By  on July 6, 2015

PARIS – If the Instagram account of “The Rich Kids of Tehran” is an indicator, Iran’s population is more than willing to embrace what’s ahead of them once – and if – the West's economic and political sanctions against the country are lifted: An at once passionate yet erratic consumption of Western goods.“We ride German and Italian wheels and dress Chanel, Gucci, Louboutin and Tom Ford,” the account’s authors boasted a few months ago, showing off their BMW i8 sports coupés, despite a 110 percent import tax on foreign luxury cars. They also posted pictures of themselves enjoying French croissants and American pancakes at Sam Center, their favorite mall, or taking a break from whatever their jobs are on Kish Island, a free trade zone on the country’s paradisiac south coast, dubbed as Dubai’s rival.The site was reportedly censored by the Iranian regime — before it went live again.Although the “rich kids” are arguably a minority, it shows that the potential for fashion design and luxury in the region is considerable.“Iran is a market of 80 million people. It’s a very young population and both men and women are very fashion-oriented. There is a significant opportunity,” said Rouzbeh Pirouz, chairman of Turquoise Partners Group, a consulting agency that advises a fleet of Western companies interested in taking the leap beyond arguably one of the last remaining frontiers.The key, of course, will be whether Iran and the West can reach a deal over the Middle Eastern nation's nuclear development program, with the latest deadline in the long-running talks set for Tuesday. Even if a deal is finalized, the next question will be how quickly the West will agree to end the sanctions that have crippled the country’s economy for decades.“We believe there is a high likelihood that the negotiations will bear fruit,” Pirouz noted, expecting sanctions to be lifted within four to six months after an agreement has been reached.The time is certainly ripe.This year, the economy is set to grow by 3 percent, while inflation is down significantly from 45 percent two years ago to 15 percent currently.Turquoise Partners has been approached by Western companies from various sectors. For now, “dot-coms are on top of the list, followed by the hospitality sector and pharmaceuticals,” according to Pirouz.According to market sources, there are two kinds of retail in Iran: official and unofficial. On the official side, brands such as Benetton, which runs its own stores, and Salvatore Ferragamo, which is distributed via luxury multi-brand boutique Alijenab, are already doing business in the country.“We have been present in Iran since 2006,” a spokeswoman for Benetton told WWD. “We were truly a pioneer in this regard, and it [has become] our competitive advantage among the other foreign brands aiming to invest in the country. As of today, we still have 24 active sales points all over Iran run by commercial partners, in Tehran and all the other major cities.”A spokeswoman for the Salvatore Ferragamo noted that “in line with its pioneer spirit, the group watches this market with careful attention and interest to understand which opportunities could be grasped in the future.”On the other side, there are stores, mostly in the fast-fashion category, which are labeled as Zara or Massimo Duti but are not affiliated with their namesake labels. Inditex confirmed that it has “no retail activities in Iran, neither through a direct subsidiary nor through a franchise agreement.”“Basically, there is guy who goes to Dubai, brings a bunch of goods from those labels and resells them here,” a source told WWD.Luxury goods, meanwhile, are often copies.According to market sources, LVMH Moët Hennessy Louis Vuitton and Kering have been putting feelers out in the region. Iran is definitely on the two companies' radar, a source said, but added the groups were “still in an exploratory phase.” No suitable locations for retail have been identified nor has it been decided which brands would open a store there and under what type of format or agreement.The luxury goods most accepted by the conservative Muslim regime are watches, said Allan Kellenberger, who has been researching the region for eLocations, the Swiss-based retail real estate platform. “They are not considered immoral, are less flashy and favored mostly by the male customer. That said, if an entrepreneur wants to be taken seriously, you will need an expensive watch and matching car,” Kellenberger observed, citing Omega and Zenith among those brands already doing business in Iran.Leila Yavari, the Tehran-born, Los Angeles-raised chief buyer of Stylebop.com, said, “Iran has many different faces, it’s not a homogenous mass, it’s not an Arab country. Sixty percent are under 35 years old, it’s a civil society, very well educated, very wealthy. Of course, there will be some nouveaux riches, which will need educating, but in general people are hungry and desperate for luxury. They don’t know what to do with their wealth, and that’s a huge opportunity for the brands. There is also a lot of visa restrictions, so it’s clear that the domestic market would benefit the most.”If the sanctions get lifted, she predicted, it will be the end of an era. “Remember how people were saying ‘Coca-Cola is sitting on the wall’ when the Berlin Wall came down? That’s what it feels like in Iran,” she said.Yavari said she learned about Hermès and Yves