Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
May 2008
Page i
Management briefing
May 2008
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Contents
Contents.......................................................................................................................................... iv
The Gulf............................................................................................................................................ 1
Turkey .............................................................................................................................................. 5
Syria ................................................................................................................................................. 8
Lebanon ......................................................................................................................................... 12
Israel............................................................................................................................................... 15
International News Services’ writers for this briefing are Paul Cochrane, in
Beirut; and Helena Flusfelder, in Jerusalem.
The Gulf
The sector has developed significantly over the past decade as denim wear,
and jeans in particular, have become as much a part of people’s wardrobe as
in Europe or the Americas.
Driving consumer habits towards buying denim has been the rise of advertising
and pan-Arab media in the region, which has increased the exposure of
consumers to western fashion trends, which is increasingly regarded as the
clothing style to adopt, particularly among young people. Television channels
such as Fashion TV Arabia are widely watched in the region, showcasing the
latest apparel modes – both western and Arab – while lifestyle and fashion
magazines are equally popular.
Denim sales have also been fuelled by recent significant changes to the
Middle East retail sector, with malls springing up throughout the region and
multinational retailers moving in to establish a presence in both its emerging
and wealthy markets. This has resulted in a greater emphasis on advertising
and marketing by international retailers such as Vero Moda, Topshop and
Aishti to not only introduce denim brands but also market seasonal trends
through multi-media campaigns involving billboards, magazines, radio and
television.
In the Levant and Turkey the internationalisation of the jeans market has
pushed local manufacturers and retailers to adopt aggressive marketing and
branding strategies to retain market share, as has been the case, for instance,
of Turkish brands Colins, Redstar and Mavi, and DX in Lebanon.
Equally, local manufacturers are producing jeans of similar quality and style as
the major brands but at a fraction of the cost, which is more suited to many
Middle Eastern consumers’ budgets. They are also attracting sales by
releasing a fast turnover of trends and styles, such as Boomer Jeans and
Hanaa Saleeba in Syria.
The region’s demographics are also playing their part in fuelling denim
demand. According to the World Bank, some 60% of the Arab Middle East’s
population is under 30 years old, a prime market for denim clothing retailers
and a reason for establishing strong brand presence.
But while such indicators point to a strong future for denim manufacturers and
retailers in the region, economic development in many Arab countries is
unequal. Lebanon, Syria, Egypt, and Jordan suffer from high unemployment
figures and low income levels that negate the required disposable income
levels for higher consumption. The looming spectre of political instability is
another factor that could impact on the growth of the sector.
Gross national income (GNI) per capita is equally low in the Middle East
(defined in this briefing as the Arab Middle East and North Africa, plus Israel
and Turkey), being US$7,000 according to the World Bank, even on a
purchasing power parity (PPP) level, with living standards being hit over the
last year by rising food and fuel costs. Nonetheless, despite such mixed
economic signals, the region is culturally very attuned to the fashion world,
said Elie Bejjani, commercial officer at Lebanese brand stores Aishti.
And despite low incomes, many people, particularly the younger sectors of
society, are willing to spend money on their appearance, which is generally
clean-cut for men and contemporary fashion for women, according to Charles
Arbid, president of the Lebanese Franchise Association.
And although the region is retaining many of its traditions, including clothing,
there is currently a mix of styles, with Muslim women who wear the hijab and
long overcoats or abayas often wearing jeans underneath. Men are also
moving away from a more conservative look, particularly outside the
workplace, towards jeans.
While the Levant, Syria in particular, and Turkey are manufacturing denim and
have stronger local brands – such as Colins and Mavi in Turkey and Hanaa
Saliba in Syria – the wealthier Gulf countries are another story. Manufacturing
is minimal due to higher wage costs and the region’s emphasis on service,
finance and energy-orientated economies, but with higher income levels retail
sales are booming. Textile sales in the Gulf Cooperation Council (GCC)
countries of Qatar, Bahrain, Saudi Arabia, Kuwait, Oman and the United Arab
Emirates (UAE) is estimated to be worth US$12bn, according to Motexha,
organiser of an annual textile and fashion exhibition in Dubai in the UAE.
