By Lubna Hamdan
The Middle East distributor of the biggest names in high-end fashion, the Chalhoub Group, started with a dream in Damascus and went on to become an empire. Half a century and 600 stores later, co-CEOs and brothers Patrick and Anthony Chalhoub discuss surviving in admittedly tough times and the future of luxury shopping
Patrick Chalhoub slides through the glass doors of a private meeting room in one of his 600-something luxury stores. Sporting a seemingly expensive grey-blue suit, he is an hour late to our interview.
“Just before I came, I’m sorry, I was held by one of our colleagues who left the company one-and-a-half months ago. He just called back and said, ‘I didn’t know how much I was attached to the values of the company. Do you think it’s still possible for me to come back to the company? I’m ready to come back not even at the position I was in, even less, because I miss the whole family atmosphere about it’,” he says.
“This is what is driving us; we have employees who have been with the organisation for 20 years and are enjoying it and enjoying coming to the office. This is what drives us. The drive is we have to make it playful, wonderful.”
And he has, alongside his brother Anthony, undoubtedly done so.
Successors to their father’s dream of bringing international luxury to the Middle East, the joint CEOs head what is today one of the region’s largest and most recognised luxury distributors, Chalhoub Group.
Founded in 1955 by Syrian nationals-turned French citizens Michel Chalhoub and wife Widad, the group opened its first international boutique Christofle in Damascus in a bid to bring France’s savoir-faire to the increasingly sophisticated capital.
Six decades later, Chalhoub Group operates in 14 countries with more than 600 retail stores, distributing the crème de la crème of high-end luxury brands such as Christian Dior, Louis Vuitton, Chanel, Fendi, Christian Louboutin, Givenchy, Carolina Herrera and Prada. Since taking over in 2011, the sons have cultivated their own multi-brand department stores, Faces and Level Shoe District.
And the Chalhoub Group is showing no signs of slowing down.
In early November, Chalhoub opened multi-brand department stores Tryano in Abu Dhabi and 10,000 square metre shop Level Kids at City Walk in Dubai. By the end of the year it also will have opened five shops across the UAE and Saudi Arabia dedicated to its own oriental fragrance brand, Ghawali.
Yet in spite of an expanding portfolio and optimistic attitude, Chalhoub Group is undeniably facing challenges. Due to sustained low oil prices and the subdued economic climate, the company’s past financial year was not as fruitful as previous years.
“We had little growth in 2015, lower than our budget. It started well in the first quarter and then it slowed down, particularly in the third and fourth quarters. Altogether, it has been a small growth, but for a family business, the most important thing is looking at the long-term, to make sure that we continue being relevant [and] making sure that we take the necessary steps in order to beat the market growth,” Patrick says.
“Our estimation is that the luxury market in the Middle East is growing about 1 to 2 percent according to the latest study we had from Bain & Company. And we as a group grow faster than that, which means that we feel that we can [grow our] market share and at the same time we are not pushed for turnover or profit like many of the other public companies where they have to deliver financial figures and results. We are more driven about how we can create a sustainable business.”
The Chalhoubs may not be concerned about market share, but customer spending is certainly on their minds.
Sitting by his sibling’s side, elder brother Anthony Chalhoub speaks in a heavy French accent. “There was a kind of change in the customers’ attitudes and the customers’ profile [in 2015]. We lost some customers who were not coming as often as before. Some customers have a different spending power, so they are decreasing the purchases or portions of the purchases. But we think it is temporary. We’ve been experiencing a growth of almost two digits — between eight to 10 percent — [in comparison] to previous years. And now we have a growth which is more like a mature market growth, a bit like in Europe.”
When the interview turns to the topic of growth, the younger sibling steps in and emphasises that for the Chalhoub Group, most of the increase in sales lies in Saudi Arabia and the UAE.
“If we target local customers, by far it is Saudi because of the size of the population and the growth of the population. And if we target more the visitors and the tourists, including those who come from Saudi Arabia, then the UAE and Dubai would be a fast growing market, despite the slowdown,” Patrick says.
There have been other setbacks too, though. Last month, the group revealed the closing down of multi-brand department store Saks Fifth Avenue in Burjuman Mall, located in the older part of Dubai. It had previously been re-located from Jumeirah Beach Residence in 2010. What caused such a big name to close down? Mere circumstance, according to the brothers.
“Burjuman changed its profile and the customers changed, it’s obvious,” Patrick says. “And then you have the size, I mean, Dubai Mall has 80 million people visiting it; Mall of the Emirates has between 50 and 60 million.
“Burjuman has probably 20 million people. And then there is the quality of the people who go; Burjuman has shifted from being the destination of shopping and luxury shopping to become a community more for the people living in Bur Dubai. So for sure it is less relevant in having an international department store. The mall is still very good, it’s Burjuman, but it has changed perspective.”
And while the group is adjusting well to market changes it is, like most family businesses, not open to all proposed modifications. Putting their family empire on the stock market, for example, is all but ruled out.
“As long as Patrick and I are alive, it is out of the question,” Anthony says.
Patrick agrees. “For that to happen, there must be a reason. And usually one of the reasons is to get more funding. To get some funding in order to develop or get out of the market somehow. We are not interested in either. We always said we will grow as per our financial means to do it. What is good in our family business is that we created a strong governance structure. So what public companies usually have is a strong [company] governance because they are in the stock market and they have to have that. We have been able to create this governance without having to be at the mercy of the stock market or under the pressure,” Patrick says.
Thanks to years of burning the midnight oil, the brothers have paved a way for the third generation of Chalhoubs to do the same.
“Anthony and I are in the second generation. Obviously, in any family business, we have to think about how we can create a sustainable environment that our children and grandchildren could have; to create this system for our group to evolve in the future. We have something in the group, [where] we never say we are working for anyone; we are working with each other. So we have been working with our father, not for him. It’s different,” Patrick says.
There are some differences between the brothers, though. Fashion is an example. Anthony is dressed in a dark blue suit with a bright red tie and colourful cufflinks, which he later explains were originally earrings that he acquired from a kiosk in Paris and then had transformed.
No, the brothers are not the same, and each have a distinctively unique personality. But when it comes to work ethic, it is clear they see eye to eye.
“If you visit our offices, I don’t have a desk in any one of our offices; I have a meeting table,” says the elder Chalhoub. “People have to sit next to me because we are working together on one paper, not on opposite sides. [It’s] not to try and see, ‘oh, what is he working on’. No, sit next to me, come on. It’s different. We try to measure [the success of the business] in happiness rather than in turnover.”
That is a difficult-to-believe premise. But the Chalhoub brothers are convincing in their argument that staff morale at least contributes to the bottom line.
It is that notion of dreams that makes not only Chalhoub Group customers but also its staff happy.
“Can I ask you a question? Do you stop dreaming? Have you ever stopped? I think when one talks about luxury, it’s a little bit of our dreams,” Patrick says, while Anthony instantaneously nods. “We are not into the necessities. So yes, you can stop buying luxury but you cannot stop eating, but you could eat cheaper and cheaper.
“What we want is to try to fulfil small dreams and to make it possible. It could be materialistic dreams, but still. Luxury has its ups and downs, like everything else. But we are convinced that it is a market that will continue to develop as long as we continue dreaming and aspiring.”
Given their company’s lasting legacy, it is unlikely that the Chalhoub brothers or their successors will ever stop dreaming.