Looking Beyond the Obvious in Sub-Saharan Africa – Part I

For many fashion brands, South Africa has been the stepping stone into the
sub-Saharan region due to the attractive economic growth and affluent
market. But has the time now come to start expanding north?

According to Euromonitor International, sales through apparel and
footwear specialists in Nigeria and Kenya are expected to grow by 93
percent and 57 percent in constant 2014 value terms, respectively, from
2014 to 2019, highlighting growth opportunities outside the wealth-hub of
the region. This is the first of a 2-part series of articles that sets out
to examine growth drivers in the region, as well as the competitive
landscape in store-based retailing; the second article will review dynamic
growth in e-commerce.

The allure of westernisation

As often seen in developing markets, clothing is used as a symbol of status
and wealth, creating demand for designer labels and heavily logoed
products. This bling-fuelled consumption culture is being driven by a young
population, urbanisation and a growing middle class. As aspirational
consumers place a premium on appearance, retailers have responded to this
by introducing credit schemes enabling consumers to purchase products they
otherwise could not afford.

The majority of Africans are already familiar with Western brands due to
the huge second-hand market that exists across the region, offering a
significant advantage to those brands looking to open first stores.
Furthermore, international brands are associated with quality and wealth,
with many Africans choosing to purchase second-hand clothing arriving from
overseas rather than new products from local brands.

Although there is a strong desire for Western clothing, fashion brands
hoping to appeal to this wide consumer base will still need to alter their
product offerings to incorporate bold colours and fitting designs that
reflect local culture and preferences. Furthermore, according to
Euromonitor International, sub-Saharan Africa will have the highest growth
globally in the child population from 2013 to 2020. Combine this with a
growing middle class, and international brands that are affiliated with
quality have considerable opportunities in childrenswear.

Heading north, but is it twice as nice?

The luxury industry is starting to acknowledge the potential in the region,
with Hugo Boss and Ermenegildo Zegna entering Nigeria back in 2013,
capitalising on the growing demand for luxury products. Expansion of South
African businesses into Nigeria and Kenya is further evidence of the growth
potential in these countries. Mr Price, South Africa’s leading apparel and
footwear retailer, with a 9 percent market share in 2014, has opened stores
in both Nigeria and Kenya and has been gaining traction as its trend-led
product and value pricing have proved popular with consumers.

The fact that Woolworths, an established South African retailer, entered
Nigeria in 2012, but withdrew in 2014 is evidence that the country is
moving towards a modern, competitive retailing environment. Woolworths was
unable to successfully compete against existing fashion retailers, such as
Twice as Nice, Fast Forward Stores and Da Viva, which offer a mix of
African designs and fast-fashion products at competitive prices.
Additionally, the impact of high duties and increasing rent rates, fuelled
by a lack of shopping centres, is putting further pressure on retailer’s
operational costs. Kenya, on the other hand, has relatively few established
fashion brands, allowing Woolworths and Truworths to gain ground there;
however, informal open air markets and street traders remain popular
distribution channels for consumers.

Logical steps lead to Nigeria

Nigeria, with a consumer base simply too big to ignore, will be the next
logical step for those fashion brands already operating in the region, and
as local business partners venture north, the time has come to start
considering expansion outside of South Africa. First-mover advantages never
guarantee success, but could prove beneficial when entering countries such
as Nigeria. However, expansion in this region is likely to be restricted by
the scarce amount of prime retail locations and slow development of
shopping centres. This, in turn, is likely to drive dynamic growth in
e-commerce. While this is not a region promising wealth overnight,
long-term investment could prove fruitful as Africa begins to establish
itself as fashion’s final frontier.

Written by Bernadette Kissane, Apparel and Footwear Associate at
Euromonitor International

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