What makes Africa a promising market for fashion and luxury goods consumption in the coming years?
The African continent comprised of 54 independent states where wealth creation is not uniform from one country to the next, and in some countries with larger economies, only a small segment of the population accounts for the major proportion of the overall wealth.
There are, nonetheless signs which bode well for the future of luxury in Africa. Growing urbanization, the continent’s changing demographic profile with a sharp rise in the youthful population which is embracing technological advances, an expanding middle class in addition to an appetite for luxury goods accompanied by a growing desire for status and the ability to acquire status through the purchase of luxury goods, as well as the recent successful opening of luxury stores in certain countries, are solid triggers for a sustainable growth of the luxury market in Africa.
Overview on African wealth
As the second fastest developing economy only behind Asia-Pacific, Africa has seen an increase in the wealth of its population, nourishing an interest in finer things of life which has caught the attention of international luxury goods companies which are starting to see the continent’s becoming a potential nesting place for opulent acquisitions.
The total individual wealth held on the continent amounts to US $2.3 trillion and around US $920 of this is held by HNWIs (those with US$1 million or more) of which there are approximately 148,000. There are approximately 320 people in the centi-millionaire wealth band category (defined by net assets of US $100 million or more). The top 10 wealthiest countries in Africa by total wealth for 2017 are South Africa, Egypt, Nigeria, Morocco, Kenya, Angola, Ghana, Tanzania, Ethiopia & the Ivory Coast in that order. The total individual wealth held in Africa is expected to rise by 34 percent over the next 10 years, reaching US $3.1 trillion by the end of 2027 (Source: AfrAsia Bank ‘Africa 2018 Wealth Report’).
This study also concluded that the African luxury sector generated approximately US $6.0 billion in revenue in 2017. This figure includes luxury cars, luxury clothing & accessories, luxury watches, private jets, yachts and luxury hotels and lodges. The largest luxury markets by revenue were: South Africa, Kenya, Nigeria, Morocco and Egypt. Note: luxury sector revenue is boosted by a large luxury hotel sector in these countries.
In addition, Knight Frank Research estimates that Africa’s UHNWI (ultra-high net worth individuals with investable assets of at least US $30 million) may expand 59 percent from 1,900 by 2024, the most of all regions globally (Source: Aitken & Rakic, Bloomberg 2015).
What are the key factors driving growth in this part of the world?
Martine Ghnassia, Cofounder InCapsule by Ifop (http://incapsule.ifop.com) Trends and Marketing Consulting department of Ifop Group) who was interviewed for this article, produced an outlook study on sub-Saharan Africa for makers of luxury goods: Luxury & Retail Trends in Sub-Saharan Africa, and on the significant development of luxury goods consumption in this region.
Martine Ghnassia explained that since the beginning of the 21st century, the African continent has seen a period of robust economic growth, supported by high commodity prices, increased foreign investment and improved economic and political governance. But because it is clearly defined, Africa is an easy target for generalizations which are often reductive and one-dimensional. Martine believes that it is time to see it differently, time to walk away from stereotypes and embrace its full potential. The term “untapped potential” is often bandied about when it comes to Africa, but when we drill down to the reality, the numbers speak for themselves. And while it remains fragile, it is making progress as it undergoes a complex process of transition.
Sub-Saharan Africa has emerged in the last 10 years as the second-fastest growing region in the world, after Asia-Pacific, and is projected to maintain this position to 2020 (Source: Euromonitor). All growth indicators are positive: a demographic boom, a rapidly expanding young population, the growth and increased wealth of the middle class, the financial independence of women, urbanization (in 2030, of the 41 mega-cities on the planet, 6 will be African, with 4 in the sub-Saharan zone), development of the hyper-rich (the number of HNWI with more than 1 million US dollars in assets has doubled in 15 years and should be up to 45 percent by 2024), and accelerated penetration of new technologies and smartphone use.
Africa is poised to become the world’s second-fastest growing region for the consumption of luxury goods. In terms of sub-Saharan Africa, its luxury markets are expected to grow by 30 percent over the next 5 years, making it a future El Dorado for luxury brands (Source: Euromonitor).
Which are the countries in Africa most ready for the development of luxury goods and fashion, in which order of importance and why?
The “Luxury & Retail Trends in Sub-Saharan Africa, In Capsule by Ifop” study which Martine Ghnassia advised was carried out for their luxury customers, is based on an analysis of open data (curated by her partner Luxurynsight (http://www.luxurynsight.com), interviews with professionals and experts in the region and decoding of local marketing strategies. “It allowed us to identify 5 promising countries for luxury brands in sub-Saharan Africa, each with different levels of maturity”.
