As chairman of the Beirut Traders Association, Nicolas Chammas oversees study and research into Lebanon’s commercial sector and lobbies the Lebanese government on behalf of traders. In a chat with Executive he spoke about the contracting economy and the need for policymakers to cut retailers some slack through more supportive legislation.
E Where has 2011’s poor economic performance left Lebanon’s retailers?
The year 2011 started very weakly because we had a hangover from 2010. The political bickering really dragged the entire economy down. And then in the very early days of January the government collapsed. So all in all, with the absence of government and no decision makers at all and the troubles in Syria, in the first semester of 2011 the [commercial sector] activity collapsed by about 30 percent. There has been a correction upwards in the third quarter… there was a slight increase in the number of tourists and number of visitors and on the retail scene as well. So I would say that we are looking overall at a 20 percent decrease in 2011. The first semester was terrible, and we were able to get some breathing room in the second part of 2011. Lebanon is a resilient country — the economy goes through terrible cycles, very deep troughs and very high peaks. But our problem now is a macroeconomic one, because we have fallen down from an 8 percent to a 1 percent growth rate and now you need some momentum in order to go back up.
E How exactly has the regional unrest affected the economic performance of the retail sector?
You have to bear in mind that the situation in Beirut is different to the situation in other regions. [In Lebanon] you have two types of interactions with Syria — you have the interactions at the borders in Tripoli and in Zahlé, whereby you have a daily exchange between the Lebanese and the Syrians. In Beirut, you have the final customer coming to shop from the retailers and you have the retailers of Syria coming to buy from the wholesalers, so all these have been affected.
E Have some consumer sectors been disproportionately affected?
You have three segments of consumers in Lebanon. You have the Lebanese residents who constitute perhaps, depending on the sectors, at least two thirds of the consumers, you have the Lebanese expatriates and you have the Arab residents. When you talk about the luxury segment, you have perhaps 40–30–30 [distribution across these segments], because the purchasing power of the visiting Lebanese is much higher than the local residents. We have estimated that the revenues of a typical Lebanese residing abroad are four to five times higher than his counterpart here in Lebanon, so this directly affects the luxury sector.
The medium level [of the retail sector] has been really affected because of the melting purchasing power of the population. The luxury items and international brands have not been suffering because of the constant flow of visitors and expatriates. The number of tourists coming by land has drastically decreased, and it’s true that visitors from the Gulf states have decreased in number, but if you look at the purchasing ticket, it has stayed strong, which at the end of the day makes for a good sales volume in luxury products. The problem is the down periods are measured in months and the up periods are measured in days or at best in weeks.
E Are some shopping areas within Lebanon succeeding more than others?
Malls are becoming more and more important, and they are taking away some business from the traditional markets. You have typical streets in Beirut — I would say Hamra, Verdun, Ashrafieh [and] lesser-known areas like Mar Elias and Barbour. These areas are suffering because malls are one-stop shops. Parking is a terrible thing, so you are in a tough spot if you are a middle-of-the-road retailer on one of the streets of Beirut. On the contrary, you are in a sweet spot if you have a strong international brand and [are] located either in one of the known malls or in one or two streets in Downtown Beirut. So you have a matrix in terms of positioning and location.
E What does the Beirut Traders Association envision for Lebanon’s retail sector?
Our aim is to make Lebanon the showcase of the Arab world and the meeting point of trade currents between East and West. We believe that in the past, in the ‘60s and ‘70s, Lebanon actually played that role. So we see it as our responsibility to replicate this — trade is a traditional sector, but its interests have been overlooked, unfortunately.
E What specific legislation are you lobbying for to try and support retailers?
Subsidized loans have been awarded to the tourism, IT and agriculture industries. [Retailers] did not benefit from this at all. There was a misconception because [the government] thought that as traders our balance sheets mostly consist of current assets, which is not the case. We need to get subsidized loans on commercial investments. The cheapest boutique costs $3 million to $4 million. This is our single most important demand from the government. They bet on laissez-faire whenever it makes their case easier, but it will not happen spontaneously this time. You need to inject either some liquidity or maybe remove some constraints; give the economy more degrees of freedom. And it seems they are taking us the wrong way, because now we are negotiating the minimum wage and so on.
E Is it not difficult to get the numbers to back up your campaigns?
Data is very scarce. [The Beirut Traders Association] analyses the data, we do the number crunching and we face the government on behalf of the entire business community. As far as micro data is concerned… companies are not listed; most companies are family businesses and they don’t have any obligation whatsoever to publish their results. And then you have a banking secrecy law, which makes things even more difficult, so our aim is to try to find some proxies or some alternative ways. We need the data rather than the individual traders because… when we are bargaining with the government we need stronger data.
E What unique strengths does Lebanon have as a retail destination going forward?
The strong demand. [International shoppers] will keep coming because Lebanon has traditionally been the showcase for the Arab world. So even if it is small compared to Dubai and elsewhere, it is an elegant and sophisticated market. It is also perhaps a testing ground for the large companies, so they cannot afford not to be in Lebanon — not so much for the volume they will achieve here, but for the image. Being in Lebanon is important because Lebanon also is a trendsetter. As long as you have political stability, they will keep coming. We would like Lebanon to be a shopping destination for all seasons, and we will work hard toward achieving this goal.