Changes for Retailers in Iran

iran-fashion

In January 2016, a historic change ended sanctions against Iran from Europe and the United States. Once Iran proved to satisfaction that they had dismantled their nuclear program, the US and Europe released assets totaling 100 billion dollars.

 

Iran immediately took advantage of the change by making deals in Paris and Rome for cars, oil and aircraft, deals worth billions of dollars. Iranian President Rouhani quickly signed a deal to upgrade Iran’s airline fleet, expand airports, and work on a car factory in Tehran.

How will all of these changes affect the United States and their retail industry?

Despite the sanctions, Iran commands the second largest economy in the Middle East. A large part of their population of 80 million consists of young, educated urbanites, retail’s ideal market. This part of the population is very interested in Western or American products as well.

This is evident just by walking down the streets in Tehran. Their shops are very Americanized with knockoff Nikes and burger joints. Iranians have a love affair with American culture.

Iran also missed the e-commerce boom, with the younger generation skipping straight to mobile purchasing rather than through computers. They want the higher end items they see through Twitter and Facebook, particularly Apple products.

When sanctions are lifted, the first foreign companies to move in are generally the low-end companies and fast food chains, but they will have to fight local companies that have the support of the government.

Companies like Apple and luxury retailers like Louis Vuitton have already found ways in sell in Iran, but foreign companies starting there will come up against many obstacles.

Despite the United States being part of the negotiations to lift the sanction, an embargo still exists between Iran and the US. The US can now import things from Iran such as pistachios and carpets, but establishing American businesses there will be difficult.

European companies don’t have the same issues, but different ones. Apparel companies must abide by the culture of Iran, which says that women must dress modestly. The retailers must conform to the culture by advertising modest clothing and not using models to sell the less-modest items. Companies who do not abide by the rules can face closure if they are seen as a bad influence.

American retailers have to go up against the older people of Iran who have fresh memories of the conflicts between the countries.

Change is in the air, but it will not be a quick change as everyone adapts to new ways of doing business.