The real potential of Nigeria’s luxury market

Despite its population size and GDP ratio, Nigeria presently boasts an incipient luxury market, largely due to: the lack of suitable infrastructure – there are no premium street level real estate or specialized shopping centers (malls) in neither Lagos nor Abuja; high import tariffs – avg. 60% for most luxury goods categories; lack of experienced local retailers; lack of experienced local human resources

CPP Luxury Industry Management Consultants Ltd estimates that 90% of Nigeria’s HNWI consumers shop abroad or make direct purchase orders through intermediaries – the so called ‘grey market’

Most of the existing luxury retail is focused in 3 locations with average monthly rent of US$3,000/sqm, with at least one year in advance downpayment: Hilton Hotel, Abuja; Palms Mall, Lagos; Ikeja City Mall, Lagos. The existing malls in Lagos are mass market driven, led by grocery shopping at the hypermarkets. Future projects include a mass market mall with a luxury section in Victoria Island (Lagos) estimated opening 2016. Mentioned should also be made that none of the existing 5 star hotels in Lagos have the potential to develop luxury retail.

Nigeria’s domestic luxury market is valued at USD 213 million in 2013, 70% of sales being made by the auto sector, which also the most developed luxury sector. Auto sales are followed by private jet aviation and watches, with 12%, respectively 5%.

Most developed luxury sectors in Nigeria: auto, watches, private aviation, fine wines & spirits

Least developed luxury sectors in Nigeria: hotels, jewelry, fashion, accessories, travel, premium cards / private banking

Luxury sectors inexistent in Nigeria: Spas

Major shopping destinations abroad for HNWI Nigerians residing permanently in Nigeria:

  1. London
  2. Dubai
  3. Paris
  4. Milan
  5. Capetown

Nigerian luxury consumer profile

  1. Nouveau-riche 30%
  2. Old Money 25%
  3. Upper Middle Class 15%
  4. Aspirational 30%

(percentages of total)

  1. Nouveau riche

-          entrepreneurs – private business owners / top executives in major companies in Nigeria

-          travel abroad at least once a month (make 80% of luxury shopping abroad)

-          brand driven (major brands)

-          high show off factor both locally and when abroad

-          own at least 2 luxury cars

-          own residential real estate both in Nigeria and abroad

-          travel business class

  1. Old money

-          State/governmental officials

-          Top executives of state owned enterprises

-          Notaries / Doctors / Prosecutors / Lawyers

-          Strong show-off factor, prefer major brands (long time established classic brands)

-          Make 70% of luxury goods purchases abroad

  1. Upper Middle Class

-           mid-size business owners

-          holding middle management positions in multi-national companies (FMCG, energy, construction, banking)

-          vocational jobs: artists, media, music, beauticians etc.

-           make 50% of luxury goods purchases locally

  1. Aspirational

-          higher than average salaries

-          small business owners

-          make 80% of luxury goods purchases locally

Luxury fashion & Accessories

The only international luxury fashion brands with a mono-brand store representation in Nigeria are: Ermenegildo Zegna (2013) and Hugo Boss (2012). Premium fashion brand Diesel opened mono-brand store in 2013. All stores are operated in franchising.

The two largest multi-brand fashion and accessories stores in Lagos are: Temple Muse (Givenchy, Emilio Pucci and several other premium local designers) and Polo Avenue by Polo Ltd (Dolce & Gabbana, Gucci, Balenciaga, Montblanc).

Brioni, Bally, Serapian, Philipp Plein, Montegrappa are present in multi-brand stores under the brand Zakaa, owned and operated by Hole 19 Group (2 boutiques in Abuja, Lagos (1), Port Harcourt (1) and Uyo (1)

Compiling data of domestic and international luxury shopping of fashion and accessories by Nigerians, the top 10 most desirable and sought after luxury brands are:

  1. Louis Vuitton
  2. Giorgio Armani
  3. Chanel
  4. Dolce & Gabbana
  5. Gucci
  6. Fendi
  7. Ralph Lauren

Luxury cars

Nigeria’s best developed luxury sector is also its biggest, in terms of sales. The market leader is Mercedes Benz, with a presence of over 2 decades in Nigeria. Second best-selling luxury car brand is Porsche, followed by BMW, Range Rover, Lexus and Audi. The exclusive distributor of BMW, Coscharis Group has recently signed an exclusive distribution agreement with Rolls Royce, the first showroom in Lagos expected to open by the end of 2014. With the exception of Lexus which is imported through a grey channel, all other luxury car brands have professional exclusive representation, each with dedicated showrooms.

