By Suzy Menkes www.nytimes.com
MILAN — Could the dramatic events in the Middle East ultimately be a bonus to the luxury industry?
The events unfolding in the Arab countries, and the subsequent spike in the cost of crude oil, are being watched carefully by manufacturers and retailers now in Italy for the fashion season — as they are by every international business.
Yet, despite the general anxiety and the unwillingness to discuss sales over the dead bodies of revolution victims, the departure of dictators is seen as good news at the highest management levels. The potential growth of a middle class, in countries where the rich are a tiny minority, could be positive for consumerism.
“This is a whole area of the world that missed the beat for the last 80 years — but for the future of the global economy, let’s hope it goes in the direction of China and not Iran,” said Michael Burke, chief executive of Fendi, part of the LVMH Moët Hennessy Louis Vuitton luxury conglomerate.
“This could be the best news since 1978, when China decided to go with the market economy,” said Mr. Burke, lamenting that in Egypt, a country of almost 83 million people, he does not have a single Fendi product on sale — even though its wealthy elite may have bought into luxury. “For every dictator, we could have one million customers. Traditionally, we do well when the many are integrated into society.”
Others are no so sanguine. Diego Della Valle, chairman and chief executive of Tod’s group of leather companies, says there are too many imponderables at the moment to talk about “good news” for the industry. He specifically cited the unknown result should the flow of refugees across the Mediterranean to Italy cause social unrest.
“Maybe, after 10 or 20 years, we will see an advantage,” said Mr. Della Valle. “It depends on what happens and whether people get back to work. It is important to understand how quickly things are changing. I was in Egypt in the first week in January — and I could never have imagined this.”
Sidney Toledano, chief executive of Christian Dior in Paris, put the events into context. “What we like is stability,” he said. “We want to go into countries where there is a middle class and where we see some immediate potential.”
Dior recently opened a shop in Morocco, a country that Mr. Toledano views favorably, with plans for a store in Casablanca to join the existing one in Marrakesh.
Tomaso Galli, a consultant in brand management, also cited Morocco as “the most progressive, in spite of being a kingdom.”
“The moment that other countries like Egypt open up,” Mr. Galli said, “there is no reason why luxury brands should not develop. Maybe not just in 20 years. It could be a lot faster.” He recommended a “wait and see” policy toward democracy and the opening up of new markets.
For John Hooks, deputy chairman and director at Giorgio Armani, the Middle East is not new territory, with Dubai the home of the first Armani hotel and with the brand’s strong presence in the Gulf region.
“Until the present disturbances, the three major factors that have determined the evolution of the market have been the price of oil, the generational change in the ruling class and the demographic explosion,” said Mr. Hooks, explaining that with those changes came greater spending power, a new Western-educated elite and a lot of young people.
Therefore, over the last four years the company opened 15 A/X Armani Exchange and Emporio stores in Bahrain, Lebanon, Qatar, Saudi Arabia and the United Arab Emirates.
Mr. Hooks said that Armani — which sells only through multibrand stores in Cairo, Casablanca and Tunis — had planned to open its own boutiques in Egypt and Morocco, but that those changes were on hold.
“I myself was very impressed by the new towns that are growing up in the Maghreb, such as the area known as ‘New Cairo’ and the prosperous suburbs of Marrakesh and Casablanca,” Mr. Hooks said. “These are not just gated communities but evidence of a significant and expanding middle class.
“This middle class is the real driving force behind these uprisings, particularly in Egypt and Tunisia and this augurs well for a quick return to economic stability and even accelerated development.” Suzy Menkes