Saint Laurent through her mother when she was still a little girl. “In the Seventies, Iranian women were among the most fashionable in the world. Any wedding or party used to be like a sea of Chanel. Iranians are very Francophile, they speak French and are interested in the French maisons,” she explained.But Yavari noted that for an online luxury retailer like Stylebop.com it would be a longer road ahead, hampered by the regime’s Internet censorship. “Technically, all you need is logistics and a local partner, but Iran has some of the most sophisticated censorship in the world, we don’t see images of women showing a lot of skin, and fashion per se is about promiscuity. We would have to wait and see how much the government will allow. We would probably have to create special content for the local market," she said.Foreign brands are currently prohibited from advertising on TV, and though billboards and magazines are exempt from the rule, it is more expensive for foreigners to show off their products, according to Turquoise Partners.Yavari said the younger generation in Iran turns to Turkey for pop culture. “Turkish TV series are extremely popular. Women look to Turkish stars for images of how to do their hair and makeup. It’s a very interesting phenomenon,” she said.According to Euromonitor, women aged between 20 and 40 years old accounted for almost 20 percent of the Iranian population in 2014, or 14.9 million people.“Wearing makeup on a daily basis has become a common practice for the majority of them, especially in urban areas where young women consider putting makeup on as an essential activity before leaving the home,” the researchers argued.Low-priced products in attractive packaging are especially growing in popularity, according to Euromonitor, though “these are usually counterfeit products imported from China, South Korea and Turkey.”The leading brand in 2014 was Meisam Atr Azad Chabahar’s Bourjois, accounting for an 11 percent share of value sales.Kellenberger of Swiss eLocations noted that wooing the lower middle-class Iranian customer will be as interesting as attracting the wealthy.“In Tehran alone there are 20 million people, not all of them are wealthy. We see a lot of potential for mass market brands, especially in beauty, such as Kiko, for instance. Once the sanctions fall, there will be a boom in the Iranian economy, which is already very diverse unlike that of its neighbors – there is not only oil, but strong agriculture, cement and automobile industries," he said.Kellenberger argued that the reason why Benetton is flourishing in the region is because the Western label is considered “affordable luxury” by Iranians.He still discourages brands from going into the region without a local partner that can advise on the right mall, of which there are some 65 in Tehran alone, and help navigate through the local bureaucracy.“An elegant high street does not exist yet, so you want to make sure you get into the right shopping center,” he said, citing Sam, Palladium and Golestan as potential new homes for Western labels.Rents stand at about $500 a square meter, depending on the location, with Northern Tehran distinguishing itself as the chic part of town, boasting its own ski resort.“Tehran in particular is well known for the interest it shows in designer bags, clothes, beauty and makeup. This trend has been a feature of Tehran before and after the Revolution as women want to look good and to make sure they look good in front of friends and family members,” said Rachel Codd, contributing analyst at Euromonitor International, forecasting that the country's luxury and beauty industries are likely to continue to grow and remain big businesses.The research group estimates that the market value of apparel and footwear stood at $8.1 billion in 2014, having surged 51 percent over a one-year period, while beauty and personal care stood at $3.5 billion, up 29 percent year-over-year.“Shopping is the Iranians’ favorite pastime when they travel to Dubai or Istanbul for holidays. They are extremely eager to get the same experience in Iran,” said Ramin Rabii, chief executive officer of Turquoise Partners, quoting not only fashion but also shopping in Western-style convenience stores as a success story.“Carrefour’s Hyperstar in West Tehran is one of its most visited shops in the world,” he said. “People stay until 11 p.m. They prefer it to the traditional corner stores.”According to Turquoise Partners, the biggest challenges of doing business in Iran – aside from the sanctions – are the devaluation of the Iranian currency, which renders goods three times as expensive, and high import tariffs on clothing, making it accessible “to perhaps five percent of the population,” an unfortunate situation, given the fact that the country’s middle class is large and growing.“It may be looking traditional to outsiders, but inside it is following Western trends. A typical Iranian family lives in the city, has a car and flat-screen TV, and is very similar to the Lebanese in their consumer behavior. Chanel, Louis Vuitton, Hermès, Burberry are highly valued by clients. Iran is an ancient civilization with a long tradition in fine craftsmanship and art. There is a reason why traditional and contemporary Iranian art trades high at Sotheby’s and Christie’s. There is an artistic sensibility here,” Rabii added.

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