Wednesday, 14 August 2013

The State of the Union: Luxury in Sub-Saharan Africa…………………..

Title: Sub-Saharan Africa: Where some purveyors of luxury goods are happy to tread

A good night: empty bottles of champagne at a Lagos nightclub frequented by wealthy Nigerians
On a recent sweaty night at Murtala Muhammed international airport in Lagos, a Nigerian man strutted towards the boarding gates like somebody who knows – or rather hopes – that he is being watched. He was pulling a carry-on Louis Vuitton suitcase, with a smaller Louis Vuitton bag on top. His shoes were from Louis Vuitton and so were his trousers, belt, shirt and sunglasses. It was over-the-top, even by the standards of Nigeria, where some of the elite love to flaunt the luxury brands purchases in the boutiques in European capitals.
Until very recently, flying abroad was the only way for them to buy luxury goods. Now, things may be changing. In April, Ermenegildo Zegna opened a store in Lagos, the first luxury clothing brand to do so. Its setting – on Akin Adesola Street, a busy road that links the lagoon and ocean on either side of Victoria Island, the city’s financial district – is not glamorous. But Zegna, which had never had a store in sub-Saharan Africa, is betting that customers more accustomed to shopping on Bond Street or the Champs-Élysées will not mind.

Zegna is considering opening a store in Angola, which, like Nigeria, has a small but extremely wealthy elite thanks to its oil industry, and in Mozambique, the site of large new gas finds. Africa “is going to be a territory that’s very important for luxury”, even if the market is still at an early stage, according to Gildo Zegna, chief executive. Describing the company’s strategy in emerging markets, including Africa, Mr Zegna told the FT last year that it was targeting “the top 1 per cent of the population, or perhaps even less”.
Zegna’s African expansion may initially seem startling – both Angola and Mozambique experienced devastating wars not long ago – but the company is not alone. Breitling now distributes its watches through wholesalers in at least a dozen African countries, including Ghana. The trend is less surprising when you look at Africa’s place in the global economy. Sub-Saharan African economies are expanding faster than any other region, bar developing Asia, with the IMF forecasting growth of 5.4 per cent in 2013 and 5.7 per cent in 2014. Though many African countries are growing from a very low base – and income distribution is often very unequal – the number of wealthy, status-conscious people is rising and will continue to do so while commodity prices stay high.
For now, the only entrenched market for luxury goods in sub-Saharan Africa is South Africa, which has the continent’s largest economy and a largely urban population. A recent report by the consultancy Bain noted that South Africa has 71,000 dollar millionaires, 60 per cent of the total number in sub-Saharan Africa. That is more than Saudi Arabia or the United Arab Emirates and not that far off the 95,000 millionaires in Russia. Bain estimated that by 2020, 420,000 households in South Africa would have disposable income of more than $100,000 and forecasts that the luxury goods market, worth about $1bn a year, will grow by 20-30 per cent for the next five years.
In South Africa’s favour is its large number of high-end shopping malls that offer the sort of retail space attractive to international brands such as Louis Vuitton, Burberry, Gucci and Fendi, all present in the country. South Africa has its own luxury brands working mainly with leather and jewellery.
In Lagos, the continent’s most populous city, with more than 12m people, there only two small malls of international standard – compared with 74 in Johannesburg – and even these may not be of a high enough standard for the likes of Louis Vuitton.

Francesco Trapani, head of LVMH’s jewellery and watches division, said last year that Africa remained “a very, very small market for us”. Hermès said that despite looking at South Africa, it had not yet found any suitable opportunities to do business or open a shop on the continent. Yet as Zegna’s foray into Lagos shows, the amount of money sloshing around – and the appetite for conspicuous consumption – means that some luxury goods companies no longer feel content simply to wait for change.

According to Euromonitor, Nigeria was the second fastest growing market in the world for champagne between 2006 and 2011, by which time it had became the 17th biggest consumer of bubbly in the world, with 752,879 bottles drunk. Over the five years to 2016 the trend will continue, with only France experiencing a larger rise in champagne consumption, by volume. And it’s not the cheap stuff – Moet, Veuve Clicquot and Dom Pérignon are all popular among Nigeria’s elite.

Carmakers have taken note. Porsche opened a dealership in Lagos last year, a short walk away from the Zegna store. For luxury to take full flight will require the emergence of a middle-class. That said, for some luxury bosses, a narrow band of super-rich people will do for now

Paulina says: For African luxury market watchers like me the above piece is gold.....

No comments:

Post a Comment