Egypt’s real potential as a luxury market for major international luxury fashion brands

CPP Luxury Industry Management Consultants has been closely following Egypt for the past 10 years, as one of the least developed luxury markets, which poses solid potential. The luxury fashion, jewellery and accessories segments lag behind much more developed automotive – all major luxury car brands already present in Egypt, latest opening being one of the most advanced and sophisticated Mercedes-Benz showroom.

HOTELS

As for hotels, with a few exceptions, all luxury hotel brands are present in Egypt, the most recently opened being a lavish St Regis. W Hotels is in final stages of construction and could open by the end of this year. Other projects announced for Cairo include another Marriott International luxury brand. New arrivals will hopefully be a motivation for many hotels to undergo much needed renovations.

Among the long time established luxury hotels only the Four Seasons Hotel Cairo at First Residence was renovated, its Qatari owners (ARTIC) adding a Four Seasons boat, docked on the Nile right in front of the hotel with an exceptional array of dining / cuisine options. The property is attached to a shopping mall First Cairo, over a decade ago THE luxury shopping destination of Cairo. The mall would require extensive renovations, to potentially become a choice for top international luxury brands.

The past decade saw a boom in the development of grand luxurious compounds with villas and mentions rivalling Beverly Hills, but on a much bigger scale. Almost each such complex boasts various sports, such as tennis and golf, but also state-of-the-art gyms. Almost all of them have a ‘Club’, similar to the US model. This has led to exceptional sustained demand for luxury home interiors.

WATCHES

The watches sector is relatively well covered, however, only Rolex and Hublot have mono-brand stores in Cairo (each brand with one mono-brand boutique), most of the other brands are represented in wholesale / multi-brand. The watches, writing instruments and small accessories sectors have been driven for decades, similarly to other emerging markets, by gifting closely related to extremely high levels of corruption.  The watches sector is sourced by the international grey market, some of the so-called distributors ”importing” by suitcase from Dubai or Istanbul airports tax free shopping.

Felopateer Palace represents exclusively Rolex and Hublot in Egypt. In October 2020, the company completed works of a purposely built shopping centre in New Cairo, FP ICON, which, has since remained empty. Although rushing to set up logos and mono-brand spaces at FP ICON, Felopateer is neither the exclusive distributor nor the franchisee of Audemars Piguet or Chopard. Mention must also be made that in the past two years , most probably because of its main customer profile, Felopateer Palace lost the distribution of Patek Philippe (exited the market in 2019) and Montblanc – which now operates directly.

Other major luxury watches distributors in Egypt include Time Trade (Omega, Longines, TAG-Heuer, Blancpain etc) and BTC (Ulysse Nardin, Corum, Rado etc).

Tiffany&Co, Bvlgari and Cartier are present with mono-brand boutiques opened over a decade ago within the First Mall Cairo, each store featuring a dated retail design concept. The Tiffany&Co boutique boasts such an old retail design concept that the owners may no longer even have distribution rights.

The constantly evolving metropolis and its constant expansion is posing a major challenge in terms of polarised areas, for example, the downtown, as it used to be known no longer being frequented and usually avoided because of traffic and long distances. ‘New Cairo’ is seemingly shaping as an important destination.

FASHION

With the exception of Burberry (3 stores), Paul & Shark  (2), BOSS, Emporio Armani, Polo Ralph Lauren (4), Carolina Herrera, Billionaire, Philip Plein, Longchamp, Tommy Hilfiger which are all represented with mono-brand franchised stores in Egypt, all other luxury fashion brands are distributed by the leading local wholesale distributors (multi-brand stores), EGO (several stand alone locations, street-level) and Beymen (located at Four Seasons Hotel Cairo Nile Plaza. Yet, the stock for most brands within these multi-brand stores is limited, both in product range and sizes. Mention must also be made that not all merchandise is of the most recent seasonal international collections.

BEAUTY

Probably the most developed luxury sector, the market is led by locally developed company Mazaya, which operates the largest number of stores throughout Egypt (20), all of the highest international standards. All the major fragrances and cosmetics brands are represented. When it will enter the market, Sephora will face a very challenging entry, with such a high calibre competitor.

Market features such as the show-off factor and a very dynamic social life – vibrant lifestyle, make Egypt an ideal luxury market. It is widely known that Cairo is a hub for cinema and music with countless Egyptian celebrities revered and adored in the entire Arab world. Cairo is a regular destination for wealthy visitors from GCC, especially Saudi Arabia, their primary interest being entertainment (dining, lounges, clubs) and casinos (even Caesars Palace has an outpost in Cairo). The visitors are also potential luxury goods shoppers, at an estimated of 15 to 20% of total.

HOME COLLECTIONS / FURNITURE

With the booming luxury residential market, both upcoming compounds with huge mansions / villas but also penthouses and condominiums, the demand for luxury home decor, interiors and furniture remains very high. No major international luxury home collections / interior design brand is present in Egypt. The most important wholesale distributors with mono-brand stores at the major malls are Mazloum ,

POTENTIAL

Bridal, evening gowns, formal menswear (ceremonial) and children’s wear present the biggest potential, without any major such specialised international brands being present in Egypt.

For now, wealthy consumers have been shopping abroad, especially in Europe, Turkey or the U.A.E. However, even before the pandemic Egyptians would face the major challenge of visas and pricey air fares. By adding accommodation and all other expenses, luxury branded goods can be 30% more expensive than in Milan or Paris.

Major luxury fashion brands have been monitoring our reports on Cairo many showing keen interest to enter the Egyptian market. Louis Vuitton, Gucci, Prada, Dolce&Gabbana, Armani, Fendi, Hermes, Chanel, Tom Ford and Dior are among the international luxury brands with high potential, provided the right location is found – either a wing / part of one of the large shopping mall or a dedicated exclusive shopping gallery or smaller size mall. Street level stores are out of the question.

One of the main motivators for Egyptian wealthy consumers to buy locally will be not only that they are purchasing the latest collections but also that the merchandise is genuine. Mono-brand stores through high-trained buyers will be able to ensure that the stores are impeccably stocked to meet demand according to various criteria such as design / aesthetics (Egyptian may have particular preferences), occasion, colours, sizes.

Another critical factor is identifying a long term investor / developer, with a clear vision and commitment, and not last, but proven financial resources which can sustain huge initial one-time costs but also an investment in inventory, being known that such project do not reach a break-even point earlier than 3-4 years.

With many brands expressing a potential interest to enter the current market, CPP is seeking potential locations of 8.000 to 10.000 sqm. Some brands would expand with a direct operation (DOS – directly operated stores) while others would expand with a franchisee partner. The respective shopping gallery / smaller size mall, would also include fine dining with franchises of international success stories.

With such a sophisticated consumer base, exceptional attention and specific investment needs to be made in constantly training staff so that the wealthy Egyptians would find no difference in service standards compared to store abroad. Buying is another critical factor and usually initial 4 to 5 seasonal orders have a much higher margin of error – it is a matter of style (aesthetic), size but also pricing (ex in emerging markets consumers would prefer a leather made item instead of a recycled plastic material)

CPP has also received interest from two of the major international luxury department stores to potentially enter Egypt.

For more details: office@cpp-mc.com 

More from ANALYSIS

---