Part I: The Ups & Downs Of Luxury Businesses In Africa

By Maryanne Maina Published: February 11, 2016, 7:47 am
Kenya luxury car market. Photo: naibuzz.com

This article was first published by Business of luxury in Africa

It is estimated that the global luxury industry was worth $279.5 billion in 2015, with Africa’s luxury market accounting for about $4 billion of this, according to Euromonitor.

Over the last decade, there has been an increase in African billionaires and millionaires who have driven luxury goods and services consumption  on the continent with their demand for private jets, timepieces and other items.

This has creates the need for more luxury goods and services in the continent and entrepreneurs across the region have taken up the challenge to bring these luxury brands to the masses: through a joint venture, franchise or owning the store.

For a luxury business, one often requires high capital investment and also be able to stomach the numerous set-up, production and other operational costs.

Some of these luxury business owners from Nigeria and South Africa shared their insights on how they’ve managed to succeed in these emerging high-end market.

Nigeria’s Coscharis Group Ltd., which retails various luxury brands inclusive of Rolls-Royce and Jaguars, in the West African nation said their client base ranges from entrepreneurs, the Ultra-High Networth Individuals and Very Very Important People (VVIPs) who include the royal families.

According to Coscharis, some of these customer only purchase luxury cars as collectors’ items.

But the business has faced 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 percent in three 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 Maduka said there are also grey market products such as car dealers without franchise agreements importing luxury cars into the Nigerian 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, which means an African antelope, sells women’s bags, wallets and purses made from various exotic skins such as crocodile, he Blesbok — a type of antelope with strong skin suitable for bags, and springbok horns used to make charms and cuffs.

Some of her luxury items include the Ayesha bag made from Scarlet Red Blesbok and gold hardware that retails at $1 238.24. Other include the Yemaja, which is made from ostrich skin with Gold Hardware, that sell at $3 018.21 and a wallet made from crocodile skin and gold hardware that goes for $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,”  Rupert said.

“Because each our crocodile pieces are handmade one of a kind they each have to be priced individually. A luxury bag should be a timeless piece of exceptional quality which grows better with age.”

“The biggest challenges I face is government greed and inefficiency. As my brand is inextricably linked to Africa and South Africa in particular I will never move my sourcing and manufacturing elsewhere,” she said.

“It would be beneficial if African countries dropped their trade barriers to create a larger local marketplace across the continent for sourcing materials and selling finished products.”

Okapi also retails online which is a practice taken up by very few African luxury brands.

“Most African luxury brands are focused on ready to wear which is still a hurdle for people to purchase online. Our success with online is that we can communicate to a wide audience, globally. The biggest shortcoming is that prospective clients prefer to feel the product before purchasing it,” she explained.

Net-a-Porter site is one of the retail points used by Okapi to increase sales from an international market.

Rupert said the website had given Okapi more exposure to international customers.

“They have an incredibly reach because they are based online and we have managed to tap a wider customer base and our business is growing,” he said.

 

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