After the exhausting rush of 2010, which saw new luxury boutiques cropping up in downtown Beirut like saplings in springtime, Lebanon’s luxury retail market has settled into a more stable summer of 2011, reaping the rewards of last year’s investments.
“The international luxury portfolio stands almost complete here in Beirut. And today we can say proudly that we offer the market the utmost in the fashion luxury industry,” says Nora Yagmur, general manager at Snowball, mother company of PLUM, PLUM Kidstore, Sugar PLUM, Lanvin Balmain and Isabel Marant.
“Beirut’s market is daring; [it opens] to new names in the industry faster than other countries in the region. Beirut has always been defined as the fashion window of the Middle East,” Yagmur adds.
Distinguished fashion marques such as Louis Vuitton, Hermes, Burberry and Dior have all set up shop in Beirut Souks, Solidere’s temple to ritzy retail.
Spending spree
The increasing prevalence of luxury shops in Beirut is no coincidence. “Lebanese men and women are famed for their sense of style and the attention they pay to every single detail that forms their personal image,” says Izzat Traboulsi, managing director of Hugo Boss for the Middle East. Whether it’s in their price range or not, it appears that stepping out in the right threads is a top priority for many; “If you have 100,000 people who can afford luxury in Lebanon, you have 200,000 people buying it,” Traboulsi says.
“When it comes to growth, we had minus 1 [percent] in 2009, plus 16 [percent] in 2010 and we budgeted plus 11 this year,” says Patrick Chalhoub, joint chief executive officer of regional luxury heavyweight, Chalhoub group. The political upheavals of the so-called ‘Arab Spring’ seem to have had little affect on the luxury market.
“We were running at plus 21 or 22 [percent] until the end of May in the region, which is quite remarkable and shows there is a market dynamic in luxury,” adds Chalhoub.
Events closer to home had a more pronounced affect. After the collapse of Saad Hariri’s government in February, many managers and owners of the luxury brands’ downtown shops witnessed a notable crash in sales.
Hugo Boss reported a drop in 2009 in the Middle East, while globally the company remained stable. The brand recorded a turnover of $2.13 billion globally in 2009, with an increase to $2.42 billion in 2010. Traboulsi notes, “profits dropped 16 percent in 2009” because of the global financial crisis, but “globally, we had a good balance because of emerging markets like Japan and India.”
Lebanon’s position as a favorite holiday spot for wealthy Gulf Arabs has traditionally played into the hands of the luxury retail market, but according to Traboulsi this trend has been declining of late. The shoppers spending hundreds of thousands of dollars are deterred from visiting due to the country’s unstable situation.
Traboulsi added that compared to the global net income of $2.69 billion in 2010, Hugo Boss’s turnover in Lebanon was small — resulting in only $20 million in 2009 and 2010.
“It is too bad to lose all the potential we have,” says Traboulsi, “I expected more of Lebanon because we have many assets and good businesspeople that are ‘fashion-forward’.”
The competition today in Beirut is fierce, says Traboulsi, who points to Solidere’s extended luxury retail area where the Middle East Luxury Group’s Gianfranco Ferre has already placed a huge 80 percent sale tag on its window for summer 2011.
Overestimated potential?
Lebanon’s economic fate is intricately linked to the internal political situation, which is notoriously hard to forecast. Nonetheless, Beirut has become one of the foremost fashion destinations of the Middle East. According to Yagmur, the market is currently home to at least 98percent of the international luxury portfolio and is constantly introducing the latest international designers.
However, Beirut’s luxury markets bustle in the shadow of their Middle Eastern competitor, Dubai. Traboulsi says that the higher wages in Dubai reinforce the clients’ ability to buy luxury items, while the average salary in Lebanon is much lower, not to mention the stifling effect of Lebanon’s ongoing political crisis. “It is a pity to see the private sector doing so well, while politicians battle over futilities,” Traboulsi concludes.
“This does not mean that Beirut is not on the top of the list [as a fashion destination],” insists Yagmur.