High taxation (up to 60%) on newly registered luxury cars makes the market stifled. It current sector value could double by 2020, should there be a lax in import duties and tariffs. Mention should also be made that over 20% of sales of all major luxury car brands are made to state and governmental institution.

Nigeria’s luxury car sector value in 2013 is estimated at US$ 144 million, with a total of 1,643 new units registered in 2013.

Luxury beauty

None of the major international selective retailers is present in Nigeria. Sales of perfumery and cosmetics are made through small boutiques, mostly in malls. Imports are not made through official channels, therefore, prices at 20 to 30% higher than in Europe.

90% of wealthy Nigerians make their purchases of luxury beauty products at Duty Free stores in major international airports on their return to Nigeria.

Due to the lack of specialized retailers, the best results are likely to be achieved by mono-brand boutique retail. The only company present with such a mono-brand store is Estee Lauder Group’s M.A.C. which opened at Ikeja Mall Lagos in 2012.

Rival L’Oreal has been reported to consider mono-brand retail spaces for its L’Oreal Paris and Lancome brands in Nigeria in the next 2 years. According to L’Oreal, by 2020, Nigeria could be one of the fastest growing global premium and luxury beauty market, with a 3% of all global sales.

Niche luxury haute parfumerie brands or luxury cosmetics brands are not currently distributed in Nigeria

Luxury travel

There are no specialized premium / luxury travel agents. Most luxury holiday packages, business class air travel and other such bookings are made through generalist travel agencies. An increasing number of HNWI clients are using travel agencies based in the U.K. as well as bookings online.

Luxury jewelry & watches sector

Major international luxury watch brands such as Rolex and Piaget have been present with corner within specialized luxury multi-brand stores for more than 5 years. Chopard, Cartier, Montblanc, Frederique Constant have been present since 2011. There is currently no mono-brand store of any luxury watch company. The country’s largest and long term established luxury watches retailer is Polo Ltd, which currently operated two stores in Lagos and one in Abuja.

Ulysse Nardin, Zenith, Maurice Lacroix and Parmigiani have been present since 2012 at the Zakaa multi-brand stores in Abuja, operated and owned by Hole 19 Group.

Local sales of luxury branded high jewelry remains limited and is made through direct sales (‘’on order’’).

Development opportunities

The luxury sectors with the highest mid-term potential for development:

-          fashion & accessories

  • wholesale (multi-brand) of niche international luxury brands
  • mono-brand franchising of major international luxury brands
  • sunglasses (specialized stores)
  • eyewear (frames / optical – major international brands)
  • sports accessories (swim suits)
  • wedding gowns & tuxedos
  • lingerie / underwear
  • menswear

-          hotels (only Lagos)

  • boutique luxury (50 to 60 keys)
  • city luxury hotel under management of a major international luxury chain

-          beauty & Spa (only Lagos)

  • operated by major international companies (not franchised)

-          jewelry

  • fashion jewelry
  • engagement rings
  • gold & platinum bespoke pieces

-          home collections (given the boom in construction of new luxury residential projects)

  • bedding
  • bathroom accessories
  • full home furniture
  • garden furniture

-          hi-tech

  • kitchen and home appliances
  • HI-FI
  • Premium TV and sound systems
  • Security systems
  • Automated controls of indoors and outdoors

The potential of the luxury fashion & accessories sector in Nigeria:

-          mid-term (3 to 5 years) – sector value of US$ 140 million

-          long-term (10 years) – sector value of US$ 250 million

Luxury Market challenges and threats

-          requirement by retail real estate owners for upfront payment for a minimum 2 years in advance

-          very high day to day operational costs

  • salaries in luxury businesses are likely to increase
  • import of expat human resources comes with greater costs
  • high costs of energy (most buildings in Lagos run on generators – centralized electricity is inexistent; in some cases energy costs run into 40% of all operational costs

-          higher costs for operations due to corruption (imports, logistics, approvals etc)

-          scarce international standard construction, especially interior design and finishes

-          high costs of basic store fittings (AC, marble, lighting etc)

CPP Luxury Industry Management Consultants Ltd estimates the future potential of Nigeria’s luxury market at US$1 billion, a large part being made up by the upper middle class which currently exceeds 100.000 individuals. The pace of development will depend on the potential of local investors / retailers to absorb the investment costs in franchising luxury brands (almost none of the major international luxury brands would consider a direct operation in Nigeria) but also on how fast a luxury infrastructure is built and Nigerians are offered a similar lifestyle experience when shopping locally.

Oliver Petcu in Lagos

Porsche showroom in Lagos, Nigeria