All that glitters
Luxury goods retailers have enjoyed a mixed bag of success over recent months, but show no signs of losing faith in the Lebanese market.
Money, they say, can’t buy you happiness. But few would disagree that it can buy you beautiful things, and fewer still that many beautiful things can be bought in Lebanon.
Whether it’s Swiss watches, French fountain pens, haute couture fashion or Italian-made private yachts, luxury goods have traditionally boasted an impressive record of success in a market with an insatiable appetite for high spending
Today is fundamentally no different. The influx of wealthy Gulf tourists and the redevelopment of Downtown as the natural habitat of high-end brands has ignited a lucrative retail boom in recent years, with Beirut inking its name back on to the regional circuit.
Yet while Lebanon has plunged into political uncertainty and economic stagnation over the last fourteen months, other retail centers – especially Dubai – have been sullying Beirut’s crown as the king of luxury retail in the Arab world.
At the heart of the current difficulties is struggling consumer confidence and a drop-off in the numbers of affluent tourists, but distributors and agents are not giving up on the Lebanese market. For those who don’t faint at the price tag, Beirut’s shelves are still stocked with goodies.
Buying time
A classy timepiece has always been a symbol of status, which is probably why expensive watches are so popular in this part of the world. According to Global Refund statistics, watches and jewelry are the second most-bought item by duty-free shoppers in Lebanon, with only fashion and clothing selling more per year in terms of value.
With no home-grown Lebanese brands, distributors ship in and sell foreign makes of high-end watches. Switzerland is still the world’s most prestigious horological centre, and it’s telling that a disproportionately large 4% of Lebanon’s imports, according to customs statistics, originate in the tiny land of chocolate and cheese.
Unless traders in Beirut have been buying up some particularly expensive Gruyere, it seems reasonable to assume that the $423m of Swiss imports in 2005 was largely made up of jewelry and watches. And although Swiss imports seem to indicate a slowdown, only growing by 6% over 2004-5 compared to 82% over 2003-4, some retailers insist that the market is still there.
“Demand in Lebanon is actually outstripping supply for watches with complications,” says Zeina Kahwaji, General Manager at the Cadrans watch and jewelry boutique in Downtown. “Most of the luxury brands we distribute, let’s say Patek Phillippe or A. Lange & Sohne, are only produced on a limited basis. If we had more watches available, I’m confident we could sell them.”
For the priciest category – hand-made mechanical watches with complications – the market is made up of chiefly of Lebanese connoisseurs or collectors. “These are people who know what they want in advance, and are prepared to pay for it,” says Kahwaji. “They don’t just wander by the shop and walk in to buy a watch.”
To acquire one of these, which boast complications like perpetual calendars or moon-phase dials, buyers can expect to part with upwards of $10,000. Some brands don’t even bother producing steel watches, but go straight to gold to please the refined tastes and deep pockets of their clientele.
Not all of these precision instruments are flying off the shelves, though. Ziad Anan, whose Rolex boutique in Downtown is the official distributor of the brand, says that business has not been easy since he opened his doors in 2004.
“It’s too early to assess performance yet,” says Anan, “but the political situation since Hariri has clearly had an effect. Having said that, there’s a huge potential as far as luxury goods go, and many brands that were previously dormant have been reinvigorated and rebranded over the last few years. At the moment the influx of cash is almost all in real estate, but that’s indicative of future potential for tourism and retail. The market still has to mature.”
Other watch dealers tell a similar story, with several citing the extra problem of full or partial counterfeiting – something Anan describes as “rampant”. Still, anyone with the money to buy a $10,000 watch is presumably more interested in the genuine quality of the real thing than a cheap copy for the sake of the name.
Jewel in the crown
Watch-making may not be a Lebanese forte, but jewelry certainly is. Famous names like Mouawad, Tabbah or Chatila began trading in the 19th century, before moving their operations to Switzerland when civil war broke out in the 1970s. Although the domestic market here is now just a tiny fraction of their global reach, these renowned brands have put Lebanese jewelry on the map.
The retail market in Lebanon is estimated to be worth $350m annually, and employs some 4000 people. Exhibitions and trade fairs like Joaillerie Liban help to maintain Beirut’s image as the leading jewelry centre in the Middle East, as well as showcasing the most dazzling creations of local jewelers.
Whereas the watch market hinges largely on Lebanese clientele, some jewelers say their case is different.
“For top-end brands, like Piaget or Van Cleef, we’re especially reliant on clientele from Arab countries,” says Kahwaji. “But for all kinds of jewelry, these clients provide more business than the Lebanese.”
Some jewelry houses in and around Beirut have a privileged personal relationship with Gulf families who make specific trips to Lebanon to purchase custom-designed jewelry for a special occasion, whilst other high-class retailers feed off the tourist business generated in Downtown.