Indeed, the Emirate of Dubai is at the forefront of retail growth in the GCC. It is
home to five of the world’s seven largest shopping malls and accounts for 30%
of the GCC region’s total retail space, according to Middle East consultancy
firm Retail International.
All major jeans brands – including Diesel, Levi’s, Pepe Jeans, Tommy Hilfiger,
Marlboro Classics, Guess, and Gap – are available in the UAE, as elsewhere
in the Gulf, namely Bahrain, Kuwait, Qatar and Saudi Arabia.
“There are about 20 major brands and many more of smaller stature, either
Southeast Asian or Asian brands, or even local Middle East brands,” said Sunil
Umapathy, marketing manager for Splash, part of the Landmark Retail group
in the UAE, which has 70 stores in the GCC distributing Lee Cooper and other
international brands.
Mid-range jeans are typically available in major European retailers in the Gulf,
such as Topshop, H&M, Next, Zara, Mango, Bershka, Stradivarius, Jack &
Jones and Vero Moda. High-end jean brands, such as Rock & Republic,
Earnest Sewn, Citizens of Humanity, Seven and True Religion, are sold
through outlets such as Saks Fifth Avenue, Harvey Nichols, S*uce, Aizone and
Ounass.
However, despite strong demand in the GCC for jeans, retailers say the region
is difficult to market outside of the mid-range to luxury denim sector. “The Gulf
is a good market but difficult at the same time. Dubai is a different market from
Saudi Arabia, and Saudi is different from Kuwait. Dubai is also a mixture of
cultures,” said Mohamad El Hajj, manager of retailer Moustache in Lebanon,
which distributes its own brand – DX – and sells Turkish brand CROM and
German brands Tom Tailor and Solid throughout the region.
“The expat population from Asia are moderate, the expatriate population from
Western countries go for more clean but quality looks, whereas the local Gulf
customers are the ones who experiment,” said Umapathy. “Denim wear has
come to its experimental best, from extreme skinny, carrot legs, totally
distressed, metal detailing, intentional seams and misplaced darts to
completely clean engineered looks,” he added. “The cross-utilisation of
elements in denim is the rage now.”
Customers typically buy four to six pairs of jeans a year, he said, ranging in
price from AED100 (US$27) for classic denims to AED170 (US$40) for treated
denim, although prices for luxury brands are the European equivalent.
In the ultra-competitive Gulf market, Umapathy said Splash brings out 500-600
styles of denim per season for its ten collections a year.
“Brand value exists everywhere, especially in the Emirates where most of the
popular brands sit under one roof, so you cannot escape the competition.
Nonetheless all customers are looking out for ingenuity and innovation in their
denims, so styling is the first pull,” said Umapathy.
Turkey
Turkey is the region’s denim powerhouse, being a key cotton producer, denim
manufacturer and exporter, particularly to its neighbours in the European
Union (EU), Russia and southwards in the Middle East.
Since the mid-1980s when international brands started sourcing product from
Turkey, the sector has rapidly expanded as domestic and external demand
has risen, with the value of Turkey’s denim sector estimated at US$1.9bn in
2006, according to the Turkish Clothing Manufacturers Association (TCMA).
The sector experienced 18% growth in 2004-2005, but saw growth drop to 7%
in 2005-2006 due to a decline in exports, which decreased by 8.6%, according
to the TCMA, following a surge in EU imports from China. But with a rise in the
value of the euro against the Turkish lira, in addition to EU and Turkish quotas
on Chinese imports, the sector has since rebounded, producing 195m m2 of
denim fabric in 2007, according to the TCMA. An estimated 52% of this
amount was exported.
