As global supply shifts, Americans look for new footing in the Middle East
December 12, 2000
DUBAI, U.A.E. — Gone is the Middle East of the glorious late-'80s when, according to an American exhibitor at Index Dubai, the affluent buyer's modus operandi went something like this:
"Let's buy 50 jetfighters at $1 million a piece and containerloads of carpet."
Today, the Middle East (including Gulf Cooperation Council countries Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) is less friendly to imports than Americans are accustomed to. Not only have a strong U.S. dollar and heavy Middle Eastern import duties conspired to stem the flow of American imports, but a surfeit of cheap imports is entering the region from new production centers. Thus, American upholstery fabrics manufacturers who once just exhibited in the region's trade fairs, have begun adding muscle to their sales efforts in the Middle East.
"It's not as open a market as it was five or 10 years ago when you could sell anything that wasn't nailed down," said Rick Rogers, sales manager for the American producer and converter, Burlington. "The region has more choices, more sources that they can choose from for quality fabrics. They don't have to look just to the U.S. They can look to Europe and South Asia and India Pakistan and China."
The rap on furnishings textiles from these countries is well known: The quality is "not up to snuff," as one exhibitor put it. Rogers said, however, that not only is the quality of goods from these regions improving, but for a few buyers, quality is all but immaterial. "Some customers here tell me that they cannot afford not to buy (from emerging sources) because the price is just so good. Some of the Asian mills are selling at prices — and I'm talking in general terms — that are equal to the mills' cost to make the product. Ten years ago, the Asian options weren't as open."
However because there are few U.S. and European-owned mills in the Gulf area, and no locally-owned textile producers there, the Middle East presents an enticing opportunity. The question is how exactly to take advantage of it.
The response by the producer and converter, Burlington, is to capitalize on the diversity of the region's buyers.
"There's a market here for almost anything. We can sell very low-end flock, and, this afternoon for example, we had a customer visit and place an order for $14 a yard rayon chenilles.''
Rogers, whose territory includes the Middle East, Africa and Eastern Europe, said that Burlington has recently re-staffed its international sales office with reps who will sell the region directly and through brokers. "It's just a question of getting our product in front of them again."
Others in the industry believe success in the Middle East requires more than offering the right product at the right price. "You really must have local agents there if you're to do any serious business there," said an agent who asked not to be named. "The local agents know the customers and the culture of the country.
"This is especially true on the fabric side," said the source, who works for two fabric producers with clients in the Middle East. "There are essentially two parts to the fabric business: one is the contract part where you're making contacts with customers and trying to build relationships. It's not really a matter of whether your blue is better than the next guy's blue. It's really about relationships.
"The other is knowing where to place product and where the business is. The locals have a much better sense of that than someone who goes there two to four times a year. You need a distributor who is going to have some stock locally and will sell to local retail-type stores or directly to the design trade," he said.
"If you're happy to have a couple of customers, then you can sell the market from elsewhere," said Steven Schroeder general manager, Middle East sales office for the manufacturer, Quaker Fabrics. "But if you want it to be a market you can count on, you have to develop a wider customer base as you would do it in the States."
Quaker opened a Middle East sales office in the spring of 2000 in the Hamriyah Free Zone in Dubai. Companies who lease property in any of the country's nine Free Zones are exempt from customs duties and all other taxes. (The development of Free Zones was enabled in the Emiri Decree No. 6 in 1995.) Zone legislation also permits foreign companies to fully own any enterprises they launch on U.A.E. soil. Beyond Free Zones, trade law dictates that foreign enterprises must open with a local partner who owns 51 percent of the company. Saudi Arabia and Kuwait also have free trade zones.
"The Gulf countries themselves have a lot of potential that still needs to be harvested,'' said Schroeder. ''Unless you are here in the market everyday, it is impossible to know what opportunities exist and how to harness them for maximum growth."
Schroeder said that Quaker plans to expand its sales and distribution operations in the Middle East, Turkey and Africa.
