Michel Abchee Admic’s CEO talks about the difficulties of opening a mall in 2005 and how he plans to bounce back
Since its humble beginning in 1997, Admic has become one of the leading players on Lebanon’s retail landscape. EXECUTIVE talked to Admic’s CEO and chairman Michel Abchee about how it all started, last year’s seismic impact on the retail sector, the opening of City Mall and his increasing belief in Murphy’s Law.
E How did it all start? You completed your studies in the United States and thought: let’s go back to Lebanon and start a retail empire?
“Not at all. We came back to see what the opportunities were without really having anything in mind. However, having lived abroad for a long time and seeing the Lebanese retail market, we thought there may be space for a department store. So, we did some studies, looked for a location and decided to build the BHV/Monoprix shopping complex at Jnah.”
E A lot of people expected it would not work …
“As was the case with City Mall, most people were very skeptical about the location and thought it could never work. However, we were convinced that if we would do a professional job in creating a one-stop-shop with quality products and an emphasis on entertainment, people would come anyway, certainly seeing the fact that many Lebanese have lived abroad. What’s more, ‘everything under one roof’ was a novelty in Lebanon, but not abroad. So, we thought why would it not work here? Why wouldn’t the Lebanese like to park their car easily, go shopping and enjoy themselves?
E And BHV/ Monoprix Jnah turned out to be a success from the start?
“Not really. BHV opened in December ’98 and had quite a slow start, partly because Monoprix only followed in June ’99. Now, many people thought the second was opened to save the first, which was not true at all. It was always meant to be one integrated project and of course we had preferred to open the whole complex in one go, but sometimes there are certain circumstances that cause delay and force you to open in phases. Same with City Mall last year. So, we had to face all this early skepticism, but as soon as we opened Monoprix, as soon as the project was completed, sales picked up and the Jnah project became a huge success.”
E If you have to put it briefly, in what way did BHV/ Monoprix change Lebanese shopping habits?
“Two things. First of all, it offered a large variety of quality products, which before perhaps were on offer, but only in many different locations. Secondly, we offered extremely sharp prices. Many people asked how we could do it. The answer is small margins and big volumes. We were able to buy big quantities. Don’t forget BHV/ Monoprix was in that time the biggest shopping complex in the country.”
E Following the success story in Jnah, you opened a second Monoprix in Ashrafieh December 2000. To what extent was that a different experience?
“That was quite a different experience, because we took over Abela’s supermarket. We modernized it, made shopping more convenient, more comfortable. Overall, it was somehow easier than opening BHV/Monoprix in Jnah because in Ashrafieh there was an existing client base.”
E What came next?
In 2003/ 2004 we opened three more Monoprix supermarkets in Zouk, Baabda and Verdun and we started preparing the City Mall project.
E Admic often does not go for the most likely locations. How do you choose?
“A lot of people ask me that question. Of course there’s the ground rule, the cliche ‘location, location, location,’ but it’s more than that. We look at the infrastructure surrounding the building. It no coincidence for example that bridges and the new highway to Broumana are being built around the City Mall. What’s more, within the mall we offer an infrastructure suitable for international retailers, both in terms of location and concept. A lot of constructors in Lebanon overlook that aspect.
E Admic’s latest project, City Mall, is the biggest mall in the country. What are the main characteristics?
“City Mall’s has a total built up area of 201,000 m2, of which 80,000 m2 are leasable. Main anchor tenants are Geant and BHV, which is to open in October 2006 and will be the largest department store in the Middle East. Apart from that, we have a string of leading local retailers such as Aïzone, Virgin, Vera Moda, and both established internationals brands and international newcomers such as Top Shop, River Island and Whistlers. We recently opened the ‘Toddlers Club,’ a large children’s playground, which will add an important dimension to the entertainment side of the mall. In June, we will open the food court and cinemas, which will increasingly bring the mall to life in the evening.”
