Lebanon’s luxury market could drop by up to 10% due to ongoing turmoil in Syria
The ongoing turmoil in Syria, Lebanon’s second trading partner, has already translated in major drop in Lebanon’s GDP growth estimate by the IMF, from 7% last year to a mere 1,5%. Tightened restrictions by the U.S. and E.U. on Syria have had an indirect negative on major Lebanese banks with operations in Syria. Analysts estimate that traffic by land into Lebanon from Syria, especially from countries such as Jordan has more than halved since the debut of the chaos on Syria.
According to CPP‘s research, wealthy Syrians represented as much as 20% of the luxury consumer base in Lebanon, the local luxury market in Syria being underdeveloped, with few international luxury brands represented, most goods overpriced and from outlet stocks.
The uncertain regional economic environment is likely to be reflected in a decrease in foreign investment, especially from the GCC countries, which could result into a drop in corporate travel traffic too. GCC nationals who travel to Lebanon for business represent another important luxury consumer target for the Lebanese luxury market. The Lebanese luxury sectors which are likely to see a drop in sales in the mid term are: fashion, accessories, jewellery, watches and cars. Luxury hospitality is one of the few sectors of Lebanon’s luxury market which are less likely to be affected in the mid term, corporate traffic remaining strong and demand still exceeding current offering.
The volatility of Lebanon’s luxury market, especially in the fashion and accessories section is also heightened by the over-expansion of international luxury brands, CPP’s research revealing the potential of sales to locals is in contrast with the mono-brand representation of most of the international luxury brands which have rushed to open in Lebanon, most openings occuring in the past 2 years. CPP estimates that actual potential of the Lebanese market does not justify mono-brand representation for more than half of the new openings. Examples of such openings of more niche brands : La Martina, Tom Ford, Paul Smith, Stefano Ricci, Celine.
Mention should also be made that, with the exception of Louis Vuitton and Hermes, all major international luxury brands have expanded in Lebanon through franchising, two retail operators, local Aishti and Dubai based Luxury Clothing Company. Costs of opening mono-brand franchise stores range from 500.000 euros for up to 2 million euros for a 200 sqm store, therefore, the earliest feasible break even cannot be estimated before four to five years from opening.