By Asa Fitch in Dubai and Aresu Eqbali in Tehran
Iranians love high fashion, but luxury companies planning to tap
Persian appetite for designer clothes and bags are facing stiff
competition from their very own brands -- albeit fake ones.
In the forked walkways of Tehran's central bazaar, many shops
offer convincing copies of Gucci belts and Cartier handbags. One
young vendor sells a fake Louis Vuitton belt made in Turkey for
about $8; the authentic product retails for around $400. "I have
the box if you want to wrap it as a gift," he offers as a
deal-clincher.
Cut off from the global economy by international sanctions over
the past decade, Iran's importers have had a tough time bringing in
real European goods that the growing middle class wants to buy.
Fakes -- many high-quality -- have been meeting that demand.
Now that most sanctions on Iran have been removed with the
country's nuclear deal, this ecosystem of knockoffs is confounding
genuine luxury retailers, slowing their entry into a promising new
market.
Despite Iran's ultraconservative leadership and official
aversion for Western values, industry analysts see the youthful,
oil-rich country of 80 million as an exciting prospect for
retailers of the world's most famous brands. Per capita consumer
spending in Tehran's urban core averaged $4,700 last year, the
highest level in the Middle East, according to the London-based
Planet Retail.
Roberto Cavalli opened a boutique in Tehran's wealthy
Zaferaniyeh neighborhood last February, and Versace followed in
April, both in partnership with Iranian businessman Farshid
Jamali.
"Sales have been satisfactory, but lower than what we expected,"
Mr. Jamali said.
The reason, he said, was that many wealthy Iranians aren't well
informed about the change in the retail landscape and still assume
luxury goods in local boutiques are convincing fake versions of the
Western brands they profess to be.
There are no statistics on the market for fake fashion in Iran.
While making and selling knockoffs is technically illegal, they are
sold openly, with little sign of government oversight.
"In Iran it's all fake," said Mehrnaz, a Tehran-based
businesswoman and luxury shopper who asked not to be identified by
her full name. "There are no licenses, even for those who have the
logos and claim to be original."
Consumer doubt has been reinforced by players like Zilan, a
company that has imported clothes made by Zara and other brands
under Spain's Inditex SA since 2006. Its stores look like official
Zara outlets, according to its website. Zilan's existence means
Zara would face competition with unlicensed, rogue versions of its
own stores if it entered Iran.
An Inditex spokeswoman said Zara had no stores in Iran, and
declined to comment further. Zilan couldn't be reached for comment.
Zilan is using the Zara brand and selling Zara clothes, but there
is no relationship between the companies.
While Iran has well-functioning trademark laws, Inditex would
have to register its Zara brand and go to court to shut Zilan down,
according to Sadegh Shamshiri, an intellectual property lawyer at
Hengam Legal Services in Tehran. That process would take at least a
few months, Mr. Shamshiri said.
Iranian consumers have grown used to a market littered with fake
goods, and in some cases prefer them to the real thing because of
their affordability and availability. One Tehran-based importer of
fakes from China, who would only identify herself as Forouz for
fear of legal liability, said interest in counterfeit goods began
to pick up a year or two ago as upwardly mobile Iranians grew more
brand-conscious.
"My Gucci sandals sold out, and I am now going to China to buy
more," said Forouz, who advertises using the Instagram handle
mezon.blanche. "Women love them. I have customers who drive Toyota
Prados, own holiday villas in northern Iran, but they don't pay for
the original."
Even if the Iranian government tackled the impostor problem,
foreign luxury brands still face the challenge of changing consumer
habits.
"Right now, our goods are 40% less expensive than the same in
Dubai, but there is a perception here that it's expensive anyway,"
said Mr. Jamali, the Iranian businessman backing the Roberto
Cavalli and Versace boutiques in Tehran.
Luxury brands learned from setting up shop in China in the early
1990s that being a pioneer in a market with large potential can pay
dividends, even if the business isn't an immediate success, said
Armando Branchini, the vice chairman of the Milan-based Fondazione
Altagamma, a foundation that represents Italian luxury brands. It
took until the early 2000s, when China joined the World Trade
Organization, for Italian luxury brands to begin reaping their
rewards there, he said.
"The pioneers benefited years later from having their reputation
established much better than the second followers," Mr. Branchini
said.
By the time Iran's market makes a similar transformation,
however, Sadra Hosseini thinks e-commerce will be a powerful
competitor to traditional luxury outlets.
Mr. Hosseini co-founded The Luxe London, a U.K.-based startup
that has been selling luxury goods to Iranians directly from
Europe, eliminating middlemen and leaving little doubt about the
authenticity of products.
The Luxe London has done hundreds of thousands of pounds worth
of sales in the past year and a half, he said, a sign that
retailers may have online solutions to address the lack of
confidence in locally available luxury goods.
"There's an Iranian mentality that if it's made in Iran it's
crap," he said. "That will persist in the future."
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
January 23, 2017 05:44 ET (10:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.