Iranian fashion retailers continue to grow despite sanctions

Representatives of local brands at the fourth edition of Iran Retail Show, held at the Tehran International Exhibition Center from July 24-27, signaled their intention to expand across the country, filling the void left by international labels.

According to Shahrokh Keshavarz, director of the exhibition showcasing 105 domestic companies – 30% of which were apparel retailers – and Iran’s regional market representative of the Council of Middle East Malls and Retailers, the aim of the event is to provide a physical platform for B2B activities and help develop the market for participating brands.

Over the past ten years, international sanctions against Iran have had many impacts on Iranian fashion and retail businesses. Both industries have faced an increasingly unstable and unpredictable economic environment, largely due to sanctions imposed by the UN, US and EU over the US uranium enrichment program. ‘Iran. But there have been pros and cons for some Iranian fashion players.

Despite sanctions and other challenges such as rising costs, the number of Iranian clothing retail branches in the country has grown sharply over the past decade. Sam Zarrabi, a retail consultant who has worked with international brands such as Mango, explains that “the existence of a favorable environment after the departure of foreign brands has allowed [local] brands to expand in the country and take a bigger market share…[though] it is [only] possible if brands have also invested in their commitment to customer service.

In Tehran, for example, the high-end Bamland mall initially operated to serve tenants from foreign brands such as Geox, Nike and Mango, but replaced over 90% of its tenants with Iranian brands. in a short time. According to Ali Eslami, CEO of Bamland Tourist business complex.

Although some sanctions were briefly lifted under the US Obama administration, they were reinstated under former President Trump. In July, the European Union’s foreign policy chief proposed a new draft text to relaunch negotiations on the 2015 Iran nuclear deal as part of diplomats’ efforts to restore the Joint Comprehensive Plan of Action, an agreement that had previously led to the lifting of sanctions.

Sanctions and the broader instability of the Iranian market have led to a skyrocketing import of contraband fashion. Meanwhile, the recent departure of international brands that had entered the country as sanctions were temporarily lifted has prompted consumers to turn to local Iranian brands. Many of these brands have also moved upmarket.

Iranian brands like Serge, which started around 23 years ago with the aim of producing local products to replace Turkish imports, have been present in the retail market for three years. Mr. Zoghi, brand manager, explains that with 16 stores across Iran, the biggest challenge for this women’s fashion brand is sourcing raw materials, especially fabric. Western sanctions have also led Iranian fashion brands to source more textiles from producers in China and Turkey.

More recently, since the escalation of the war in Ukraine, retail leaders in Russia have offered to import more Iranian fashion brands to fill the void left by Western brands leaving the Russian market.

According to Majid Nami, vice-president of the Textile and Garment Production and Export Union, Iran’s fashion industry is worth around $8 billion, 70% of which is made up of domestic products.

The presence of young designer and retail brands in shopping malls is a sign of change in Iran’s fast-evolving retail sector. Local online retailers like Astin have started offering pop-ups in local malls. “Our platform creates a sense of distinction from wearing high-end Iranian products, which might have seemed a bit difficult a decade ago when foreign brands were working in Iran,” said the co- Astin’s founder, Bahadur Adab.

Alpha X, a young brand founded just two years ago by brothers Arash and Shayan Bustani, already has a branch in the Opal shopping center in Tehran. “Our customers are willing to pay more [to] wear more special clothes,” said Arash, who worked for brands like Armani and Nike before the sanctions.

“What is different between us and [brands from] other countries is just the infrastructure. In terms of design and art, we can totally compete with the fashion industry. [abroad],” he added.

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