- South Africa “The Established” is tipped as the gateway to the continent’s luxury market, largely due to its well-established shopping culture, increased international exposure, significant innovation, relatively stable and transparent pricing and convenience.
- Kenya “The Steady Grower” is strategically positioned as the ‘gateway to East Africa’ and generally seen as one of sub-Saharan Africa’s most advanced countries.
- Nigeria “The Burgeoning” is Africa’s biggest economic power. Home to the largest population and GDP in sub-Saharan Africa, its market size is a hugely important factor, making it difficult to ignore the opportunity.
- Angola “The Unexploited” has become an increasingly popular investment destination due to its strong economic growth and emerging high-end market.
- Ivory Coast “The Underdog” is Africa’s fastest-growing economy as it is now on the path to peace and prosperity with a strong macroeconomic environment and a solid position in international markets.
Roberta Annan, a Ghanaian entrepreneur creator of the foundation, African Fashion Fund, interviewed for this article believes that the 4 African countries ready for development of luxury goods and fashion in Africa are:
- South Africa: They have 71,000 millionaires, about 60 percent of Africa’s total millionaires. Foreign luxury brands already have shops there. By 2020, Bain estimates there will be 420,000 South African households with more than $100k disposable incomes (Rice, Financial Times, 2013). Luxury companies and buyers are therefore likely to continue to look to South Africa for luxury products.
- Morocco: According to Bloomberg’s Deborah Aitken & Maja Rakic (2015), Morocco and South Africa account for 86% of Africa’s directly-operated luxury stores.
- Nigeria: The Nigerian upper-middle class is booming, especially people working in the oil and gas sector. (Rice, Financial Times 2013). According to Euromonitor, between 2006-2011, Nigeria was the fastest growing champagne market in the world, making them the 17th biggest market for Champagne worldwide. Premier Tax Free stated that Nigerians account for approximately 46 percent of total purchases by Africans in London (KPMG, 2015).
- Angola: Nigeria’s nearest rival, has plenty of dollar millionaires who spend lavishly in boutiques in Portugal and Spain (Rice, Financial Times, 2013). Angola also has a thriving fashion industry.
As part of BMI’s (Business Monitor International) emerging market, Luxury Market Overview report, they closely examined some of their favorite emerging markets including the key luxury sectors to watch. They have divided these markets into four stages of luxury market development based on their different stages of luxury market evolution with consumer purchasing patterns varying considerably according to incomes, consumer preferences and the development of their retail sectors. The stages are 1. Premiumisation, 2. Luxury Take-Off, 3. Big Luxury and 4. Beyond Big Luxury. The two African markets highlighted in their study are Nigeria and South Africa.
Nigeria falls into the Premiumisation stage. Although incomes are increasing, they remain low and only a very small proportion of the population can afford the price point of the big luxury labels. Instead, there are greater expansion opportunities for more affordable areas of luxury where prices of their products are typically in the US $50-US $100 range (i.e. cosmetics, alcohol). The luxury brands looking to enter these markets will often partner with a local franchisee as operational risks to setting up their own stores are too high.
South Africa falls into the Luxury Take-Off stage which includes a rapidly expanding upper income class, combined with significant investment in formal retail spaces and a more established shopping mall culture, begins to open up the market to a diverse range of luxury companies and products (I.e. watches, jewelry, fashion and leather goods). Brands compete for early-mover advantage and set up directly operated stores. Price being still a concern, companies at the higher end of the luxury spectrum will therefore only have a limited presence.
Do buying habits related to local fashion and luxury goods vary from country to country?
As Martine Ghnassia explained, the “Luxury & Retail Trends in Sub-Saharan Africa, InCapsule by Ifop” study shows the mapping of the 5 countries based on their level of maturity demonstrates that purchasing and consumption trends vary from one country to another as these are determined by the development of retail, the presence of brands, the development of media and the cultural influences of the country.
- South Africa: For South Africa, the local fashion scene has grown rapidly over the past couple of years with some brands capturing much attention on the global fashion circuit. This increased visibility is helped by a flourishing fashion week which attracts buyer from around the globe. KISUA, MAXHOSA BY LADUMA NGXOKOLO, RICH MNISI and MMSOXAXWELL are fashion designers emerging on the international scene.
