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Fri 24 May 2013 11:29 AM

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Paris Gallery's sweet smell of success

Dubai retailer Paris Gallery nearly went bust in 2006. CEO Mohammed Abdul Rahim Al Fahim reveals how he turned the firm around, and why the UAE brand is now set to go global.

Paris Gallery's sweet smell of success

Dubai. Paris. London.New York. Paris Gallery Group CEO Mohammed Abdul Rahim Al Fahim is aiming to conquer them all with his family’s luxury retail chain.

It would be a major scoop for a business that has bloomed from a small perfumery in the Sharjah desert, but after becoming a leader across the GCC, the glamour of international cities seems ever closer.

Last year Paris Gallery announced plans to expand outside the GCC for the first time, with five stores planned for Iraq, followed by Azerbaijan. In March Al Fahim reveals to Arabian Business he is in talks to open two stores in South Africa in what would be the company’s first presence outside the Middle East.

The expansion has come faster than he predicted — the South African plans are due only to the persistent requests of an investor in that country and were not originally in the company’s plans — but Al Fahim has no intention of putting on the brakes.

“Our longer plan is to be the leader in luxury retail in the Middle East and possibly to be in the capitals of the main developed countries, like... England, France, Italy, even New York, LA and so on,” he tells Arabian Business.

“That’s our ambition. We believe internally that the company’s capabilities are increasing and it’s becoming more capable of competing in very competitive markets beyond the GCC and Middle East. We’re [already]... leading in many sectors in our business in the GCC so next for us was to move into the Middle Eastern countries; this is what we’re trying to do in the next three-to-five years. After that [we want] to be more international.”

Paris Gallery — renowned for selling the exclusive $300,000 bottle of Clive Christian perfume — has become a sought-after brand internationally, with several inquiries to franchise in other countries, Al Fahim says.

“We are very much proud of it. Our brand awareness in the cultures around us here in the Middle East is great,” he says.

“I’m talking about people from different sectors, different industries who approach us and [when we ask] what attracted you to this type of retailing [the answer] is always ‘it’s a beautiful brand, nice services, we haven’t seen that around the globe’, all this nice stuff. This makes us take the approach more seriously.”

The company recorded yet another year of record growth in 2012, with net income up 41 percent, on the back of new stores in Fujairah and Ras Al Khaimah. This year it plans to expand to Oman, opening stores in Muscat and Salalah, while sealing a deal for at least four locations in Azerbaijan.

A fourth store also is planned for Qatar, where a string of new shopping malls are planned despite about ten already opening in recent years. Al Fahim says he’s not worried about a potential glut in the oil-rich market, with Qatar experiencing increased purchasing power and disposable income.

“We have three shops there [and] we’re going to open another one which would be the fourth. Amazingly they’re all growing,” he says. “One of the largest growths [across the company] is in the Doha store.

“Qatar is going through the same progression as Dubai did in the 1990s. That happens when the business grows, when the economy becomes more attractive, that’s a normal process. They’ll [each] find a way to do business, the market will introduce new creative concepts and only the leaders will be sustainable and grow.”

The company’s future vision today significantly contrasts to the mess Al Fahim inherited when he took over the company reins in 2006 after a decade of what he admits was exponential growth fuelled by unaccounted-for debt.

The second eldest son, Al Fahim was given the task of saving the family business established by his father Abdul Rahim Abdul Razzak Ali Al Fahim in the 1960s initially as a cosmetics and beauty distributor. The retail outlet now known as Paris Gallery emerged in 1995 when Al Fahim and his three brothers hatched a plan to become a leading luxury retailer. Their enthusiasm nearly toppled them.

“At that time [2006] the company’s [loan] commitment was huge, more than the company could afford,” Al Fahim says. “[We had taken] facilities from banks, made commitments with business partners around the GCC and also with business partners from Europe, the US and elsewhere.

“And there was no policy, no system, no [official] decision making process. There was no clear responsibility from top to bottom; everybody was responsible and everybody was not accountable at the same time. Everybody had the authority and on the other hand, nobody had to be accountable to authorities. Even though the potential was huge the way it was practised... could have killed the organisation.

“At that point we had to redo the whole business practice, put in system policies, [introduce] a lot of regulation, create a decision making process that was very clear, [assign] authority for different parts of the business and make people accountable.”

Overhauling the company was not without its challenges, least of all presenting family members and long-term employees with the ultimatum to change or leave.

“The biggest challenge comes from within, it’s always from the people who were comfortable with the business practices of that time, because they can do anything they want without being accountable,” Al Fahim says. “With some business partners, some shareholders, this was part of the challenge.

