increasing, independent operators and small chains with resourceful local management still dominate the Lebanese retail scene.
The upmarket Lebanese department store sector is dominated by private company ABC, which is the local market leader. Its main store in Dbayeh is a local landmark and has provided the Lebanese with a Western retail oasis. It has only relatively recently had any real competition in the form of BHV and Monoprix.
The list of fashion labels available in Lebanon is extensive, comprising originally French names but increasingly US and other brands. Famous names appeared faster than changes in fashion.
In 1999, the UK parent company Sears signed a franchise agreement to open seven branches of Miss Selfridge (now part of Arcadia), and shortly afterwards Najwal Khoury, previously in the aluminum business, won the right to represent French label Pierre Balmain. The following year the Canadian retailer La Senza moved in with plans to open a dozen lingerie stores. The Daher Group spent five years working to obtain the franchise for the Spanish fashion brand Zara, managed by Z&D (part of Daher).
Another Daher company, Maxima, runs Max Mara, Max & Co, Mango, Sergio Rossi, GianFranco Ferre, and Marella in Lebanon. Another Lebanese company Dareen, represents the UK retail brands Mothercare, River Island, and Next, that feature within the ABC malls as well as stand-alone stores. The Kuwait-based Gulf Franchsing Company signed the licence for Adolfo Dominguez in Kuwait and Lebanon in late 2004.
Other Western middle-market apparel labels available in Beirut include Benetton, Kookai, Mexx, Naf Naf, Stefanel, and specialist childrenswear and maternitywear retailers, including Catimini, Jacadi and Zannier.
Unlike the Gulf, Lebanon has some of its own fashion labels with their own outlets and local production. These include Matta Freres (childrenswear) and Zaha (childrenswear and lingerie), Red Shoe and Joseph Eid. Joseph Eid founded in 1946 has a chain of seven menswear and womenswear stores all opened since 1997. Eid imports a wide selection of Italian and French ready-to-wear labels including Christian Lacroix, Les Copains, and Lolita Lempicka. Joseph Eid also produces a twice-yearly fashion catalogue mailed out to regular customers locally and in Saudi Arabia, Egypt and Syria.
Despite the absence of large scale manufacturing capability, Lebanon produces quality clothing and jewellery items, particularly at the middle price segment. While 4,000 people are working in Lebanon's jewellery industry, there are 1,300 textile factories. Local-made furniture also sells well in Lebanon and its neighbouring countries. It is estimated that 50,000 people are employed by 3,300 furniture factories in Lebanon.
Other apparel names include Rock Shoes plus Friend’s, Meta, Sports & Loisirs, Colette, If and Kamishibal. The flourishing media and creative industries in Lebanon, as well as big fashion events held at the Fashion Bar in the An Nahar building (named after the television station) all help to give Lebanon a competitive edge in this market.
The Lebanese apparel retailer Grand Stores has the Timberland franchise as well as its own expanding fashion concept called Med. Grand Stores is currently extending and refurbishing all its stores to a minimum size of 1,200 square metes.
Consumers are polarised
Meanwhile, Lebanon's consumers are quite polarised. The mass market prefers cheaper products from China, as many Lebanese people only earn a minimum wage of US$200 per month. With their wealth and established businesses inherited from the pre-civil war era, many Lebanese families however have remained rich. In addition, Lebanon's expatriates from North America and Europe also look for higher quality, branded items. By and large, Lebanese consumers are brand-conscious, and are willing to forego two or more non-branded items for a branded one.
When some Lebanese consumers cannot afford international brands, they will take the next step down and go for local brands. In the Middle East, Lebanese companies are famous for their marketing and promotional skills. Many of these companies have created popular brands in the local market. With deep influence of European traditions, Lebanon's consumers are fashion-conscious. They look for products with stylish design, which is particularly noticeable in clothing, clothing accessories and jewellery.
Since more than half of its population is under 25 years old, Lebanon also has a sizable youth market. Not surprisingly, there is a great demand for technological products that are sought after by the youth, including computers, digital cameras and audio-visual equipment. In addition, education is an important element in Lebanon. Lebanon not only offers quality education for local students, but also those from the Arab world. Students have a strong appetite for items like computers and stationery.
Apart from sourcing from Dubai, which is common, many Lebanese companies prefer buying directly from Asia in the apparel sector. Most trading companies in Lebanon are family-run businesses with fewer than ten persons. Importers normally play the role of wholesalers as well, which distribute goods to retailers. Quite often, importers have their own retail shops, and provide goods directly to consumers.
In Lebanon, traders of the same industries (such as toys, clothing and furniture) often form their own trade associations, which are called syndicates. These syndicates provide networking opportunities not only among members themselves, but also between members and government officials, buyers and suppliers. They also promote the interests of their members by lobbying the government to ensure an environment conducive to business.
Lebanon's re-export business with the neighbouring countries, particularly the Levant markets of Syria and Jordan, as well as Iraq, presents another opportunity for overseas suppliers. Being well versed in trading business, many Lebanese traders are trilingual: Arabic, English and French. But as many of them in fact reside in other countries, such as the UAE (mostly Dubai), a substantial portion of the re-export business is conducted in the form of offshore trade, which is not captured in the nation's trade statistics.
The trend of stylishly veiled young women is growing in Lebanon's Muslim communities, according to Hassan Hammoud, Associate Professor of Sociology at the Lebanese American University. He explains that women in Lebanon are bombarded by messages and images of how fashionable a woman ought to be in terms of outfit and physical shape.
"Young girls try to fit into this model," he says. "They build an image of themselves made out of what they hear, see and expect themselves to be." And if veiled women come from an immediate environment that values fashion, then their clothes will be fashionable, too. "A veiled woman, like any other woman, holds an image of what is acceptable versus what is unacceptable, based on the values of her peer group, her family, her community," Hammoud explains.
The Koran and Sunnah, or teachings of the Prophet, instruct Muslim women to cover their whole body, except for the hands and face, with loose and non-diaphanous clothes. They make no mention of form, style and colour, leaving the door open to personal interpretation.
A much stricter interpretation came from Salafi scholars. Salafi tradition, mainstream in countries such as Saudi Arabia, advocates a return to the lifestyle of the salaf, or ancestors, who lived during early Islam. Its understanding of Islamic laws is extremist. But most Lebanese consumers hold the view that is not wrong to be influenced by Western fashion and the society is one of the most liberal in the Middle East.