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By Kimberly Adams

High fashion has arrived in Egypt, balancing delicately on runways pock-marked with high customs duties, complex import regulations and the challenge of bringing the nation’s elite back to Egypt to shop.

The sprawling Beymen Cairo luxury retail store at the Four Seasons Nile Plaza complex is a $5.7 million investment by equal partners Boyner Holdings of Turkey, Alexandria’s Talaat Mostafa Group and the newly formed Oryx Fashion Holdings. The spacious 6,030 square meter outlet takes up a space originally slated for a boutique-style mall.

But even with the lift of Egypt’s ban on clothing imports in January of 2004, fashion retailers were reluctant to set up shops in Egypt.

“They wanted it to be a high-end [mall],” says Oryx Fashion CEO Ola Dajani, “but the fashion brands did not want to come to Egypt individually. They don’t want to take the risk of their own store.”

That’s when Alexandria tycoon Hisham Talaat Mostafa of the Talaat Mostafa Group approached Turkish retail giant Cem Boyner with the idea of using the space for one large department store. Up against Saks Fifth Avenue, the Beymen brand emerged as the conduit for high-end retail in Egypt.

Boyner Holding, Turkey’s largest non-food retailer, has some 400 stores in Turkey, from small, high-end boutiques to mass-market department stores, in addition to other properties in countries including Germany, Russia and the Czech Republic. Beymen Cairo is Boyner’s first Beymen store outside of Turkey.

“For us, unlike Europeans, who would consider this a joint adventure, for us it’s a simple joint venture,” says Boyner, drawing a comparison between the current development of Egypt’s economic reforms and those of Turkey 15 years ago. “We feel very similar to Egypt.”

Boyner also suggests that he views last month’s grand opening of the Cairo outlet as the first step of a long-term partnership with Talaat Mostafa Group and Oryx that could see Beymen stores open in Sharm El-Sheikh and Alexandria, as well.

For Oryx Fashion Holdings, the shining marble floors and sparkling glass display tables of the new store represent its first investment ever. Dajani and her husband, Hisham El-Khazindar, co-founder and managing director of Citadel Capital, launched the company earlier this year as a vehicle for investing in fashion, luxury goods and other high-end retail interests throughout the Middle East and North Africa.

“We thought [Beymen] was a great fit because, one, they have the know-how and they have the supply relationships,” says Dajani. “At the same time, they are not bound by the restrictions that we as an Egyptian[-only enterprise] would have trying to get into this.”

The Beymen Cairo store is also a first in its own right. With labels including Dolce & Gabbana, Yves Saint Laurent and Miu Miu complimenting its house brand, it provides many shoppers with their first opportunity to (legally) buy imported designer goods in their home country. (While the nation’s most affluent have traditionally traveled abroad to buy luxury labels, others have resorted to buying smuggled goods sold without store tags in private apartments.)

Beymen’s management says the store’s prices might be more expensive than certain European cities —and are roughly on par with London, Europe’s most expensive clothing market —but point to the 40% customs duties they are paying on all their imported clothing. Boyner says the company is choosing not to pass this cost on to customers.

“We can’t yo-yo with customers and say it’s going to be 40% higher this season and next season we’re going down. These are the right prices, and we are going to keep those prices there. We are going to sacrifice some profit until, hopefully, the customs are going to be reduced.”

“You don’t only come here when you want to shop. You come here to hang out — it’s a fashionable place, you have a coffee, you have dinner.”

But customs dues are not the only additional cost eating away at the store’s bottom line. Customs difficulties delayed Beymen Cairo’s planned summer opening, and the store has dedicated staff and outside companies working to make sure the retailer successfully and legally navigates all the procedures. This includes ensuring each of the store’s more than 70 brands has an official certificate of registration, which can take months to obtain, and maintaining a warehouse in Milan where Arabic translations of the designers’ tags can be sewn into every item heading to the store.

“But it’s getting a bit easier,” says Dajani, emphasizing how helpful high-level officials at the Ministry of Trade and Industry have been throughout the process. “Even with the customs, it’s much easier now than two months ago, or than it was a few months ago.”

“We understood the tendency that customs duties are coming down from very high to 40%,” explains Boyner, “and we understood that Egypt is on the road to liberalization and integration with the world economy. This is enough for us.”

Or at least it is for the time being. While Boyner is content to swallow the customs cost now, he admits the company does not have “endless pockets.” If the customs duties do not go down in the near future, the ability to continue carrying the cost without a corresponding price increase will hinge upon the success of the store.

“If the volume of sales per square meter is good enough, we may stay that way for a long time. Our increased sales may compensate for a lack of margin.”

“Good enough” to Boyner is at least $4,000 per square meter per year early on, but will eventually need to be more than $6,000 per sqm per year down the road.

Even with London-level prices, Boyner and Dajani say the target customers of Beymen Cairo will understand. “Purchasing power is everywhere,” says Boyner. “We may not see it in Egypt because it is spent outside [the country].”

Boyner hopes to change that phenomenon, and says the store will eventually carry some 46,000 items ranging in price from $5 to $3,000 with lower-priced items targeted at expanding the customer base. By Beymen’s math, 4.9% of Egypt’s population falls into the A and B-plus consumer range the store is targeting, meaning it has a potential customer base some 3.5 million strong.

“We want to make sure everyone who comes in will be able to buy at least something in a Beymen bag, if they wish to do so.”

Boyner acknowledges Beymen will face a challenge convincing those who can afford the higher-priced items to spend at home rather than abroad. “We know that Egyptians are so integrated with the rest of the world that it might pose a challenge to really bring an operation like this and be successful. Because why would people come to your store when they can do their shopping in London, like they’ve been doing for so many years?”

Boyner hopes to address this question with a strong emphasis on customer service, including offering free lifetime alterations, maintaining a detailed customer database, and encouraging customers to use loyalty cards to gain seasonal discounts.

“I think they will be lured by the service here,” says Boyner. “They won’t feel like a foreigner here. This is their own turf, their own people.”

In addition, Dajani says the complete and up-to-date designer collections, along with a carefully cultivated atmosphere of luxury, will draw customers from small boutiques, many of which now sell illegally imported merchandise.

Dajani sees the store as a place to meet and socialize, as well as to shop, with a central café watched over by the hugging couples featured in the store’s sprawling ceiling designed by Farghali Abdel Hafiz.

“We must make it a destination in itself. You don’t only come here when you want to shop. You come here to hang out — it’s a fashionable place, you have a coffee, you have dinner.”

Oryx Fashion Holdings hopes to continue its partnership with Beymen, particularly as Boyner Holding looks to expand its presence in Egypt in the future.

The impact of Beymen’s presence in Egypt may also extend into other sectors. The Cairo store is already carrying accessories and linens by local designers, and Boyner is considering opportunities to move some production of certain Beymen-branded items to Egypt.

Dajani also sees the store as an opportunity to expand the country’s fashion design sector. “We are trying to encourage the ladies [designers] to do more of this,” she says. “There are no stores for me to go to. What Egyptian brands am I buying?”

With an eye to promising young designers at local universities, Dajani thinks that in a year or two, high-end fashion in Egypt might not be restricted to imports.  bt