“We hired new people; we fired a lot of junior people, senior people, high senior people in executive roles. [But] one of the biggest regrets I have is the time I took to do that. I believed that people could change; some people at least can never change, that’s for sure. I gave more time, more chances but that was not good. If I did it again, I wouldn’t hesitate.”

In the end, Al Fahim’s timing just scraped in — much of the new structure was completed or in the process of being implemented by the time the global financial crisis struck in 2008. “By doing what we have done and continuously building on that made the company where it is today,” he says.

To prove he was on their side, Al Fahim established Paris Gallery Community Club to facilitate benefits for staff such as complimentary fruit and flowers. All of Paris Gallery’s 3,500 employees are now considered equal in their rights at the company, with, for example, the same level of health insurance and the ability to participate in an auction for the company’s 30 car parking spaces. Even the CEO has to pay to be upgraded to business class when flying during a work trip.

“Corporate governance means clarity in decision making, it means process, it means policies, it means fairness,” Al Fahim says. “I cannot take any decision I want, it’s not like I don’t have the authority for that, it’s that I don’t have the back-up for that in the organisation in terms of the culture.

“The culture we put in the company is people contributing to decision making based on their level of authorities or functions or responsibilities and then many of the decisions are made from bottom up, some from top down, it all depends, but if I want to enforce a decision which should be part of bottom up everybody will object... so how can you face them if you built something the right way and then you want to break it the wrong way.

“When decisions are made in a way which everybody has agreed, everybody will support it. Even if the decision sometimes is not the best decision, the rate of success is higher because it has the backing of all the people. So when it comes to expansion in this country, consolidating the business, getting into partnerships, introducing new brands, introducing new concepts, expanding beyond this country, doing franchises, all of these big and small processes are very clear and it is very much understood how the decision is made. It cannot be a one-man show any more.”

Al Fahim is resolute about what led Paris Gallery to the brink of collapse: a failure to evolve as fast as it was growing.

“Family-run companies have some advantages and some disadvantages,” he says. “When it’s in the beginning there are a lot of advantages because the decision making is quick, you can expand a lot, you can be very creative and a lack of corporate governance is good.

“When you come to a certain size the same practice you’ve done in the beginning to get to that point doesn’t work anymore and this is what happened to us. In 2006... after ten years practising a similar style, similar way, which we had done for the past ten years... could have broken the company.

“We were a little late but nevertheless we caught up with the times and we enforced the changes.”

The company’s increased focus on corporate governance also is in line with its plans to go public. Although an initial public offering has been put on hold, Al Fahim assures Arabian Business it remains a goal.

“The timeframe is linked with a few elements and those elements change, it’s not always in our hands,” Al Fahim says.

“What is in our hands is to prepare the company, its infrastructure, its organisation, its culture to be able to go to IPO and to be able to compete internationally. That, to a high extent, is done. Today the challenge is to maintain that and sustain that.”

Expansion plans also are likely to influence the timing of an IPO, which Al Fahim says is unlikely to occur before the international market is ready to accept Paris Gallery.

“When you do an IPO you have a few objectives in mind, one is to have sustainable growth in the future. That sustainable growth isn’t specified, to what growth, how many years... [but] of course [we want] to make sure the company continues, that’s very important and that’s the prime object of our family-run company.

“When you go to an IPO the expectation of the new shareholders is to grow, to become bigger, to become more important, to lead in the industry, to take more market share. If you do an IPO and just stay where you are that’s not good for our shareholders so what we’re trying to do is balance between the two.”

Al Fahim is coy about what proportion of the company would be released in an IPO.

“The percentage at this stage doesn’t mean much, whether we keep the least or the most, what is important is when we do that, what we bring to the table, what is the potential to the new shareholders,” Al Fahim says.

“When I say potentiality of Paris Gallery it’s not only expanding and opening new shops or being in new markets, it’s also [about] becoming bigger in terms of size and in terms of leadership in this sector of the market. There will be acquisitions, there will be mergers in some markets, there will be IPOs in other markets — it doesn’t have to just be UAE. So there are a lot of opportunities that today we can’t talk about because it’s not concrete yet. The potential of what it can become is huge.”

But Al Fahim also reveals concerns about exposing the company to the often-reactive stock market, where investors dive in and out, leaving the company potentially vulnerable.

“People make a lot of money through transactions and then khalas, they leave it; that’s not what we have in mind to do,” he says, declining to give more details. “We’re taking a very careful approach when it comes to IPO.”

That dream to launch in the world’s fashion capitals may just be the catalyst that forces the Al Fahim family over the line.

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Khalil Karkar 6 years ago

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