Since the 1979 Islamic Revolution in Iran, the country has remained in relative isolation from the outside world, and as such little is known about the way the Iranian consumer behaves. However, Iran and the United States struck a deal in September of 2015, which resulted in the lifting of many sanctions that had negatively impacted the country’s economy for decades. As news of the deal’s passing reached global notice, multinational conglomerates in charge of the world’s biggest brands eagerly anticipated the possibilities of exploring a new luxury market.
As sanctions were lifted, multinational conglomerates in charge of the world’s biggest brands eagerly anticipated the possibilities of exploring a new luxury market.
While analysts haven’t had the opportunity to seriously study the Iranian consumer, there are multiple factors in place that indicate that Iran is poised to become the newest fashion frontier – a land where luxury purchasing power is on par with that of Brazil, India, and China. The International Monetary Fund estimates Iran’s per capita GDP (gross domestic product) at $16,500, which means Iranians have more disposable income to spend than Brazil, India, China, and South Africa.
Couple that with Iran’s already insatiable thirst for luxury products, and it’s easy to see why so much attention is being paid to Iran as a powerful emerging market. Prior to the sanctions being lifted, Iran spent around $12 billion on imported goods, and untold millions more are spent on the so-called “gray” market, which Business of Fashion details in a fascinating editorial by Robb Young entitled ‘Unlocking the Enigma of Iran’. Analysts estimate that Iran and roughly 60 percent of its 80 million inhabitants are responsible for 2 percent of the global market. No wonder brands are chomping at the bit to have a presence there.
Even with sanctions in place, a few brands were determined to make their way into Iran, despite the barriers that were presented in their paths. Escada, Benetton, and Mango have managed to navigate the treacherous legal, operational, and bureaucratic waters in Iran (which ranks at a pitifully low 130 out of a total 189 countries according to the World Bank’s “ease of doing business” rating), and have managed to stay afloat despite Iran’s volatile currency. Now that most sanctions have lifted, Roberto Cavalli was first in the door, opening a two-story luxury boutique in Zafaraniye, an upscale neighborhood in Tehran. Versace has also announced plans to open a boutique in Tehran this year.
Analysts estimate that Iran and roughly 60 percent of its 80 million inhabitants are responsible for 2 percent of the global market.
Cavalli’s early interest in the Iran luxury market was an indicator of the start of a new friendship between the previously isolated Middle Eastern country and the Italian fashion industry. Just last week, Italy and Iran forged an agreement during a two-day visit by Italian Prime Minister Matteo Renzi that placed the National Textiles and Fashion Association Sistema Moda Italia (SMI) and the Tehran Garment Union (TGU) in partnership. This agreement banishes the bureaucratic red tape surrounding Iran’s Western business dealings, thereby making it easy for Italian companies to acquire the TGU license needed to operate in Iran.
Another entrepreneurial step was taken by someone whose brand is already familiar to the Dubai reader; Negin Fattahi-Dasmal, of the luxury nail salon chain N. Bar, established her first store in Iran this year. The beauty market in Iran is booming. While strict dress codes prohibit the wearing of certain items, Iranian women are able to carve individual identities through a homogenized sartorial scene by shaping their images with beauty products and nail art. Beauty offerings also offer accessible price points and represent a slice of the luxury lifestyle without the hefty price tag.
While the early interest of Roberto Cavalli, Versace, SMI, and Fattahi-Dasmal hold promise for the future of Iran’s position in the global luxury market, critics are quick to point out that thawed political relations don’t automatically ease the difficulties of doing business in the country. First, there is no upholding of international trademark protection agreements, which means Iran’s “gray” market is extremely active and counterfeits are easily available. The country is also sorely lacking in proper retail infrastructure, and outside businesses also run into problems with high tariffs and difficult banking restrictions. For that reason, major luxury conglomerates like LVMH, Kering, and Chalhoub are biding their time as they watch the quarterly performance results of brands who have already set up shop. While Cavalli and Versace can help define the direction in which incoming brands pivot, they are in the position of being scrutinized as early risk-takers in this untested market.
Internally, Iran is also eagerly building its own fashion industry. Madeline Moda, Iran’s version of Net-a-Porter, is set to launch soon, while designers like Mahshid Mahdian, Arefeh Mansouri, and Nima Behnoud are helping establish Iran’s fashion identity. Hopefully, with lifted sanctions and more access and exposure to Western brands, the creative class of Iran will benefit from an influx of new design ideas. Having been isolated for so long, the conditions are right for a period of growth and expansion in the fashion sector, which will be very exciting to see unfold.
It seems like it’s not just Western brands taking a risk by entering the Iranian luxury market; the risk also falls on those who embrace consumerism.
As we’ve discussed before, there is no doubt that Iran presents difficult terrain for Western brands to navigate. Although sanctions have been lifted and there is a proven demand for luxury goods, there are also the aforementioned business restrictions in place and stiff competition from the “gray” market, which provides counterfeits or authentic end-of-stock merchandise at deeply discounted rates. Yet, the biggest resistance brands will face will come not from the market itself, but from religious factions within Iran. Although the country has grown more permissive over the past decade, establishment forces are still in place, which means individuals are still restricted in what they can wear. The infiltration of Western brands could further disturb conservative factions who reject Western cultural standards.
That being said, it has been reported that Iran’s supreme leader, Ayatollah Ali Khamenei, has issued an edict declaring that fashion and modeling are not at odds with Islam, which sparked the opening of new Westernized shopping malls like Sam Centre, Golestan, and Palladium. On the flip side, clothing codes force Iranians to be hyper-aware of both their surroundings and their sartorial choices. It seems like it’s not just Western brands taking a risk by entering the Iranian luxury market; the risk also falls on those who embrace consumerism. All of these factors and forces that are working both together and in opposition to one another have made Iran the center of one of the most fascinating fashion stories of our time. From the outside, it is impossible to predict the future, but, regardless, one hopes to see Iran embrace a new fashion identity that celebrates both the country’s heritage and modernity. Although the business of fashion exists to pad investors’ pockets, fashion itself is an important sociological and psychological practice that inherently involves freedom of choice. After decades of isolation, Iran is erupting with the desire to shape its self-identity in the modern era. The eyes of the world are watching as its new chapter in history is written and, strangely enough, it is fashion that is helping dictate the direction.