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Benetton Stores Attack in Iran May Unsettle Investors

By Arash Hassan-Nia, Tehran (Source: Mianeh)

The rallies outside foreign embassies in protest at the bombardment of Palestinians in Gaza have now dispersed, and the traffic news broadcasts on Tehran radio have stopped announcing the blockage of streets in the capital caused by crowds of angry students from the Basij movement.

As the demonstrations gradually fade away, the only visible sign that they ever happened is the burnt-out ruins of the Benetton store in Dolat Street in northern Tehran, and three other branches that have closed in other parts of the city.

There has been no official news about the fire. According to eyewitnesses quoted by the Baztab website, police said the reason why these other shops were closed was that "the Italian owners of the Benetton company are Zionists".

There are fears that these events will prompt some of the companies that have already invested in the clothing retail market, fashion design, and other consumer goods markets or were planning to do so, to withdraw from Iran. It is an attractive market - 70 million people, and demographically the youngest population in the world.

If they go, they could be replaced by non-European firms, particularly from China.

The arson attack and the compulsory closure of the other three Benetton shops will have come as particularly unwelcome news for the British retail chain Debenhams which had recently expressed an interest in setting up in Iran, and has been designing and fitting out a store in the centrally-located Mirdamad Street.

Debenham's international manager Francis McAuley has said the shops will sell clothes designed by designers such as Jasper Conran and John Richmond, offering Iranians a chance to dress according to the latest global fashions.

Apart from Debenhams - a brand that is well regarded by young Iranians - the Spanish women's clothing chain Mango has announced plans to open in Tehran and Kish Island simultaneously. The launch was planned for the end of 2008, but has not yet happened. More important than the date is the question of whether the Spanish retailer will downscale its ambitious long-term planning, which envisages ten more branches in major cities like Isfahan, Shiraz and Mashhad within the next five years.

The colourful windows of brand-name clothing shops, many of them international names, suggests that fashion wear remains in high demand among young Iranians, despite the poor state of Iran's economy and spiralling inflation.

A walk through the Milad and Tandis shopping centres in western and northern Tehran, respectively, reveals that most famous clothing brands are on sale. Even American brands such as Nike and Tommy are there.

Levi jeans at more than 250 US dollars a time and T-shirts priced at over 70 dollars are costly items, especially in a country where the average annual income is under 8,000 dollars, but demand is high among younger customers.

Most of these shops are not official franchises, but as one manager pointed out, they do their best to use only authentic brands.

A salesman in a shopping centre in Vanak, north Tehran, insisted his company was taking steps to formalise its relationship with the well-known American firm that makes the clothes it sells.

"We are not formal representatives yet, and we're still importing our goods through Dubai. However, the [US] company has told us that if we manage to sell a million dollars' worth of their clothes, they will give us the franchise next year," he said.

Although many store owners regard themselves as main dealers for these brand-names, the price tags on the items on sale - in Turkish lira and United Arab Emirates dirhams - reveal that these neighbouring countries are the primary source for wholesale purchases, and suggest that some clothing is smuggled into Iran.

A senior official in the ministry of commerce says only a couple of famous brand-name firms have taken steps to obtain an official license to operate in Iran.

Formal importers and official company branches account for only a tiny proportion of the huge market for foreign brands. The rest is in the hands of informal importers and illegal smugglers.

Commerce ministry figures indicated that in the past nine months, clothing worth around 11 million dollars entered Iran through legal channels. That is far less than the value of such goods now on sale in Iran.

Given the premium price tag attached to genuine brand-names, there is also a flourishing market in fakes, some of them manufactured inside Iran with the "right" label attached.

President Mahmoud Ahmadinejad has urged Iranian manufacturers to build up their own reputation to displace foreign-made clothing on the domestic market and start exporting abroad.

"In future years, we must work towards making foreign-brand clothing redundant in the Iranian market, and take Iranian clothing to the forefront of the global market," he said at the recent inauguration of a major clothing manufacture in Ardabil, in northwestern Iran.

That is likely to be an uphill struggle, given the popularity of Chinese-, Turkish-, and Korean-made clothing, not to mention the likes of Mavi, Giordano, Buccini, Hang Ten, Puma, Adidas, Zara, Tommy and other western brands, which suggests Iranian are picky about what they buy and are prepared to pay for it.

Arash Hassan-Nia is a journalist in Tehran

... Payvand News - 01/17/09 ... --

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