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