Retailing in Lebanon in 2014 felt the impact of global trends, as well as influences particular to the chaotic situation in the Middle East. In particular, Lebanon’s ailing economy and the influx of over 1 million refugees from Syria has had a major impact on the sector.
According to Business Monitor International, while sales of sporting goods, electrical appliances and consumer electronics have been down by 7 to 10 percent, grocery retail sales in supermarkets and hypermarkets were up more than 5 percent. Significantly, the UN sponsored exchange card program for refugees has put LBP 300,000 ($200) a week into the hands of each refugee family to spend on food. Coinciding with this boost to demand, many refugees themselves have started small stores, increasing competition significantly. In fact, An-Nahar has reported that the number of small grocery stores in Lebanon has increased by as much as 70 percent. This has made life even more difficult for the small native operators — particularly in areas of north Lebanon and the Bekaa valley, where many refugee families are concentrated. In addition to this, like everywhere in the world, independent food stores have had to face continued growth in the number, and market share, of the major supermarket chains, which have been successfully diversifying what they offer. In Lebanon, this has included deep discount chains such as Fahed Super Value, premium stores such as TSC Signature, and the local Monop’ mini-markets.
With regard to clothing, the worldwide march of ‘fast fashion’ is also clearly apparent in Lebanon. Brands such as Zara, H&M and Bershka continue to do well, while independent small operators have experienced very difficult conditions. After many years of growth, overall the market is reported to have declined by about 4 percent in 2013 and will probably show a further decline in 2014. Indeed, some independent retailers say that their sales have been worse than at any time since the Civil War. Meanwhile, new players such as Gap and Victoria’s Secret have been penetrating the Lebanese market. While such new entrants will populate the malls that have become a dominant part of the retail clothing scene throughout the world, there are concerns that the Lebanese market is being oversupplied with such retail space given sluggish, or even negative growth in overall demand. The opening of the strangely named Beirut City Centre Mall (which happens to be in Hazmieh) has added 200 new retail units, while the new ABC mall in Verdun will add many more units when it opens in 2017.
[pullquote]Mall development is a matter of ‘location, location, location’[/pullquote]
Even more so than in other branches of the real estate business, mall development is a matter of ‘location, location, location.’ Not only that, but malls that fail to attract foot traffic in their early years can quickly enter a death spiral as the initial tenants leave, units sit empty and traffic falls even further. Pictures of abandoned mega-malls in China, built during a massive wave of commercial real estate speculation, stand as depressing witnesses to this phenomenon. Location is also a crucial factor in determining the demographics of likely visitors. In Beirut, the declining number of tourists has very seriously affected the downtown area, where many luxury clothing and accessory brands have placed flagship stores. In addition, security concerns have prompted frequent street closures during parliamentary sessions. This causes problems for retailers by making access and parking more difficult. The result has been streets dotted with unoccupied stores and restaurants. In addition, the luxury sector is facing challenges related to the relatively higher retail prices of their offerings in Lebanon because of the combination of import duties and VAT. Wealthy customers for these items generally travel frequently and can often find better deals on the same prestige brands in stores in Europe or the Gulf. While many of the luxury stores may remain open as ‘image-builders,’ it is probable that very few are profitable for their operators.
By contrast, the suburban malls that cater to midmarket customers looking for ‘fast fashion’ will continue to prosper in areas such as Dbayeh, where ABC and Le Mall are said to be performing well. Meanwhile ABC has had to reposition its Ashrafieh flagship mall after experiencing a major fall in traffic by offering more space to ‘fast fashion’ brands. Nevertheless, hopes remain high for ABC’s new Verdun mall as it is located close to many Gulf embassies, including that of Saudi Arabia, whose diplomats offer considerable spending power. The area is also popular with wealthy Lebanese families with successful business interests in West Africa. For them, having more opportunities to use their considerable spending power closer to their residences in Beirut while visiting the city will likely help this venture succeed. Thus, despite the general absence of wealthy tourists from the Gulf, well-to-do local families as well as Lebanese expatriates continue to look for the latest ‘hot’ fashion items in Beirut. And while female fashion makes up most of the market, increasing male interest in clothing and accessories may offer new opportunities, as recent research done by myself and my AUB colleague Leila Khauli-Hanna on male-female shopping habits has pointed out. Our conclusion was that the old idea that ‘men buy, women shop’ doesn’t apply, at least not in the Lebanese context, where the ‘metrosexual’ lifestyle is becoming increasingly apparent.
The impact of the worldwide trend towards online retailing has had a mixed impact in Lebanon. Even if stores such as Aïshti are entering the online marketplace, the penetration of e-tailing appears to be slower than elsewhere. Poor internet speeds, concern about credit card fraud and unreliable physical distribution systems have all contributed to this. This picture may change, however, as the global trend towards ‘omni-channel retailing’ gathers speed. This phenomenon refers to the increasingly seamless merger of online and physical marketing facilities. Aided by the ever increasing use of mobile products such as smartphones and tablets, customers can choose to research products and prices, initiate purchases, order and make returns either offline or online as they prefer. Marketers, as a recent report by Euromonitor put it, are enabling consumers to “experience the brand rather than separate channels within the brand.” Pioneers in ‘omni-channel retailing’ have included Macy’s department stores in the US, Waitrose, a UK supermarket chain, as well as giants of e-tailing such as Amazon, which is rumored to be opening a bricks and mortar store in New York as well as ‘pop-up’ stores in San Francisco. Even though this phenomenon may represent the wave of the future, both sides in the online/offline battle will have to meet challenges as they learn each other’s strategies in order to be successful.
[pullquote]The Lebanese love affair with extremely expensive weddings remains one bright spot in an otherwise cloudy picture[/pullquote]
Another global phenomenon among shoppers that is also apparent in Lebanon is their increasingly savvy and price conscious behavior. Customers are not only likely to compare prices for products they want on the Internet, but are ready to wait until these items go on sale. As a result, sale periods have tended to start earlier and last longer. Outlet stores, which were originally conceived as an out of town ‘no frills’ channel for surplus inventory, have now become a regular part of the retail mix, even for some quite upmarket brands. Production is now specifically allocated to them — even at the cost of potentially diluting their exclusive image.
Love for weddings
While little in this review suggests a great deal of optimism in the near future, one niche market seems to defy the general trend. The Lebanese love affair with elaborate and extremely expensive weddings remains one bright spot in an otherwise cloudy picture. Indeed, cost consciousness hardly seems to apply as some of the most extravagant of these events are rumored to have cost over $2 million. Despite the political and security situation, demand for dresses, catering, flowers and other items associated with weddings remains strong. For example, Noura, the upmarket caterer and patisserie, reports steady progress in its events and wedding business. Indeed, even if because of security issues some families are opting for overseas locations such as Tuscany, their wedding needs are often supplied by Lebanese sources. Love conquers all it seems — even in retailing.