Turkey’s denim sector took off in the early 1990s when the country went
beyond supplying its traditional markets in Germany by capitalising on the
post-communist opening of the former Soviet republics that neighbour Turkey,
such as Armenia, Azerbaijan, Georgia and ethnically related central Asian
republics such as Kazakhstan, Turkmenistan and the Kyrgyz Republic. Turkish
producers also expanded their presence in other international markets. Central
to this development was the introduction of international brands such as Levi’s,
which opened manufacturing facilities in cooperation with local manufacturers
in 1985. Other brands also started sourcing from Turkey, such as Italy’s Rifle,
Diesel, Armani and Miss Sixty, Germany’s Mustang and Hugo Boss, the UK’s
Next, Spain’s Zara, Sweden’s H & M, and American brands Lee, Wrangler,
Polo, Tommy, Guess, Gap, Mexx and DKNY.
Notably, the firms behind the leading brands also manufacture for the
internationals, with the Eroglu Group, which owns Colin’s Jeans,
manufacturing Tommy Hilfiger, Rodi Jeans manufacturing for Lacoste, and
Lotus Jeans manufacturing for Ralph Lauren’s Polo brand.
Mavi Jeans is also expanding internationally, reflected last year when the
company signed up Italian photographer Oliviero Toscani, the man behind
Benetton’s 1982-2000 campaigns, to handle its global advertising campaign. In
1994, Mavi Jeans sold 1.695m pairs a year, surging to 7m by 2005, with some
60% sold in the Turkish market. The remainder is primarily exported to Europe
and the US, where its jeans sell for US$60-200. Mavi said that by 2010, the
company plans to have a turnover of US$300m through sales in 89 countries.
International brands have still retained a presence in the market, with 36% of
Calvin Klein jeanswear made in Turkey. Other more expensive denim brands,
such as DKNY Jeans, which recently opened its first store in Istanbul, are
hoping to capitalise on the growth of the high-end clothes market in Turkey.
But while the Turkish denim sector is still enjoying strong growth, production is
in decline due to higher production costs, according to industry publications,
such as Tekstil & Teknik. Turkish manufacturers are instead outsourcing
production to neighbouring Syria, where wages are significantly lower, cotton
is subsidised and there is a free trade agreement between the two countries.
Egypt has also become a textile and denim hub for Turkish firms, utilising low
wages and qualified industrial zones that grant duty-free access to the US
market.
Syria
Syria’s economy and society are undergoing major changes in the wake of the
Government’s liberalising economic reforms and free trade agreements,
exposing it to the pressure of overseas companies that are keen to exploit
globalisation, namely in media and telecommunications, branding and
advertising. Such developments are having a positive effect on the country’s
denim manufacturers and retailers as domestic demand grows and exports
increase.
“In the last five years we’ve seen a lot of growth and a big difference in the
styles,” said Basel Shafik Zaghlouleh, owner and manager of brands Boomer,
Blue Shark, Carakal and Wanted, which are manufactured by a company
carrying his name. “There are now over 50% more brands, largely because it
is cheaper than before and there are a lot of factories. Style has also changed.
Before it was classic and now we sell all styles which are different every six
months, from low to stretch to wide.”
Syria has long been one of the region’s major cotton and textile producers and
manufacturers, with the textile sector accounting for 15% of the labour force,
30% of industrial GDP and 10% of exports according to Government of Syria
statistics.
But with Syria only opening up since 2001, the country has been relatively late
– compared to other regional competitors – in capitalising on its low-cost
labour force, cotton fields and proximity to Europe. Syria’s exports to Europe of
garments, including denim, are low at some EUR100m a year, according to the
financial publication Syria Report.
Although the denim manufacturing sector has expanded, and exports are on
the increase, the country’s denim sector has been slow in its capacity to switch
to market-orientated approaches and there is a lack of understanding of
consumer patterns in the European fashion market, according to
manufacturers speaking to just-style.
However, the country’s declining foreign currency earnings from its oil sector
has encouraged the traditionally leftist government to amend its five year plans
to further liberalise the economy as well as encourage diversification.
With changes to the investment laws, the Syrian clothing sector has become
less regulated, and the Greater Arab Free Trade Area (GAFTA), which came
into effect in 2005, has allowed garments manufactured in and imported from
other Arab countries to enter the formerly state-controlled and protected retail
sector.
The opening up of Syria’s economy has also been a boon for exporters.