Consequently, the pickings from the summer and holiday seasons of 2005 were comparatively poor for some. One Lebanese jeweller which manufactures its own brand of fashion jewelry in cost-efficient areas like South America and Asia before shipping it in to Lebanon, reported a double-digit drop in trade over 2005. Whereas sales in Ashrafieh remained relatively strong, they said, business in Downtown and Verdun declined markedly.
Others are more upbeat. “Jewelry is a luxury item and so isn’t usually as influenced by the day-to-day political situation,” says Carole Rouhana, manager of Antoine Hakim stores. “For the Tiffany & Co brand, we’ve only seen a small drop in turnover due to the instability. I still think the market is promising. Buyers will keep coming here for our jewelry because we have more European tastes and styles than Dubai, for instance.”
Smokes and drinks
Of course, not every luxury item is something to hang on to forever. There are plenty of moneyed clients willing to shell out for pricey everyday consumables – of which one is particularly obvious.
“Lebanon is the best market in the region for cigars, and one of the best in the world”, says Wael Zeidan, Executive Manager of Phoenicia Beirut, which runs the La Casa del Habano cigar stores. With the airport cigar shop selling a remarkable 100,000 boxes every year, Lebanon counts itself as one of the top ten cigar-consuming countries in the world.
“Of course there’s a penchant for Cuban cigars here, but I would say that only around a quarter of buyers are proper connoisseurs and know what they’re doing,” says Zeidan. “Even fewer actually have their own humidors and know how to preserve a cigar correctly. For most people, it’s all about appearances.”
Cuban cigar prices in Lebanon are amongst the cheapest in the world, which also aids sales. Zeidan says the average cigar only costs around $7, with more expensive brands reaching up to $30 each.
One of these might be well accompanied by a swig or two of fine whisky, another product which has a reputation for doing good business in Lebanon. For drinkers seeking something more special than the usual fare lining the shelves of Spinneys or Monoprix, Chivas has just released a blend called “Royal Salute Stone of Destiny”. This 38 year-old tipple costs a whopping $1700 per bottle – or rather, per porcelain flagon with 24-carat gold-plated crest.
Float my boat
Watches, jewelry, cigars and whisky are one thing, but those wanting to make an even bigger splash in the retail pool should really consider a private yacht.
Dealers and agents in Lebanon for mainly European-made luxury yachts say that most buyers are wealthy Lebanese families (and a few politicians) with money to burn. Business is done through personal contacts, with most owners choosing to moor their floating chateaux at La Marina Joseph Khoury in Dbayeh.
Beirut Boat, the annual trade fair and exhibition in Lebanon for all things nautical, is scheduled for May 17-21 at the BIEL complex and promises to show off all the latest in seafaring decadence.
According to some dealers, though, the good times are drying up. “In 1994-5 the market was booming,” said one agent, who asked not to be named. “At that time I sold around 15 yachts a year. Then from 1997 onwards it started to decline. In 2004 I only three sales, but since February 2005 the situation has been so bad that I haven’t even sold a single boat.”
Others say that Lebanon is not an easy place to import boats. For a start, the exchange rate between the Lebanese pound and the Euro had long encouraged potential buyers to make their purchase in Europe and then bring their yacht across to Lebanon.
Second, although any boat over 15 meters long is not tax-applicable, a 10% VAT charge is imposed as soon as the yacht is imported into the country – a considerable sum given that a Lebanese buyer will shell out around $6m for a 30-metre yacht, and up to five times that for something bigger.
Even this is small change, though, compared to the ultimate luxury accessory – the private jet. For the growing number of companies and ultra-wealthy individuals choosing to fly in the comfort of their own planes, prices start at around $4m for an entry-level Learjet. Above that, the sky’s the limit.
Private jet activity is estimated to account for 10% of total traffic at Beirut’s airport, with this figure more than doubling in the summer months thanks to the stream of moneyed tourists flying in from the Gulf. Lebanese demand for private planes is relatively weak, according to one dealer, but more and more corporate clients are instead opting to charter planes – so-called “air taxis” – for their tailor-made trips.
Looking ahead
All this is only the tip of the luxury retail iceberg in Lebanon, which extends to high-end fashion, sunglasses, cars, pens and much more.
Although most of these retailers are finding life difficult at the moment, with low consumer confidence and a prevailing sense that now is not the right time to indulge in extravagant purchases, there is a long-term belief that more clement times will return.
The short-term economic climate may be uncertain, and the threat of increased VAT may loom large, yet none of these high-end retailers are planning to abandon the market. Some are even intent on expanding. Kahwaji, for instance, says that she ultimately plans to open separate boutiques in Downtown for each of the brands distributed by Cadrans.
If this optimism is justified, then expect to see even more over-the-top opulence on the streets of Beirut.
