MARKET FOCUS - The promise of Iran - Obstacles and opportunities: the advice of an Iranian distributor


MARKET FOCUS - The promise of Iran - Obstacles and opportunities: the advice of an Iranian distributor
Europa Star WorldWatchWeb, 26 October 2016    Español

Massoud Zomorrodian, today aged 76, is one of Iran’s longest-standing watch importers. His father and grandfather were watch merchants before him, and the fourth generation has now taken up the reins of the business with his sons, Ali and Hadi. The President of T. Zomorrodian & Co. has imported pocket watches, mechanical watches, quartz watches, fashion watches and smart watches.

MARKET FOCUS - The promise of Iran - Obstacles and opportunities: the advice of an Iranian distributor

In Iran, most watchmaking boutiques are run by independent retailers or families who have a strong sense of tradition and watchmaking values! A far cry from the standardised chains of stores floated on the stock exchange… Now an agent for Swiss brands such as Alpina, Frédérique Constant, Louis Erard, Atlantic Watch, Cover Switzerland and André Mouche as well as several fashion brands, he has positioned himself in the mid-range, with boutiques in Tehran and Shiraz as well as distributing to more than 110 outlets all over the country. Massoud Zomorrodian has seen a lot during his long career: the effects of the Second World War on Iran, the time of the Shah, the 1953 coup, the 1979 Islamic Revolution, the long war with Iraq in the 1980s, various international sanctions – right up to the agreement on Iranian nuclear power in early 2016! And we complain about geopolitics in Switzerland! He is also a frequent visitor to Switzerland, having paid his 100th visit to the country at the occasion for Baselworld 2016.

“Iran is the second-largest economy in the Middle East and one of the 25 greatest world economic powers,” the distributor reminds us. “We’re currently seeing major changes in this market of around 80 million people. Swiss, European, Japanese and Chinese brands have already been around the corner for while, but only now are some representatives of their top management paying a market visit. The foreign subsidiaries of American brands are allowed to directly sell Swiss-made or Made in China watches to Iran as well However, American companies themselves are not allowed access to the Iranian market directly. The core of the agreement is therefore to allow their subsidiaries to sell products in Iran that haven’t been produced in the United States. But for Swiss companies, there’s no risk whatsoever.”

Massoud Zomorrodian
Massoud Zomorrodian

Foreign investors are going to grow in Iran, Massoud Zomorrodian believes, hence when the market develops and the economy opens up, Iranians will have more money to spend in their own country to buy watches. Here is his advice on the limitations, opportunities and essential points you have to be aware of before any launch on the Iranian market or re-planning. “In reality, almost all famous watch brands are already present in Iran, but they could be far better positioned. Training courses should be organised and the demand encouraged. My recommendations aren’t based on theory or a university thesis, but on my professional experience of more than half a century!”

LIMITATIONS

  • SMUGGLING: “Iran has very extensive borders and many products circulate illegally, including watches.”
  • REGULATIONS, CUSTOMS DUTIES AND TAXES: “These are not high on paper, but added to them are numerous aspects and constraints: mismanagement, corruption, unclear regulations, etc. For example, if you’re shipping with an airline that is not Iranian, it will cost you ten percent more. Customs might seize watches for so-called “laboratory” tests. You may have to pay VAT twice.”
  • FAKE WATCHES AND PARALLEL MARKETS: “This is the most serious problem in watch business in Iran. Fake watches, most of them made in China, are everywhere in Iran. The grey market is big too, especially for watches from Dubai. The phenomenon is such that we’re forced to provide after-sales service for watches from parallel markets.”
  • OEM/ODM BRANDS: “You see some Swiss Made, Swiss Movement, Swiss, Swiss Design or Japan Movement watches in Iran which you do not see in any other country, they copy the best sellers of other brands and make their own collection.”
  • EXCHANGE RATE FLUCTUATIONS: “Iran is the world champion of fluctuating exchange rates, which has ruined many businesses.”
  • ECONOMIC PROBLEMS: “These remain, as a result of the international sanctions, but also because of bad management by the government. Iran is a rich country, but an unstable market. Regulations can differ significantly from one day to the next.”
  • PURCHASING POWER: “This is not comparable with that of the neighbouring countries. Arab countries are rich and have much more tourists and foreign workers but far smaller populations. In Iran, the gap between the rich and the poor is very wide. It’s even growing. At the same time, Iran has a much larger potential economy than many of its neighbours.”
  • TRANSFERS: “Direct payment is not possible. Indirect payment through exchange offices is possible and easy, only USD can sometimes be complicated. For payment to public listed companies it is necessary to sign official anti-money laundering documents. Payments in Swiss francs are less subject to the risk of being blocked.”

