After Asia, Africa and the region’s new elite are now being eyed by luxury brands such as Estee Lauder. In fact, a recent study now pegs the continent’s luxury market at around 2 billion. Learn more about the various strategies that global brands are embracing as they foray into the continent in this FT.com report.
Sub-Saharan
Africa was dismissed for decades by the luxury industry, and has
attracted the attention of international heavyweights only in the past
two years.
Hugo Boss, Estée Lauder and Ermenegildo Zegna are among those who
have established retail outlets in Nigeria’s big cities, and others are
following suit with the help of local partners.
Meanwhile,
South Africa and Kenya, long-established shopping hubs for wealthy
western tourists, have seen a boom in retail and mall developments that
is prompting investment by the world’s largest brands.
But with natural resources fuelling economic growth elsewhere in
Africa, could the luxury industry have found fresh frontiers for growth
beyond its traditional strongholds?
A recent
study by management consultancy Bain & Co
would suggest so. It estimates that the continent’s luxury market is
now worth €2bn, thanks to a 35 per cent rise in overall sales in the
past four years.
“Our target customers are the emerging middle class, the established
middle class and the affluent African consumer who’s probably extremely
well travelled and brand savvy,” Sue Fox, managing director for Estée
Lauder in sub-Saharan Africa, told journalists earlier this year.
As well as opening a crop of MAC stores in Nigeria, the US beauty
giant also plans to enter Botswana and Zambia next year, It also has
announced a move to take its fragrance brands into Ivory Coast, and has
identified property opportunities in Mozambique, Angola, Ghana, Kenya
and Tanzania.
William Lauder, the group’s chairman,
told the Financial Times
that the rise in power of the global traveller – particularly from
sub-Saharan Africa – had triggered the company’s push into new
territories.
“In 2008, MAC opened a store in Paris’s Strasbourg St Denis, a
neighbourhood with west African beauty supply stores frequented by
immigrants and away from more traditional upscale precincts,” he says.
“Wealthy visitors soon spread the word and the brand garnered a cult
status back in that region before Estée Lauder had even set foot in the
francophone African market. That region is going to grow into a big
business for us.”
A globetrotting moneyed elite from new African frontiers is also
fuelling luxury flagship sales on the more upmarket streets of
recession-mired pockets of Europe. For example, Gucci executives say
privately that Angolan custom in Portugal grew 90 per cent last year –
to represent just over half of sales there.
“I am hearing more and more about the Angolan appetite for luxury,”
says South African retailer Hanneli Rupert, adding that there has been a
noticeable rise in African frontier market spenders coming to South
Africa to make premium purchases.
Industry experts also remain sceptical of a rapid rollout of retail operations in these countries in the near future.
While many western brands are combating this by holding “trunk shows”
or private dinners to entice new clients, business growth will remain
relatively modest until a greater on-the-ground presence can be
established.
John Obayuwana, the founder and managing director of the Polo Luxury
Group, says: “There are, and will continue to be, considerable
challenges for western brands looking to enter the market beyond South
Africa. Even in Nigeria there are big headaches, let alone elsewhere.”
His company acts as local partner and intermediary for several luxury
groups.
He adds: “First they have to deal with the government, with all the
regulations, duty taxes, bureaucracy and even corruption that goes with
establishing a business in these places. Then, you must deal with the
absence of any retail infrastructure. It’s going to be really tough
going for some time to come.”
Some investors think the solution to providing African consumers with
access to luxury products could lie closer to home. In 2010, Actis, a
private equity fund focused on emerging markets, acquired Vlisco, a
Dutch company that manufactures and distributes patterned wax fashion
fabrics. Manufacturers and consumers buy them to create bespoke dresses
in its exotic African prints.
The company has nearly doubled in size since it was bought, with
two-thirds of its employees scattered across sub-Saharan Africa.
This unusual platform has proved extremely attractive to those
looking to benefit from a large young African population and rising
middle class.
Murray Grant, an Actis partner, explains: “There is a considerable
consumer population emerging in Africa but it is scattered across 55
countries. What made Vlisco a sizeable business opportunity was the fact
it had successful operations in so many of them.”
Ms Rupert says that she is noticing a growing trend for African luxury consumers looking to buy local brands or product.
“Beyond fashion ... there have been huge surges in demand for
upmarket food and wines or home interiors with a strong African
aesthetic.
“There is unquestionably a demand for Western luxury goods, but as
the shopper base grows, so will a crop of homegrown contenders. It’s
exciting to watch the market unfold.”
William Lauder’s keen business sense has helped grow the Estee Lauder Companies’ operations beyond traditional markets. For more news and updates about ELC’s global strategies, follow this Twitter account.
