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