Ups And Downs Of Luxury Businesses In Africa
Written by Maryanne Maina | From Luxury Business In Africa
Bain & Company stated that the luxury industry would be worth $279.5 billion this year and Euromonitor further added that Africa’s luxury market is worth $4 billion in 2015.
There is an increase in African billionaires and millionaires who are driving luxury consumption for the luxury products and services such as private jets, champagne, timepieces and other items. This creates the need for more luxury goods and services in the continent.
An individual has various options of managing a luxury brand; through a joint venture, franchise or owning the store. To achieve luxury requires high investment for capital, set-up costs, production of items, as well as salaries, rent and other operational costs. From Nigeria and South Africa business owners share their insights in the game of luxury.
Coscharis Group Ltd. in Nigeria retails various luxury brands inclusive of Rolls-Royce and Jaguars.
Their client base ranges from entrepreneurs, the Ultra-High Networth Individuals and Very Very Important People (VVIPs) who include the royal families. Some of these individuals purchase the luxury cars as collectors’ items. The business has been faring successfully with a few hitches caused by external and internal market factors.
“We are faced with several business challenges in the Nigerian market,” explained Cosmas Maduka Jnr., the Executive Director of Coscharis Group Ltd. “The Nigerian currency has been devalued by over 45% in 3 months which has led to an increase in prices. Cash flow is very tight. We also have the election period and the violence by Boko Haram which has led to a tough business environment.”
Additional challenges have been caused by grey market products; car dealers without franchise agreements bring in luxury cars into the market.
“There are car dealers selling Jaguars, BMWs and other cars but they are not official retailers, therefore they can’t offer sales services,” Maduka further added. “Therefore, if the car breaks down, you will not get service from these dealers as they are not under franchise agreements. We ensured that we provided services even to the individuals who purchased cars from other dealers.”
Hanneli Rupert a trained painter founded Okapi in 2008 in Cape Town, South Africa with the aim of sustainable development by using natural resources from South Africa to create luxury products. Okapi is the name of an African antelope.
Her products included women’s bags, wallets and purses made from various exotic skins such as crocodile. She also uses the skin from the Blesbok which is a type of antelope with strong skin suitable for bags and springbok horns used to make charms and cuffs. The range of luxury items include the Ayesha bag made from Scarlet Red Blesbok and gold hardware retails at $1 238.24, Yemaja made from Ostrich skin with Gold Hardware is $3 018.21 and the wallet made from crocodile skin and gold hardware is $1 408.50.
“Making a crocodile skin bag can take 3 to 6 months, from beginning to the end of the product. I work with the best crocodile farm and tannery in South Africa and skins are hand selected,” explained Rupert.“Because each our crocodile pieces are handmade one of a kind they each have to be priced individually.”