Money back guarantee

VAT-refunds are enhancing the profile of Lebanese retail

In the first six months of 2003, over $1 million in VAT-refunds have been reimbursed to tourists and non-resident Lebanese. It is estimated that 15,000 tourists, roughly 1.5% of all foreign arrivals, took the time to put their purchases through the Global Refund tax-free shopping system, collecting an average of $66 from new tax-free shopping desks at Lebanon’s main border crossings.

Since 2001, Lebanon has touted itself as a shopping destination to eventually challenge Dubai. This claim has been strengthened by the evolution of the BCD, the arrival of modern, well-specified shopping centers and the long-overdue appearance of high-profile international consumer brands have proved a popular complement to Lebanon’s established tourist attractions. When it is eventually built, the long awaited Souks project will be the jewel in Lebanon’s retail crown and the center of tourist shopping.

Retailers can now point to defined shopping periods: summer, Eid el Adha and Eid el Fitr. ”Our boom periods are dictated by the Islamic calendar and, to a lesser degree, Christmas,” explains Khalil Achkar, Global Refund’s general manger in Lebanon. The company works in collaboration with the ministry of finance to refund VAT in return for a 1.85% handling fee. Global Refund operates VAT refund services in 35 countries in four continents. “We service over 210,000 outlets and deliver 10 million refunds globally,” boasts Achkar.

The profile of tourists’ spending habits is still far from comprehensive, but a survey of those who chose to collect on their VAT shows that 74% of purchases took place in Beirut – mainly in the BCD and Verdun – with 18% of shopping activity taking place in the Metn – mainly from the ABC, GS and Sports et Loisirs branches in Dbayeh.

Saudi Arabians make up the bulk of Lebanon’s tax free shoppers (a shopper qualifies for tax rebates if he or she is a foreign national or Lebanese who spends less than three months a year in the country) with Kuwaitis and Egyptians coming second and third respectively, ahead of those nationals from the UAE, Jordan, the US and the “rest of the Arab world.” Clothes (62%) and jewelry and watches (12%) are the most popular purchases, according to global refund statistics. “When it comes to clothes, Lebanon is surprisingly competitive compared to Dubai, but the emirate still has the edge on us in terms of electronic goods,” says Achkar According to Achkar, Arabs are very discreet shoppers. “They show off at home but they shop abroad,” he explains. “Ever since September 11, many have chosen to do their major shopping in Lebanon. There isn’t the stigma towards Arabs that has developed in the West, there are cultural similarities and now many international brands are available here. It is the ideal destination.” Nonetheless, Lebanon’s is still very much a fledgling culture when it comes to international retail. To attract the big rollers, Beirut would have to market itself to the big three international spenders: the Japanese, the Russians and the Americans (not Lebanese Americans). China’s dormant spending power is stirring. The world’s most populated country, which is becoming richer through a modern industrial revolution, recently overtook Hong Kong on its way to becoming the fourth in the top spending nationalities table. Saudi nationals are the world’s eighth biggest spenders.

Global Refund began operating in Lebanon in June 2002, five months after the controversial introduction of VAT. Over 1,000 stores have signed up to offer the service. Achkar says that the more sophisticated retailers are enthusiastic. “They have been quick to understand that offering rebates is an asset to the overall shopping experience,” he says. “Others are fairly ambivalent or just assume that it’s a service that solely benefits the shopper.”

Shops that wish to offer tax-free shopping pay an annual fee of LL75,900, which gives them an unlimited supply of refund checks, technical support, training and, most importantly, monthly data on what is being bought by whom.

Data is a dirty word in Lebanon. Those who do give out statistics often inflate their figures, convinced that the other guy is doing the same. Global Refund’s reports are allaying this national paranoia and setting a new benchmark in transparency.

Although the company can only chart the shopping habits of those customers who choose to use the tax-free shopping process, Achkar believes it paints a valuable picture of what tourists are spending. “The feedback tells the retailers who their customers are and where they come from,” say’s Achkar. “Based on these reports, a retailer might then want to recruit sales staff who speak a certain language (shops in Europe have sent their staff on a basic Japanese course) or who may be more sensitive to the needs of gulf Arabs. Retailers can also plan ahead better if they can identify the trends.” However, Achkar believes there is still more that can be done to get a better profile of the tourist shopper. “Most of those shoppers who are listed as American are in fact Lebanese and many of those who come in on Kuwaiti and other GCC passports are also originally Lebanese. If we could know who are Kuwaiti and who are Lebanese-Kuwaiti we would be able to get a better idea of shopping trends. Lebanese and Gulf Arabs have different shopping habits.” Achkar says that although training seminars (the cost of which is included in the annual fee) are held regularly, retailers have been slow to take advantage of the service. “We do our best to make it attractive by holding the sessions at hotels, but the invitations require a lot of follow up,” he said. “You can just send an invitation the week before and expect them to come. You have to remind them and even pick them up from work and take them to the venue.” The need to train staff may put a strain on main of the smaller retailers but the big players – Aïshti, BHV and GS stable of outlets – have embraced the new system and say they are reaping the benefits of offering the service.

Aïshti was unavailable for comment, but Achkar hinted that the up-market clothing store, which sells Gucci, Burberry and other designer labels and which has three outlets in the BCD, was among the most popular outlets for tax-free shopping. Fadi Rayess of Hamra shopping, which owns the GS brand and sells Timberland, Springfield, Hugo Boss and Ralph Lauren Polo, among others, believes that the system is putting Beirut on the retail map. “Our foreign customers are satisfied with the VAT refund process,” he says. “This is a good step towards placing Beirut among the [region’s] top shopping destinations.” Gerard L’Hotel handles the tax-free shopping at BHV, the appliance-driven department store in Jnah. “We had a very good summer especially with those customers from Saudi Arabia,” he says. “We trained our staff in June in anticipation of the rush. It was a good move as we were dealing with purchases made in all departments of the store.” Achkar says it is too early to give accurate measurements of year-on-year growth for tax-free tourist shopping. “Last year we were not at cruising speed,” he says, “so it is difficult to say how we compared year-on-year. Next year’s results will give a clearer picture. This year, there has been greater awareness and this can only increase.”

*

Top