VIVID Managing Director talks about African Luxury

Today’s post is an article written by Anina Malherbe, CEO and MD of Vivid Luxury, was recently published in Le Helderberg Magazine and offers insight into the African luxury market.

The Luxury Boom

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 For decades the African continent has been perceived in a negative light. South  Africans have somehow become immune to this stigma, being aware that Africa is not all about such negativity. It has not been easy to change this perception, particularly in the face of negative international media reporting. However, during the past few years a profound change has taken hold, gaining momentum. The message is clear – South Africa is open for business and able to compete effectively in the global luxury goods market.

Investors are eyeing Africa, including European luxury brand houses. Extensive studies have shown phenomenal growth in a number of African countries, resulting in increased disposable income and a strong upper middle-class, now being described as a rapidly emerging market. It has developed into a market with unequalled potential for luxury brands, something which role players in the local luxury industry, like me, find extremely exciting. It is obviously not without its challenges, but the change in perceptions and positive growth are encouraging.

A recent study indicated that at least a dozen of Africa’s economies recorded growth beyond 6% per annum over the past six years. World Bank figures suggest that Sub-Saharan Africa has exceeded East Asian growth in eight of the last ten years. Africa is on the proverbial ”launch pad”. With China’s growth slowing down, companies are turning to Africa for investments. Even China is investing in the abundance of natural resources available. As a result, the elite is getting richer and the luxury market sector growing accordingly.

According to a Credit Suisse Global Wealth Report, the 51,000 South African dollar millionaires in 2009 grew to 71,000 by 2011 and is expected to rise to 240,000 during the next five years. These individuals have an appetite for luxury, consuming 11 times more champagne than the Chinese population. Total luxury spending has experienced a growth of 43% between 2005 and 2010, compared to 6% in developed markets. Where would you invest?

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International luxury brands are setting up shop in Africa. Their key challenge is to understand African consumers who are still relatively naive and not as receptive to lesser-known brands, already popular elsewhere. This obstacle may require celebrity brand ambassadors to act as role models in the targeted consumer demographic. This should be combined with aggressive marketing tactics, targeted PR strategies and product mixes that are suitable to the relevant market.

The rapidly growing black middle and upper middle classes, referred to as ”Black Diamonds,” are currently the targeted consumer group for luxury brands; with the female sector accounting for nearly 40% of the spending power and being considered to have significant influence, by way of personal networks, according to a Unilever Institute study.

A further emergence is the return of skilled young Africans to their African roots, leaving behind their highflying Fortune 500 positions in Europe to start giving back to Africa. Leading business schools in the West are joining in on the game. The London Business School even held an “Africa Day”, appropriately named, “Africa: Taking Ownership”. INSEAD, based in France, has an Africa Club, listing former management consultants and investment bankers wanting to move back to the continent because, says one, they see an “opportunity to work at senior level with relatively little experience”. For them, Africa is like India and China ten years ago.

Swaady Martin-Leke, previously the acting CEO of General Electric Transport, Sub-Saharan Africa, and now founder and CEO of Africa’s first luxury tea brand, YSWARA, is but one example.  She knows business, the African market and understands the potential the luxury industry has to offer Africa. Swaady believes a country’s global image and the gateway to changing the face of Africa, is their luxury industry. YSWARA empowers Africa’s women and is helping to strengthen the capacity of artists and farmers to benefit from global markets.

The wealthiest hundred individuals in South Africa have experienced significant growth in their wealth of approximately 62% between 2009 and 2010 which furthermore fuels the demand for luxury brands. For a country with an apparent negative image, the affluent now require the assistance of lifestyle services companies like Quintessentially, a private concierge service, that organises everything from daily administration to more elaborate requests by celebrities, to help them spend their cash.

Brand houses are becoming knowledgeable within the market and consumers educated in respect of product choice and the quality associated with luxury brands. The next step is to ensure that luxury brands expand upon their exposure and image in becoming part of the African lifestyle. The International Herald Tribune would have hosted their annual Luxury Conference in Rome and part of this year’s focus was Africa. Attended by international luxury brand house representatives, producers and marketers, discussions around the Africa potential, both as a producer and consumer of luxury goods, will have even more impact on the interest shown in Africa. Exciting times lie ahead for our continent, and I, for one, am bracing myself for some exciting developments.


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