Syria sanctions hit retail supply lines

Retailers with operations in Syria are set to suffer if sanctions are imposed on financial transactions.

Retailers in Syria are likely to see their supply of products choked if economic sanctions are imposed. Joseph Eid / AFP

Retailers operating in Syria are likely to see their supply of products choked if economic sanctions are imposed by Arab states.

Many franchise agreements dictate that payment for the goods must be made before stock can be delivered, but the sanctions due to be imposed on Syria could disrupt financial transactions between retailers and their franchise partners, effectively cutting supply.

"The biggest concern now is payment challenges," said Ishwar Chugani, the executive director for Giordano Middle East, a fashion clothing chain with more than 205 stores across the region. "We are working very closely with our franchisee to look at alternative payment methods, but without breaching the sanctions."

Giordano Middle East manages a franchise agreement in Syria with Challah & Berbari, which runs four stores in the country.

The retailer uses Dubai as a logistics hub to supply clothing and accessories to the Middle East, North Africa and the Indian subcontinent.

It ships products to Syria approximately once a month, Mr Chugani said, which could mean stocks run thin very quickly as a result of sanctions.

"We are monitoring the situation and hope to ensure their continued operations," said Mr Chugani.

BinHendi Enterprises, one of the biggest retailers in the UAE, is the master franchisee in the Middle East for the Canadian coffee brand Second Cup.

It has a sub-franchise agreement with Nooran Trading in Syria, operating three coffee shops under the Second Cup brand.

Mohi-Din BinHendi, the president of BinHendi Enterprises, said there had been no problems with payments thus far, but that the situation might change if sanctions were implemented.

"They are paying, they are being very prompt. But if sanctions are imposed, we have to abide by the rules," said Mr BinHendi. "We have to see when the sanctions are done, then we will have to look at the situation more seriously. It's an international thing and affects everyone," he said.

Both Arab and international retailers have been slow to enter Syria due to the often fragile politics of the country. But industry analysts and retailers are convinced the market provides an opportunity for growth once the country is deemed politically stable.

Paris Gallery, a luxury retailer based in Dubai, began the process of finding a franchise partner in Syria, but pulled out of the deal this year after the onset of the unrest. It has now also canned plans to launch a franchise partnership in Iran.

In addition to retailers, the sanctions that are likely to be imposed will also affect retail developers building projects in Syria.

Majid Al Futtaim, which operates malls and Carrefour stores in the Middle East, began work in July on a US$1 billion (Dh3.67bn) retail, leisure and commercial complex in Damascus, despite there having been ongoing unrest for some months. Emaar has partnered with Invest Group Overseas to build Eighth Gate, a mixed-use development set to include a huge shopping mall.