Sub-Saharan Africa To Be ‘Battleground’ For Luxury Goods

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Written by Dana Sanchez

Sub-Saharan Africa is set to become a key battleground for the luxury goods industry, BusinessDayLive reports.

Luxury sales, while traditionally concentrated in South Africa and Morocco, are starting to expand in new Sub-Saharan African markets like Angola and Nigeria, according to a report by Zeenat Moorad.

In Lagos’s wealthiest district, Victoria Island, Italian luxury fashion house Ermenegildo Zegna opened a store this year on the same strip as luxury car maker Porsche. The company makes made-to-measure suits for Hollywood stars Tom Cruise and Robert De Niro.

Two months earlier, Hugo Boss opened a store in the city.

Other luxury goods groups such as Cartier, Louis Vuitton, Burberry, Gucci, Fendi and Salvatore Ferragamo also have a presence on the continent.

Total luxury goods revenue in Africa is expected to reach $2.7 billion this year, up from $2.03 billion in 2011, according to Paris-based Bain Company’s worldwide market study.

Lead author of the study Claudia D’Arpizio said with China’s growth slowing, Africa is poised to have among the fastest-growing economies. “Luxury sales are still very concentrated in South Africa and Morocco, but brands are starting to expand in new markets like Angola and Nigeria.”

The Bain study suggests that luxury goods sales will increase 11 percent this year — demonstrating Africa’s potential for upmarket goods.

Growth in China cooled after a state crackdown on public officials’ spending on luxury and anticorruption campaigns.

Bain’s findings on Africa support a report from London-based Euromonitor, which said in October that sub-Saharan Africa was set to become a key battleground for the luxury goods industry.

“Between 2008 and this year, sales of luxury goods grew 35 percent in current value terms, and are set to increase by a further 33 percent in the next five years in constant terms,” the research firm said.

According to the Euromonitor, sub-Saharan Africa is experiencing the second-fastest global economic growth — behind Asia-Pacific — and is home to five of the 10 fastest-growing economies in the world. These include Nigeria, which was the third-fastest growing market in the world for champagne between 2007 and last year.

Luxury brands and retailers are facing many challenges, said Euromonitor luxury goods research head Fflur Roberts. “Poverty remains widespread, infrastructure is weak, retail markets are undeveloped and brand awareness is lacking.

“Corruption can also be a problem, as can political instability in some countries.”

The deluge of counterfeit luxury products remained an issue.

Nonetheless, Roberts said more luxury brands were certain to open new outlets in the sub-Saharan Africa region. “Prada, for example, has confirmed plans to open in Angola, which could be a good bet for Nigeria next year. To succeed, brands will need to overcome these challenges through careful research of suppliers, local partners, end consumers and the business environment.”

Africa’s ultra-high net worth population increased 9.5 percent this with a combined wealth of $350 billion — a 7.7 percent increase over 2012, according to Wealth-X in its UBS World Ultra Wealth Report.