OPPORTUNITIES

  • BUSINESS POTENTIAL: “This is very clear, that is why despite the heavy sanctions, nearly all famous watch brands are already represented in Iran. I am not talking about coming to Iran, I am talking about re-planning the level of presence in Iran.”
  • PROFESSIONAL BUSINESS INDIVIDUALS: “Iranians are trustworthy, honest and professional merchants. It’s been a key hub of trade since the days of the Silk Road! I’ve been working in the watch business for more than 50 years and I’ve been able to survive many difficult market situations thanks to this business loyalty.”
  • SWISS-MADE: “The ‘Made in Switzerland’ label is prized in Iran. A bit like Persian carpets in the West or the German automobile industry!” THE YOUNG GENERATION: “The population has doubled in the past 37 years. Half of Iranians are under 37. And what’s more, young people are very fashion-conscious and attracted by brands and ready-to-wear fashion. On the Internet, the government filters some political content or pornography, but not content on watches, so information is able to circulate freely.”
  • CONSUMERISM ON THE RISE: “There is a strong culture and tradition of offering presents at any celebration, which obviously fosters watch purchases.”

RECOMMENDATIONS

  • EXCHANGE RATE: “You need to watch this closely, as the government exchange rate is not the same as the market rate. If you check the rates on the internet, you will be confused. What is important to know is that the reference should be the market rate (currency exchange offices) and not the bank rate.”
  • GREATER CONTROL: “The watchmakers need to exercise greater control over the flows of fake watches and the parallel markets. This is possible through legal actions but the brand should pursue the case; it’s not up to the distributors to do it. For some brands the share of fake and parallel is more than 3/4 of the turnover of that brand in Iran. This is the case for Emporio Armani.”
  • SUPPORT LOCAL PLAYERS: “You have to provide the very best conditions for your partners in Iran: it’s an exceptional market with high costs, high competition and lots of limitations. Opportunities are plenty, the brands which support more, get a bigger market share.”
  • DARE TO TAKE THE PLUNGE: “The risk is not coming to Iran, but not coming! Instead of genuine watches, fake watches will take their place and become entrenched in people’s minds. For example, Gucci entered the Iranian market late and now Iranians are used to buying models at 50-100 dollars. It will be difficult to change their perception. Another scenario is that genuine but not officially represented watches will be sold in the market and because the end clients will not get proper after sales service the brand’s prospects will be ruined, like Bulova in Iran.”
  • TASTES: “In terms of taste and culture, Iranians are closer to Europeans than to neighbouring Arab markets! People are discreet, you don’t see the same ostentation as in other markets in the region.”
  • DISTRIBUTION: “There are no major distribution chains, but a large number of independent retailers, some of which may own 1-3 boutiques. The question ‘how many stores do you own?’ from a distributor means that the person asking has no idea about the Iranian market.”
  • PURCHASING POWER: “Even if the population size is similar to that of Germany, the similarities stop there, especially in terms of purchasing power (much lower) and population structure (much younger).”
  • ADVERTISING: “This is very expensive, whether billboard posters, magazines or TV, because of the protectionist measures.”
  • RESPECT : “The quality of Iran’s watch market is high and going to rise. You should stop viewing Iran as a second-class market for selling off unsold stock.”

See the article: MARKET FOCUS - The promise of Iran

Source: Europa Star 4/16 Autumn 2016 Magazine Issue



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