- Kenya: Today, the local fashion industry in Kenya enjoys contributions from first-rate designers with a more subtle aesthetic than in other African countries. Local talent such as AMI DOSHI SHAH, DEEPA DOSAJA and ADELE DEJAK are developing in a country where they have to compete with traditional tailors and bespoke outfits.
- Nigeria: In Nigeria, strong local fashion is the key word. Often characterized as colorful and dramatic. Nigerians see adornment as a way of expression. With Nigerian fashion designer gaining acclaim worldwide, it is impossible to ignore their growing influence on the global landscape. Main local talents are LISA FOLAWIYO, ADE BAKARE and ORANGE CULTURE which attract fashion-conscious clients.
- Angola: There is growing fashion awareness in Angola thanks to the Luanda Fashion Week created in 2014. It mostly features Angolan, Brazilian and Portuguese brands with the main goal of making all of Angola’s fashion talents known throughout the entire world.
- Ivory Coast: Ivorians have less of a penchant for foreign brands. Local designers offer extraordinary designs combining African roots with “modernization”, a unique culture in comparison with neighboring countries that follow a more traditional approach. LAURENCE AIRLINE for men and WOODIN are brands building a bridge between African roots and contemporary needs.
While affordability remains an issue for many consumers in Africa, these emerging aspirational attitudes are a sign of the growth of consumerism, particularly among the younger, urban and more affluent population.
- QUALITY FOCUS: Despite low income levels, consumers attach more importance to the quality of products than price. For fashion and cosmetics products, quality is often linked with international brands. 75 percent of customers save and cut back on spending in other areas to pay more for products that are important to them (Source: Boston Consulting Group).
- BRAND CONSCIOUS: As seen in developing markets, luxury brands are used as a symbol of status and wealth, creating demand for designer labels and heavily logoed products. 1 in 4 young consumers claim that buying well-known brands makes them feel good (Source: BCG).
- MEET LOCAL TASTE: Brands should seek to adapt their offerings to meet local tastes. There’s a clear desire among high spenders to mix traditional luxury with artisanal, DIY and singularly local experiences. 70 percent of consumers feel that brands need to represent who they are, validate and communicate their personal values and provide a sense of belonging (Source: BCG).
To sum up, for an international brand to succeed, it must adapt to local conventions, work collaboratively, encourage local initiatives, establish a presence while respecting local tastes, not impose models from elsewhere and target women with an entrepreneurial outlook. Adopting these approaches can only appeal to Africans, but companies should also pay attention to promoting the marks and symbols of international brands, particularly as Africans are strongly attached to the logos of international brands, viewing them as a sign of social success.
Do Africans make their luxury purchases locally or abroad?
The rich make most of their luxury purchases overseas, or at least order them from abroad. This is because the individual market is still comparatively small, and retail space of the quality required by top brands is seldom available (Ric, Financial Times, 2013). According to a KPMG 2015 study, wealthy Africans prefer to spend on luxury goods outside of Africa, showing preference for locations such as London or Paris.
What international fashion and luxury brands do Africans favor?
Some of the factors affecting luxury purchases tend to vary from country to country but there are a few basic considerations which are prevalent in most countries. Status reigns supreme, mirroring what is observed in American and European markets and general brand recognition all play a role in purchase decisions.
For Roberta Annan, menswear is more important than womenswear in Africa, which is true in emerging markets in general. According to KPMG’s 2015 report on Luxury Goods in Africa, male income continues to outpace their female counterparts’ earnings trajectory. This may explain why the market is more geared towards menswear since the males have greater spending power.
According to New World Wealth, many international luxury brands opened stores in Africa during the global boom period 2002-2007: Zegna (South Africa, Nigeria & Egypt), Louis Vuitton, Burberry & Gucci (South Africa & Morocco), Ferragamo (South Africa & Morocco) and Dolce & Gabbana, Jimmy Choo, Kiton, Dunhill & Thomas Pink exclusively in South Africa and they believe that the following brands are likely to open brand stores in Africa during the next decade: Canali, Chanel, Dior, Christian Leboutin, Hermes and Mulberry.
Items commonly found in the wardrobe of a HNWI (Source: HNWI wardrobe, New World Wealth) are Patek Philippe & Rolex for women’s watches, Breguet, Vacheron Constantin, Ulysse Nardin, Frank Mueller & Breitling for men’s watches. As for women’s handbags, Louis Vuitton, Prada & Gucci; women’s shoes, Christian Leboutin, Jimmy Choo, Prada & Gucci and finally, Dolce & Gabbana for women’s ready-to-wear.
