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July 25 | east africa investment | 537 views | 0 Comments

By Zeenat Moorad |

Sub-Saharan Africa is a promising market for luxury goods as urbanisation, economic development and increased affluence among the rising middle class drive growth across the sector.

The region is experiencing the second-fastest economic growth, after Asia-Pacific, and between 2008 and last year the luxury goods sector grew 35%, the Global Powers of Luxury Goods report by professional services firm Deloitte said on Wednesday.

Deloitte Africa leader for consumer business Rodger George said that urbanisation had led to more people becoming aspirational and having the money to back their aspirations.

Although significant risk remains in emerging markets, and growth is from a low base, the appetite for luxury goods in these markets is increasing.

“We expect luxury goods market growth in developed economies to pick up speed for the rest of this year. And for those emerging markets that have not accumulated too much debt, like much of sub-Saharan Africa, the long-term outlook is certainly positive,” Mr George said.

South Africa and Nigeria are regarded as the region’s emerging markets, and rising purchasing power has seen brands increasingly turn their attention to the continent.

Ermenegildo Zegna, purveyors of made-to-measure suits for Hollywood stars, opened a store in Lagos last year, and has three more planned. Hugo Boss also has an outlet in the city and Prada is expected to follow suit. Emporio Armani, Versace, Paul Smith, Jigsaw and Longchamp are due to open in South Africa in November.

Mr George said that while there was a lot of intra-African shopping being done through South Africa, “you do have situations where for people in Nigeria, the UK is closer and there is also a wider range of luxury goods than in South Africa”.

Based on data collected on tax-free shopping in the UK, Nigerians are among the top global spenders. In addition to shopping in South Africa, the East African market tended to buy in Dubai too, Mr George said.

Aspirations to expand are, however, being capped by the lack of suitable real estate and quality shopping centres in most up-and-coming powerhouses.

“Luxury manufacturers like to own as much of the supply chain as possible so they can secure quality and pricing,” Mr George said.

“To own that whole chain in Africa might be difficult, logistically. Also, the practicalities of opening up a shop in a foreign country where you haven’t got a local partner is quite difficult, so some will look at the franchise model,” he said.

South Africa, with its array of malls, remains Africa’s most developed luxury retail sector.

Although its economy has slowed, demand for designer trappings among locals remains robust. An indicator of this is the automotive market in South Africa, which had witnessed notable growth of Porsche and Maserati purchases, the report said.

Source:  http://www.bdlive.co.za/business/retail/2014/07/24/urbanisation-drives-hunger-for-luxury-goods

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