Growth amid the thorns

Talks to LG about their growth and cop­ing strate­gies in the dif­fi­cult Le­banese mar­ket

Executive Magazine - - Retail - By Thomas Schellen and Na­bila Rah­hal

Re­tail­ers in Le­banon have been faced with chal­leng­ing cir­cum­stances for the past four years. Re­gional tur­moil that be­gan with the war in Syria has been push­ing tourist num­bers down, and the re­main­ing clien­tele – those re­sid­ing in Le­banon – have de­creased pur­chas­ing power com­pared to the vis­i­tors who were so com­mon a few years ago.

The Frans­a­bank- Beirut Traders As­so­ci­a­tion retail in­dex shows that al­though the Con­sumer Price In­dex is on a con­tin­u­ous de­crease (for the fourth quar­ter in row), some sec­tors of the retail mar­ket did not pick up as one would ex­pect in a de­fla­tion­ary en­vi­ron­ment. In fact, the Le­banese retail mar­ket gen­er­ally re­mained stag­nant in 2015.

Given such a sce­nario, it is no won­der that many re­tail­ers were re­luc­tant to share their woes with the me­dia. Not so LG, the Korean con­sumer goods and elec­tron­ics man­u­fac­turer. Ex­ec­u­tive sat down with Tae Hun Ryu, the gen­eral man­ager of LG Elec­tron­ics in the Le­vant, to dis­cuss the com­pany’s per­for­mance in Le­banon and the chal­lenges it faces in this mar­ket.

Yes. There are so many sup­pli­ers and brands and each sup­plier and brand has their own tar­get au­di­ence. The mar­ket now is see­ing many Chi­nese low-cost prod­ucts. The names of their man­u­fac­tur­ers are not known, and they are tar­get­ing the low- to middle-in­come de­mand seg­ments. We have passed through such stages a long time ago as we are in this mar­ket for more than 30 years, first un­der the Goldstar brand and then as LG. We have con­tin­u­ously up­graded our po­si­tion, and to­day we no longer po­si­tion our brands as af­ford­able for earn­ers of middle- or low-in­comes. Peo­ple who want low-cost prod­ucts have to look for other brands. We are tar­get­ing the up­per 35 per­cent of cus­tomers to be our loyal cus­tomers.

In your home mar­ket of Korea, LG is num­ber 2 in brand value af­ter Sam­sung. Have you mea­sured your brand aware­ness in Le­banon and how much it has grown in the past four years?

I can say that the LG pres­ence in the Middle East is much higher than it is on av­er­age in global mar­kets. Le­banon and Jor­dan are among the few mar­kets where LG en­joys ex­tremely high brand aware­ness as top con­sumer choice. Above 82 per­cent of con­sumers in Jor­dan and Le­banon name LG as num­ber one or num­ber two when asked for their fa­vorite brands in tele­vi­sions and wash­ing ma­chines.

What mar­kets do you cover from your Am­man re­gional head of­fice?

My cov­er­age area is Iraq, Syria, Le­banon, Jor­dan of course, and Pales­tine. It is the most con­flict-prone area.

We have a legally es­tab­lished branch of­fice in Beirut but did not ac­quire a li­cense to sell di­rectly in Le­banon. We have three dis­trib­u­tors in the coun­try.

When you buy in­ter­na­tional brand prod­ucts in Le­banon, you of­ten find stores that sell them, per­haps at dis­counted prices, but then do not con­tinue to of­fer th­ese prod­ucts or any af­ter-mar­ket ser­vice. On the other hand the lo­cal mar­ket for ma­jor house­hold con­sumer goods ap­pears to be dom­i­nated by a hand­ful of large im­porters and com­pe­ti­tion in this seg­ment seems very lim­ited. How are you han­dling th­ese chal­lenges?

This is a very com­pli­cated is­sue. The con­sumer has the right to get the low­est pos­si­ble price for the same prod­ucts and the mar­ket is pro­tect­ing con­sumers from mo­nop­o­lies. [But] if you have mul­ti­ple dis­trib­u­tors, they some­times en­ter wild com­pe­ti­tion and blindly cut their price so that at the end of the day ev­ery­one in the mar­ket is los­ing.

We have to be very well bal­anced on how to pro­tect the con­sumers’ in­ter­ests but also the dis­trib­u­tors’ in­ter­ests at the same time. We have to sat­isfy both, and it is one of our hall­marks that we try to sup­port our dis­trib­u­tors with bet­ter ad­ver­tise­ment or bet­ter show­rooms like the one we are meet­ing in.

Do you fi­nance their show­rooms?

No, we don’t fi­nance them but we sup­port the dis­trib­u­tors with dec­o­ra­tions or train­ings for their staff on the sell­ing of pre­mium goods. One of our re­frig­er­a­tors here re­tails for $3,500. This is no small money for any­body and so

Tae Hun Ryu, LG Le­vant gen­eral man­ager

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