Ahmed Rihawi, a denim manufacturer and wholesaler in Aleppo, the country’s
primary industrial base, said his sales were up 35% last year. “I sell some
500,000 m2 of denim fabric per month, with the excess sold to Pakistan,” he
said. Manufacturing more than 500 styles of jeans, priced at approximately
US$4.50 a pair, Rihawi sells to Europe, Turkey, the Gulf and India. With
employees paid up to US$150 a month, Rihawi said work was of a better
standard than in Egypt, where wages are as low as US$60 a month.
Cotton for Syrian-made denim typically comes from Syria, but also further
afield, such as from Pakistan. “All colouring and dying is done here in Syria,”
said Tamer. Registering 20% growth for his company last year, Tamer said his
best export markets were the Gulf, Egypt and Morocco, while Libya accounted
for 40% of exports. “We sell over 100 types of blue jeans, and have 200
different styles, differentiated by stitching,” he said.
With few people able to afford brand names, and consumerism still in its
infancy in Syria, “style is more important than the brand,” said Zaghlouleh.
Indeed, jeans sell for as little as US$4 on the street to US$10-20 in retail
stores.
Advertising and media are having an impact however, with Diesel the most
widely known (and most widely copied) international brand sold in Syria,
according to Zaghlouleh. Even for independent brands, designs are generally
based on the European style, and then re-worked locally. Like other markets
there is a differentiation between age and gender over style preference.
Retailers estimate some 50% of women wear jeans, with the remainder
typically more religious or conservative, preferring long skirts.
Mohamed Helou, owner of Style Fashion Retail, which sells some 12,000 pairs
of jeans a year, said Syrians were avid jeans purchasers. “Many young women
buy one pair a month, or even one a week, to keep in fashion,” he said.
Zaghlouleh said it was typical for Syrians to buy between three to four pairs a
year; although for young people, 12-15 pairs a year was the norm.
But despite strong demand in recent years for denim, inflationary pressure,
rising fuel prices and low salaries are impacting domestic sales. “The
economic situation is having an effect on sales, it’s a problem as people are
increasingly only buying necessities,” said Helou.
Lebanon
Beirut is struggling to hold on to its position as the fashion capital of the Middle
East due to political instability and the rising economic star of Dubai and the
Gulf. Up until the Israel-Hezbollah war in 2006, international and domestic
retailers and brands would market heavily in Lebanon during the summer
months, when over 1m tourists, particularly from the Gulf, would visit.
But with the country in a recession, and tourist figures down, retailers are
struggling to generate sales, despite the Lebanese penchant for wearing the
latest fashions. This is having a particular effect on retailers that have etched
out a niche selling brands that were relatively unknown outside of the Middle
East but became established due to being known in Beirut – brands such as
Crom, Daniela Tobler (DT), Even and Engine. Such mid-range jeans sell for
US$33-100 a pair.
“Lebanon is a difficult market for jeans as Lebanese want the brand and the
latest style, and I thought Crom – which I introduced from Turkey 15 years ago
– wouldn’t do well, as it’s not a big brand,” said Mohamad El Hajj, manager of
retail outlet Moustache, which distributes its own brand DX, and sells Tom
Tailor, Free So and Germany’s Solid. “I tried to build up the brand and created
models with specific details specialised for the market. I also offered to repair
jeans free of charge,” he added.
But although Hajj and others were able to establish a market niche for jeans
that was relatively unique to Lebanon, the political and economic situation has
forced companies to aggressively advertise.
“There are lots of brands and lots of publicity, but many brands are overpriced
as [they are] spending so much on promotion,” said Charles Arbid, manager of
Lebanese clothing retailer Rectangle Jaune and president of the Lebanese
Franchise Association.
Due to the unstable political situation, Hajj said he was selling jeans at 70%
off, or two for the price of one, following a 25% drop in sales over the past
year. “When a bomb [explosion] happens the market is down for two to four
days, as people are stressed and don’t want to buy anything,” he said.
Retailers estimate consumers buy two to three pairs of jeans a season. Every
season Hajj said he sells more than 100 styles of jeans based on a new
concept or trend, shifting an estimated 50,000 pairs a year at seven stores.