"There are a lot of untapped markets here that I feel hold substantial opportunities for growth. Beyond the Gulf countries there is going to be a lot of business to be had in places like North Africa, India, Africa and the Levant countries. Also, Iran is going to be an opportunity in the next few years."
"Let's buy 50 jetfighters at $1 million a piece and containerloads of carpet."
Today, the Middle East (including Gulf Cooperation Council countries Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) is less friendly to imports than Americans are accustomed to. Not only have a strong U.S. dollar and heavy Middle Eastern import duties conspired to stem the flow of American imports, but a surfeit of cheap imports is entering the region from new production centers. Thus, American upholstery fabrics manufacturers who once just exhibited in the region's trade fairs, have begun adding muscle to their sales efforts in the Middle East.
"It's not as open a market as it was five or 10 years ago when you could sell anything that wasn't nailed down," said Rick Rogers, sales manager for the American producer and converter, Burlington. "The region has more choices, more sources that they can choose from for quality fabrics. They don't have to look just to the U.S. They can look to Europe and South Asia and India Pakistan and China."
The rap on furnishings textiles from these countries is well known: The quality is "not up to snuff," as one exhibitor put it. Rogers said, however, that not only is the quality of goods from these regions improving, but for a few buyers, quality is all but immaterial. "Some customers here tell me that they cannot afford not to buy (from emerging sources) because the price is just so good. Some of the Asian mills are selling at prices — and I'm talking in general terms — that are equal to the mills' cost to make the product. Ten years ago, the Asian options weren't as open."
However because there are few U.S. and European-owned mills in the Gulf area, and no locally-owned textile producers there, the Middle East presents an enticing opportunity. The question is how exactly to take advantage of it.
The response by the producer and converter, Burlington, is to capitalize on the diversity of the region's buyers.
"There's a market here for almost anything. We can sell very low-end flock, and, this afternoon for example, we had a customer visit and place an order for $14 a yard rayon chenilles.''
Rogers, whose territory includes the Middle East, Africa and Eastern Europe, said that Burlington has recently re-staffed its international sales office with reps who will sell the region directly and through brokers. "It's just a question of getting our product in front of them again."
Others in the industry believe success in the Middle East requires more than offering the right product at the right price. "You really must have local agents there if you're to do any serious business there," said an agent who asked not to be named. "The local agents know the customers and the culture of the country.
"This is especially true on the fabric side," said the source, who works for two fabric producers with clients in the Middle East. "There are essentially two parts to the fabric business: one is the contract part where you're making contacts with customers and trying to build relationships. It's not really a matter of whether your blue is better than the next guy's blue. It's really about relationships.
"The other is knowing where to place product and where the business is. The locals have a much better sense of that than someone who goes there two to four times a year. You need a distributor who is going to have some stock locally and will sell to local retail-type stores or directly to the design trade," he said.
"If you're happy to have a couple of customers, then you can sell the market from elsewhere," said Steven Schroeder general manager, Middle East sales office for the manufacturer, Quaker Fabrics. "But if you want it to be a market you can count on, you have to develop a wider customer base as you would do it in the States."
Quaker opened a Middle East sales office in the spring of 2000 in the Hamriyah Free Zone in Dubai. Companies who lease property in any of the country's nine Free Zones are exempt from customs duties and all other taxes. (The development of Free Zones was enabled in the Emiri Decree No. 6 in 1995.) Zone legislation also permits foreign companies to fully own any enterprises they launch on U.A.E. soil. Beyond Free Zones, trade law dictates that foreign enterprises must open with a local partner who owns 51 percent of the company. Saudi Arabia and Kuwait also have free trade zones.
"The Gulf countries themselves have a lot of potential that still needs to be harvested,'' said Schroeder. ''Unless you are here in the market everyday, it is impossible to know what opportunities exist and how to harness them for maximum growth."
Schroeder said that Quaker plans to expand its sales and distribution operations in the Middle East, Turkey and Africa.
"There are a lot of untapped markets here that I feel hold substantial opportunities for growth. Beyond the Gulf countries there is going to be a lot of business to be had in places like North Africa, India, Africa and the Levant countries. Also, Iran is going to be an opportunity in the next few years."
