Mongolia's Economy
Despite success, price and counterfeiting complicate luxury in Mongolia As Mongolia`s economy grows, entrepreneurs like E. Zorigt, owner of Ulaanbaatar-based company Parfums Luxe, have spotted a lucrative business opportunity—selling luxury goods to a population with steadily increasing wealth. Zorigt is the sole distributor of Christian Dior and Givenchy cosmetics and perfumes in Mongolia. Though Christian Dior has had a presence (albeit small) in Mongolia since 1962, reserved only for Russian Communist party officials, Zorigt signed an exclusive distribution agreement with the Christian Dior Group when Mongolia changed to a market economy in 1990. Initially, Zorigt sold pret-a-porter fashion in his boutique, but the discrepancy between European clothing sizes and Mongolian body types became an obstacle to profits. Ten years ago, he began to sell Dior perfumes and cosmetics, and his boutique at Metro Mall reaps steady annual profits. “Cosmetics are universal,” Zorigt said. “Anyone can use them, no matter what size you are, and you use them everyday.” Zorigt himself acknowledges that Dior’s high prices may hinder demand in Mongolia, but he remains optimistic about his future success. “Nowadays, the economy has undergone a very big evolution, so everywhere there are the kind of people I like to call ‘New Mongolians,’” Zorigt said. “And these people prefer original goods—the price doesn’t matter, the quality and authenticity is what matters.” “Our customers today include the families of the President, the Prime Minister, and other VIPs, but some of our customers are ordinary people,” Zorigt claims. “We’re very happy to make these products available to everybody because historically, these type of products were only available to non-Mongolians.” But when the average monthly salary in Ulaanbaatar is the same price as one bottle of Dior Capture Totale anti-aging cream, one wonders whether Zorigt’s products will truly be accessible to everyone, especially given the limitations he faces. Dior holds tight control over their brand and image, and their worldwide distributors are under strict contract to adhere to the pricing, advertising, and promotions conceived by the Dior Group headquarters in Paris, France. Customers can see the same Dior perfume ad, featuring American actress Charlize Theron, in Addis Ababa, Beijing, New York, or Ulaanbaatar. “Each product must have the same logo, the same price on the world market,” Zorigt said. “This is a very important strategy for Christian Dior. Dior gives all its distributors suggested retail prices for its products, and we have no right to change the price according to our own opinions.” But then, Zorigt admits, making these high-end products accessible to everyone is not the point of luxury goods. “If we make luxury products inexpensive enough for everybody, they will lose their prestigious image and the market value will go down,” Zorigt worries. “I’ve had several customers come to my shop and ask me to reduce the price, and I can’t! If I reduce the price below Dior’s suggested retail price, it would damage my reputation as a businessman, and Dior’s image.” In reaction to the exclusivity of the luxury-goods market, production of counterfeit goods has increased exponentially over the last decade, and become hugely problematic for luxury brands worldwide. A recent anti-piracy conference, sponsored by the Council of Fashion Designers of America, claimed that counterfeit manufacturing is responsible for an annual loss of at least US$12 billion in the fashion industry. Though luxury goods account for only 5 percent of the US$600 billion annual counterfeit industry, luxury-goods companies are especially at risk from counterfeiters, because their reputations for quality and exclusivity suffer as well as their profits. The world’s largest supplier of counterfeit designer goods is Mongolia’s neighbor, China. Given the proximity to China, it is common to see fake Chanel and Dior handbags all around Ulaanbaatar. For now, Zorigt has little to worry about; cosmetics are much harder to duplicate than handbags or other accessories. However, Zorigt plans to expand his business to include Dior accessories by the end of 2009. A new seven-story building on Seoul Street, which will house two retail floors and commercial offices, is currently under construction, and Zorigt is confident it will be open by Christmas of next year. However, increased presence of authentic luxury goods in Mongolia may only encourage counterfeiters to flood the market with designer knockoffs—and China may be all too willing to supply its northern neighbor. If Mongolia follows this global trend, Zorigt may face his biggest challenge yet. by Bijani Mizell UB POST |
