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Baku – The Unexpected City

posted: 4 November, 2014

I recently paid a return visit to Azerbaijan to catch up with clients old and new, and I was staggered by how much the city of Baku had changed and developed over the last few years.

Azerbaijan is a name that conjures images of the exotic, but until recently has been little known and much misunderstood. This small republic in the Caucasus is fast becoming a rising star on the international stage and is developing into a key energy, security and trade partner for Europe.

Baku by night

I can assure you that your first impressions of the capital city Baku will be very positive – from arrival at the sleek, futuristic international airport you then glide onto the modern 4-lane highway, then arrive in a big bustling metropolis which resembles a weird fusion of Soviet era high-rise buildings and ultra-modern Dubai-like towers, hotels and new shopping cathedrals.

Baku has a beautiful 3 km seaside promenade (known locally as the ‘Bulvar’) along the Caspian Sea offering stunning views of the city, which is populated with lush green parks and tree-lined pavements. The city is remarkably clean, graffiti-free, and the whole place feels very friendly, open and safe.

You get a clear impression that this is a city which really believes in itself and its new-found confidence and identity.

Travel visas to enter the country are not easy to come by, and tourism is currently limited to citizens of CIS countries, Turkey and Iran, all of whom are able to visit without restriction. This is about to change however, as in 2015 Baku will host the inaugural European Games, and Formula 1 takes to the streets in 2016. Tourism is set to become one of the key drivers fuelling the tremendous boom in the construction of hotels, new shopping malls and luxury residential areas.

Although 99% of the Azeri population is Shia Muslim, the country has adopted an intensely secular and tolerant outlook. A lone shop in the centre of Baku, called simply ‘The Muslim Shop’ shows how rare the public expressions faith are in the capital. In the evenings, restaurants serve Turkish-made beer to customers in Fountains Square, and alcohol is freely available in the city’s bars, cafes and hotels. Most women do not wear headscarves, and there is a thriving night-club scene. It seems that anything goes just as long as you respect your neighbour.

The post-Soviet boom in Azerbaijan appears to have trickled all the way down the population. Azeris seem to be a resourceful and hard-working bunch, often with second incomes, and many budding entrepreneurs who have flourished under the spirit of enterprise encouraged by the government. I met a few of these individuals myself last week, and their ambition and imagination knows no limits!

Bazar Store

Retail is one of the fast emerging new consumer-driven sectors which is helping Azerbaijan to consistently outperform all other CIS neighbours in terms of real GDP growth (5% year-over-year). The majority of consumers still appear to prefer traditional formats such as bazaars, markets and mom-and-pop stores, and this is essentially still a ‘cash only’ economy. There are a few local supermarket operators – indeed Azerbaijan’s top seven grocers represents less than 5% of food sales – but no international player has yet entered the market, and this remains a major market gap.


Hugo Boss

However, there is a new modern era in retailing already breaking over Baku. Walking up Azadliq Square and Baku Boulevard is almost reminiscent of a stroll along Rue de Rivoli in Paris – elegant 19th century buildings are home a veritable who’s who of international brands and haute couture stores, from Mango through to Stella McCartney. Azeri men and women like to dress to impress, and Azeri taste is focused almost exclusively upon European brands – surprisingly few American brands are on show, although J.Crew will shortly debut.

Park Bulvar

The first generation modern shopping malls which sprang up around 5-6 years ago are already looking tired and a little passé in comparison to the new wave of super-regional and luxury Malls such as Mall 28 and Port Baku, both of which stand comparison to anything in Western Europe – seriously impressive retail destinations.

All of these retail brands are via local franchise or license partnerships, with no foreign direct investment in retail as yet in Azerbaijan. In fact, that’s probably the way it is likely to remain in the short-to-medium term – Azeris seem to prize keeping control of their own economic destiny, and are reluctant to be ‘colonised’. However, they are definitely open for business, and are actively seeking to partner with as many international brands that they can get their hands on.

One thing is for sure – the Baku I saw last week will most likely be nothing like the Baku I will see 12 months from now. The scale of investment, construction and economic growth is staggering – reminiscent of the Dubai of 20 years ago. Today, its goal of obtaining developed country status by the mid-2020s looks ever more achievable, and this is definitely a market opportunity which retailers and brands ignore at their peril.

For more photos please see our Pinterest Travel Diary