“Every season styles change as jeans are disposable. This year is basic with
plain stitching, but last year it was stitching, and before that destroyed or “dirty”
jeans,” he added.
Style has typically followed Europe, in both cut and regarding what population
segments are wearing what jeans. “Four years ago, denim started to be in
fashion in Lebanon, and is no longer seen as a utility, but with added value. As
a fashion item, sales of jeans are up,” said Arbid. “Men are more classically
dressed, and look for quality over design,” he added.
Elie Bejjani, commercial officer at Lebanese brand stores Aishti and Aizone,
agreed with Arbid. “In Europe there is a different mentality, using narrow and
fitted jeans, but the Lebanese have a more conservative look: boot cut and
regular. Also, American cuts don’t sell well here, such as the loose and baggy
fit,” he said. Jeans are also popular year round. “Lebanese men don’t like
shorts, linen or cotton trousers, so wear jeans, even in the summer,” Bejjani
added.
At an average price of US$190 a pair, with some 70% of sales to women of the
33,000 pairs sold a year, Aishti sells brands Gas, Seven, J & Company, True
Religion, Diesel, Rock & Republic, Armani Jeans, G-star and Citizens of
Humanity. Levi’s are banned in Lebanon due to the company’s alleged
financial ties to Israel, an issue that remains the hottest political potato in a
country riven with discord.
Lebanese women prefer European style cuts, said Hajj, although among
young women skin-tight, or ‘spray on’, jeans are also popular. “A lot of times
employees help women get the jeans on,” he said.
He added that the most popular brand was Diesel, followed by True Religion,
which was then reflected in the styles offered by retailers and manufacturers.
“Everyone copies the top brand, like Diesel, or last year G Star. I hope to do a
lot of marketing to shift to the American brands away from Italian, as costs are
in dollars not euros,” Hajj said, in reference to the Lebanese lira being fixed to
the ailing US dollar.
While high-end jeans not made in Lebanon are imported directly from
multinational retailers, low- to mid-level denim is typically imported from
Turkey. “Turkey has more professionalism than Syria, for dyeing and
everything else, but our designs are done here in Lebanon,” said Hajj.
The Lebanese textile sector has shrunk in the last few years due to higher
labour costs and a reduction in customs protection for textiles to 5%, but better
quality jeans are still manufactured. “We have the technique, of washing, and
especially at the finishing level,” said Arbid. “This is a new generation for
denim, to create a leisurely and casual product in a sophisticated way, and one
that cannot be copied easily.”
Israel
Zvika Lieberman, director of the textile and fashion branch of the Israel
Manufacturers’ Association, says that as of this year, there is largely “no
manufacturing, just retail of denim in Israel”. The Israeli-owned Polgat Jeans
factory, in Kiryat Gat, closed three months ago, leaving the country without a
denim producer.
“No one is making denim here. There are a few small manufacturers buying
denim from importers. Most of the denim is imported from the Far East,
especially China, the ‘Silicon Valley’ of textiles in the world,” Lieberman said.
Gidi Goldfinger, CEO of Concept Shivuk, which operates the Lee Cooper
fashion retail chain in Israel, said the leading brands of jeans in Israel are Lee
Cooper, with 38% of the Israeli market in 2007; Crocker (a local brand) with
12%, Diesel with 10%, Lee and Levi’s with 5% each, with the remaining
companies – Angler (Wrangler), PepeJeans and others – holding less than 2%
each. Of this market, 98% of the denim sold consists of jeans trousers, (in
2007) with just small amounts of denim jackets and other items, according to
Goldfinger. He estimated the turnover of these brands’ sales in Israel at
US$150m.
“We buy the fabric in Japan and South Korea, manufacture the denim in
China, Turkey and Morocco, and cut, sew and wash [the jeans] in China. The
main issue is the professionalism of the laundering [of the jeans]. The
professional aim is to achieve the effect of the jeans looking old.” Lee Cooper
imports denim every month, owns licences in Israel and the Far East and
distributes it to its 58 shops in Eastern Europe. The company owns 45 shops