Maryanne Maina, a Kenyan-born luxury communications and lifestyle services consultant who also does personal shopping for affluent Africans, interviewed for this article, advised that other desired European luxury ready-to-wear brands among her clientele are Tom Ford for men and Ralph & Russo, Elie Saab, Dior & Zuhair Murad for women.
For Martine Ghnassia, in order for an international brand to succeed, it must adapt to local conventions, work collaboratively, encourage local initiatives, establish a presence while respecting local tastes, not impose models from elsewhere, and target women with an entrepreneurial outlook. Adopting these approaches can only appeal to Africans, but companies should also pay attention to promoting the marks and symbols of international brands, particularly as Africans are strongly attached to the logos of international brands, viewing them as a sign of social success.
Communication and digitalization
Growing technology in the region provides new ways of reaching consumers. Africans are increasingly connected, with high mobile penetration-having reached 1 billion in 2017. This offers opportunities in various consumer industries, which include finance, apparel goods, beverage, beauty and personal care (Source: Euromonitor International). Mobile phone use has dramatically increased in sub-Saharan in recent years spurring innovation and luxury shoppers in this market, are making more purchases via their smartphones.
Many international brands have not yet developed compelling content geared towards emerging markets and it is often the case in these markets, that consumers extensively research luxury products on line before purchasing.
Social media also plays a pertinent role in brand marketing in most African countries and is often more effective than a brand’s own website. There is an increasing presence of local African fashion influencers on Instagram such as Fashion Breed, What My Boyfriend Wore, Baked Online, and about 25 or so well-known UK-based African fashion influencers such as styleismything, natashandlovu, tostos with strong international followings.
Exciting plans for the future
Roberta Annan, a Ghanaian entrepreneur who founded her own company initially as a social enterprise sponsoring showrooms which morphed into, an impact fund for African creatives and interviewed for this article, has recently launched the Impact Fund for Africa, a 100 M€ investment fund in partnership with The African Fashion Fund, a non-governmental organization she formed in 2014 which empowers fashion designers from Africa and its diaspora to succeed in the fashion industry along with the Ethical Fashion Initiative (EFI) a flagship program of the International Trade Centre, a joint agency of the United Nation and the World Trade Organization. The African Fashion Fund seeks to provide a platform which nurtures, transforms and promotes fashion brands of African designers giving them professional support and equipping them with the business acumen they require to launch their brands internationally.
Some of the goals of the fund are to promote female entrepreneurship, boost Africa’s economic reputation, advance Africa’s position in the luxury fashion industry, promote needed diversity in the luxury fashion industry and intercultural exchange between Africa and the West. AFF’s incubator program provides mentorship with high profile industry players. A couple of designers having profited from these funds are Nigerian designers Kenneth Ize and Lanre Da Silva, among others.
One of Roberta Annan’s concerns is that in 10 years, 65 percent of the population in Africa will be under 25 years old and she feels there needs to be a way to promote entrepreneurship to maximize opportunities.
Her work in fashion extends to her role as the founder of the Frallain Group, a leading promoter of African luxury brands and a provider of risk capital to global luxury brands and incorporates social impact within the brand’s spirit and acts as the funding partner for the incubator program. Frallain assists in providing a platform with industry experts in fashion, public relations, sales and distribution for the commercialization of these brands. Her aim is to eventually create an e-commerce platform which would use finance facility to access capital and global market for African Luxury Brands.
Her goal would also eventually be to use technology to create an e-commerce division with both a logistics and financing arm partnering with a company such as DHL, which has a strong presence in Africa making it easy for international retailers to buy and promote local African talent.
Roberta Annan states “Africa is the last frontier for international luxury. We are in a position to redefine sustainable luxury and set the international standards. We have a rich culture and abundant natural resources. With the right investment and expertise, we can be in a very competitive position”.
Could Africa indeed offer long-term growth opportunities for fashion and luxury brands?
The continent needs to have a more sustainable growth so that the luxury market is not driven by just the super-rich.
As the banking market has moved from scratch to digital in Africa in less than half a decade, could the luxury market in Africa be the laboratory of a new way to sell (and produce) luxury in the future?
One thing is for sure, Africa never ceases to amaze us!
Terri Cohen, Founder & President of Terri Cohen Fashion & Luxury Advisors
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