E Again, many people believed the mall would never work. And, at first, the mall did not work very well. How come?
“As was the case in Jnah, many people believed the City Mall could not work because of its location and certain geographical boundaries that are said to exist in this country. I don’t want to go into the details of that, but let me just say that we have lived abroad long enough to believe that with the right product and right formula one can overcome any boundary. True, at first Geant and the mall did not do well. The plan was for the City Mall to open in a flourishing Lebanon. Everyone thought 2005 was going to be a top year, instead the earthquake struck. Today, a lot of people try to play down the impact of the assassination of Hariri and the bomb attacks and assassination that followed, but the retail and distribution sector suffered enormously. Perhaps, the City Mall was extra unlucky as several bomb explosions took place in the mall’s direct vicinity. As a consequence of the insecurity, a lot of international retailers, based regionally in Kuwait, the Gulf and Saudi Arabia, decided to slow down their investments in Lebanon, as long as the situation was unsafe. So, City Mall opened in June 2005 with an occupancy rate of 40% to 45%, while 70% is the norm. Finally, let’s not forget the state of the global economy with the high Euro, high oil prices, and high cost of imports. You know, it’s like Murphy’s Law states, once one thing goes wrong, everything goes wrong. Now, I never believed in that, but after last year I might start to believe in it.”
E Has the situation improved today?
“Contrary to what many people believe, things have picked up considerably. Since the assassination of Gibran Tueni, the situation has been relatively calm and since last November international players have started to come back. We currently have an occupancy rate of some 90%. So, yes, City Mall has underperformed in 2005 and Admic suffered in 2005, but we’ve overcome the worst and are now going uphill, granted things stay as they are. People should realize though that you do not recover from a bad year within a year. It takes time. And I’d like to add that safety in itself is not enough. We need an active role of the government to promote Lebanon as a safe travel destination, as we need foreign visitors to make the country perform.”
E What about the other Admic components? Could you give us some figures regarding Admic’s general performance?
“We just closed the books last March, but I don’t like to give figures. What I can say is that BHV/Monoprix in Jnah has a yearly turnover of some $80 million. All five Monoprix outlets booked a small increase in sales, while BHV sales remained stable. As said, Geant did not perform as planned, but is picking up. City Mall with one year of delay due to the circumstances mentioned above we are now where we wanted to be almost a year ago.
E How many employees work for Admic?
“Well, we’ve come a long way since we started with 2 people in 1997. Today we employ some 1500 people, which doesn’t include some 300 people who are part-time employed as cleaners or security guards. When BHV opens we will have another 300 people added to the payroll. What’s more, Admic generates a considerable amount of indirect employment as we hire transport companies, suppliers, advertisement agencies.”
E In brief, what is Admic’s philosophy, the key to success?
“First of all, to offer a wide range of quality products. Secondly, comfort and convenience. Shopping should be more than shopping, it should be a pleasant experience in terms of parking, service, accessibility, entertainment etc. Thirdly, to be very price competitive.
E Do you think the completion of the Souqs project in 2007 will be a threat to the success of City Mall?
“No, I don’t think so. The two are complementary. The Souqs will complete the development of downtown and predominantly cater for the high-end market. City Mall is based in the peripherique (suburb) of Beirut and feeds on the city’s exit. If you look at it, we are based at the south, east and north exit of the city. Thank God, there is a sea in the west, otherwise we would be there as well (laughs)”
E Does Lebanon have room for even more malls?
“Yes, I think so. The whole retail business is undergoing change and the trend in retail is towards organized shopping. In that context, Lebanon is in fact rallying behind global developments, so I think more malls will open. Now, if they will be all successful is a different story. That all depends on things like location, mall design and tenant mix.”
E What will the future bring for Admic?
“2006/2007 will be a period of consolidation and reflection, in which we will decide upon our next step, which can be in Lebanon or in the region, as the trend is going towards regional markets. But that’s all I can say for now.”
