Walk into one of the discount retail stores in Hamra or Furn El Chebbak and you will end up elbowing other shoppers to reach the display. It is a similar picture if you take a stroll to the Sunday flea market next to the Beirut River, where throngs of people hunt out the best bargains. But walk into a luxury goods store and you are likely to be one of few clients there.
Nicolas Chammas, head of the Beirut Traders Association, estimates that consumption in Lebanon is down by 5 percent, a significant percentage considering that, according to Chammas, consumption fuels 85 percent of gross domestic production. “The economic stagnation has affected all categories of products since tourists and expats avoided visiting Lebanon,” says Mher Atamian, managing director at Est. Hagop Atamian, a distributor of luxury and medium end watches in Lebanon.
Across Lebanon retail shops are closing down, with Chammas citing closures in Hamra, Verdun, Ashrafieh and downtown Beirut. “Even though Beirut has always had the largest share of the volume of watches sold, we rely on cities such as Tripoli, Zgharta, Sidon, Tyre and the Bekaa region in order to sell a good quantity of watches. However, this year some of these areas have really struggled due to the political situation,” says Atamian.
As in most other service sectors of the Lebanese economy, the retail sector’s bleak situation has been aggravated by the decreased purchasing power in the local market. This has affected almost all categories of retail, from durable items such as consumer electronics and furniture to fashion items, with the notable exception of staples and food, which have been positively influenced by the influx of Syrians residing in Lebanon.
According to Chammas, luxury goods were the most affected with Atamian admitting that growth was hard to achieve during these difficult times, but that they managed to introduce some imported brands to their midrange segment, which helped maintain their figures close to those of last year.
Local designers have also seen the dwindling sales in the local luxury market. Luxury furniture designer Nada Debs says she exports 65 percent of her products and blames slow sales on the lack of tourists and the poor economy, as well as the low footfall in Saifi Village where her boutique is located.
Chammas explains that as purchasing power among Lebanese decreases, a downward spiral effect is created, whereby those who could afford luxury products before the crisis migrated to the medium end of the market this year. Azadea, a Lebanon based regional retailer with more than 25 fashion and accessory brands and 90 stores in Lebanon alone, can attest to this. “2014 was a year of rapid expansion for Azadea and we can report a solid performance throughout the year, appealing to a wide audience of different tastes, styles and age groups,” says Aline Chabenne, the company’s country manager.
Chabenne explains that in times of economic crisis it is important for prices and products to remain competitive. She cites several strategies of affordability and good services to help their clients, including a dedicated customer service department, ongoing activities and promotions, and the Qanz — a gift card that can be used in all brand stores that are part of Azadea.
Creating an incentive for customers to shop has become a necessary tool for all retailers, and text messages offering all sorts of promotions and games have become common. “Our sales haven’t decreased by much when compared to 2013, however our profit margin has been affected considerably due to the various extra marketing promotions we did compared to previous years,” says Atamian, explaining that they offered incentives and discounts during various holidays, such as Mother’s Day or Valentine’s Day, to encourage people to buy.
Just as many migrated from the high end goods sector to the midmarket, those who were barely able to afford the midmarket found themselves sliding to the lower end of the retail market. This is the sector where you see the most activity, according to Chammas. “The low end sector, although it does not amount to much in global retail performance, is what is keeping a drastic situation from being deadly,” he says.
Shops like Eldorado or Big Sale, which offer all sorts of items at low prices, witnessed increased activity in 2014. More than 100 customers enter the Big Sale outlet store in Furn El Chebbak every day, and around half of them buy fashion items for their children or for themselves, according to the manager on duty.
Despite the bleak situation, retailers are still going ahead with their plans. ABC plans to open a mall in Verdun in 2017 and Azadea is introducing two new brands in 2015, as well as expanding its network of stores. Bets are on for an immediate and palpable improvement of the retail sector once the internal and regional security situations stabilitize.