International Retailers Eye-Up Africa
Africa retail sector on the verge of sky-rocketing with big international brands landing on our shores. Large international retailers eager to get a footprint on the African continent are using South Africa as their vantage point, while they assess their next expansion point into the growing economies of Africa. Their moves show not only confidence in the African market potential itself but it also further reinforces South Africa’s place as the stepping-stone into Africa.
Accessories maker Radley, born in the heart of London, is one of the latest in a long string of international brands making their debut on African soil. They have partnered with Brand Capital, and have already seen the contribution to their growth figures. Talking to the country’s suitability for luxury brand expansion Xavier co CEO of Radley said “South Africa is a big emerging market and there’s a strong appetite for brands. Also, there is the relevant distribution in South Africa for premium brands like ours, either in department stores like Stuttafords or big shopping centres where we could open our stores.”[i] The interest from international brands is not just from the luxury June.[ii]
Other retailers who have taken the leap onto African soil include Mango, TopShop, Zara and Cotton On. US fashion brand Forever 21 has announced plans to set up shop in Cape Town from mid-year. “We are excited to enter the South African market and have plans for some exceptional stores for this market” said Jatin Malhotra, director of real estate and business development at Forever 21.[iii] This comes hot on the heels of the announcement from H&M that they would enter the market in 2015, although the location within South Africa has yet to be confirmed.
Beyond South Africa the African countries showing the most growth in the international retail sector are Kenya, Nigeria and Ghana. According to Euromonitor International, between 2008 and 2013 sales figures for luxury goods increased in Africa by almost 35 percent.[iv] Africa is home to five of the ten fastest growing economies in the world. “Nigeria who recently scrapped its textile import ban, driving renewed interest from fashion and apparel retailers, is currently home to brands including Levi’s, Mango, Nike and Swatch, [who] have set up shop in Palms Shopping Mall in Lagos.”[v]. Ghana has followed much the same pattern with Mango, Puma, Nike all operating from the Accra Mall. Retailers who act early are taking advantage of a burgeoning middle class in Africa that is increasingly interested in international branded goods, with increasing disposable income to foot the bill. The discovery of oil in countries such as Ghana, Kenya and Nigeria has been part of reason for a sudden rise of income, and an emergence of a new set of wealthy individuals with expensive taste.[vi] In Lagos, Hugo Boss has opened a store, while Prada has confirmed plans to open a store in oil-producing Angola.
Suitable retail space and growing, but still limited, high end consumers still pose a challenge for international brands, but have not stopped many of them getting a foot in the door of a growing African middle and upper class. Online retailers such as the UK group ASOS have bypassed many of these issues with their delivery of international brands to various African states within six to twelve days of ordering. The other issue is that of a high level of counterfeit goods, and low control, but as brand awareness grows the demand for genuine goods grows too.
Local Retailers Respond to International Pressure
These new arrivals do not operate in a vacuum and face the same challenges as local retailers, and challenges from the local retailers themselves. Factors that are against entry into Africa include a shortage of prime, high end retail space, as well as the currency challenges that mean international mass-market brands, end up being high end in local currency. Local retailers are not taking the entry lying down. Truworths CEO Michael Mark, said the fashion retailer regards global competition in the same manner it does local competitors. “International retailers who open stores in South Africa do not necessarily understand trends better than we do and they face their own difficulties in trading in South Africa,” he said. “While the group will never become complacent to the threat of local or international competition, we believe that if the right fashion is available in our stores, it will continue to attract customers, regardless of the level of competitor activity.”[vii]
Despite such optimistic talk, it is clear that as the retail landscape changes locally, local players are going to have to sharpen their pencils and ensure that they can compete head on. Local retailers need to improve sourcing and shorten speed-to-market lead times, to ensure they have a comparable on-trend offering to their international competition. Further to this on-line has become a newer trend with the likes of Zando and ASOS taking the style hungry market by storm, and retailers need to anticipate the adventurous new African customer who is as likely to experiment with different retail channels as they are to experiment with different brands. Local retailers are also arming themselves with international armaments. In South Africa, Woolworths has bought up more international brands to add to its current selection of Trenery and Country Road. “Woolworths has big plans for the Witchery and Mimco brands in South Africa, according to group director of planning for clothing and general merchandise, Paula Disberry.”[viii]
“One of the things that has amazed us is that [Africa] is a very brand conscious market, particularly in our West African markets in Ghana and Nigeria,” Mark Turner of Mass Discounters, a subsidiary of Walmart has commented.[ix] With such a hunger for brands, and a 70 percent of the continent’s population living in countries that achieved over 4 percent economic growth rates over the last 10 years, it looks like Africa will continue to be the new growing play ground for international retailers the world over.
[iv] Zeenat Moorad, Luxury Goods Firms taking the battle to Africa, BizCommunity.com, 27 December
[vi] Zeenat Moorad, Luxury Goods Firms taking the battle to Africa, BizCommunity.com, 27 December 2013
[viii] Zeenat Moorad, Big plans on way for Witchery, Mimco in South Africa, Business Day Live, March 2013