Brand Acquisitions - Here is Why The LVMH Model Has Not Seen So Much Use Among African Fashion Brands
The luxury goods industry is one that keeps growing, with higher profit margins, as a result of increased consumer spending despite the global financial crisis. A luxury good is a commodity that customers demand more as their income increases and vice versa.
Since luxury goods make life more comfortable and pleasant for those that can afford them, they keep investing in these goods and the market keeps moving. Every continent of the world has luxury goods but none is as large as the LVMH group.
The LVMH (Moët Hennessy Louis Vuitton) Group is one that comprises "75 exceptional Houses that create high quality products." It is present in all five major sectors of the luxury market: Wines and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry and Selective Retailing.
The brands under the LVMH Group were acquired over a period of 4 decades due to the founder, Mr. Bernard Arnult's, voracious appetite for deal making. Even though LVMH has an office in South Africa, the model has not quite gained grounds among African brands.
Despite the large number of millionaires in Africa, the luxury goods market is not as large as it can be, so many wealthy African who desire designer handbags or luxury jewellery have to travel to New York or Europe to purchase these goods.
What is the Luxury Goods Market like in Africa?
In Africa, the luxury goods market was valued at $5.9 billion in 2016 and LVMH predicts it will grow 30% in the next 5 years but despite these figures, many luxury brands are sceptical about bringing business down to Africa.
Suzy Menkes, renowned fashion editor of the International Herald Tribune said, “Luxury goods companies have been extremely slow to invest in Africa compared to the mighty rush into China and the rest of the Far East. The investments are mostly in the north and south of the continent. The rest is mostly one large, blank consumer space.”
The number of luxury goods brands that emerge from Africa and put quality first, like House of Deola Sagoe, Maki Oh, Minku, Adele Dejak, Taibo Bacar, Thebe Magugu, Maxhosa by Laduma and RandR are rising by the number yet there is still this big gap in the luxury goods market.
What is causing the gap in the African Luxury Goods market?
Despite having these many African made luxury brands which are thriving, the luxury goods market is not as great as it could be.
After Edun, a fashion brand which sold made in Africa goods, received backlash when retailers like Saks complained about late shipment and shoddy quality, and ultimately dropped the label en masse, many designers have been careful about making productions in Africa.
Brands like Studio 189, Lemlem and Liberty & Justice who employ the use of African artisans had to train their workers in depth on how to make their products, so every item they produce is quality and this costs money and time.
- Difficulty in Exportation:
Because of the structure of many African countries, there can be a lot of delay at the port where processing tends to be slow when trying to export products. For example, Liberty, of Liberty & Justice, says, “We’ve done big projects with Bloomsdale's where we didn’t deliver on time, which didn’t make them too excited.”
- Power and Connectivity:
Many Afrian countries still have not been able to reach the point of having 24/7 power supply, this can highly affect the speed of production of goods and increase cost of production as generators will be needed.
“Power and connectivity are major structural challenges that can affect doing business at the speed we’re used to here in the US.” says Kebede, the founder of Lemlem.
- Doubtfulness Over the Maturity of the African Market:
While many brands are looking at Africa as a potential market for their goods, many are still very doubtful over the maturity of the market. They believe the market still has to grow more before it can accommodate luxury brands.
Guillaume de Seynes, managing director of French luxury Group Hermès International said, “We have not yet found any opportunities to make business in Africa or to open a store in Africa. We’ve looked at Egypt , Morocco, South Africa. These markets are maybe not yet mature enough to welcome a Hermès store.”
Perhaps, the above points are some of the reasons why LVMH model is almost nonexistent in the African luxury goods market.
While Africa is seen as a potential market for luxury brands to put roots in, the uncertainty over the African market is keeping luxury brands at bay, but as Franca Sozzani said of Ermenegildo Zegna, an Italian menswear brand, who is looking to open a store in Lagos, Nigeria, “Somebody has to start, Zegna started in China 20 years ago and everybody thought they were crazy.”