How to Crack Nigeria’s $1.2 Billion Beauty Market | Worldview, BoF Professional
Introducing our latest BoF Professional briefing, Worldview, your weekly analysis on the global markets that increasingly drive growth in fashion, including spotlights on must-know people, companies and places, and a round-up of international news.
The Beauty Merchant Plugging Global Brands into Nigeria
Who: Alali Hart, CEO and founder of Montaigne AH Ltd, a beauty and wellness retailer, wholesaler and spa with 40 retail doors across the country in malls and outlets in Lagos, Abuja, Port Harcourt, Owerri, Enugu and Warri
What: Montaigne Place, the firm’s flagship, stocks over 80 global brands including selective distribution for fragrances from Chanel, Armani, YSL, Lancôme, Bulgari, Acqua di Parma, and exclusive distribution for skincare, niche fragrance and cosmetics brands including Clarins, Creed and Yves Rocher
Where: Lagos, Nigeria
In a city as dazzling and thoroughly hectic as Lagos, it’s fair to say that Montaigne Place appears like an oasis of calm in the urban storm. For wealthy Nigerians, it’s a place to shop for upmarket beauty products, get the latest treatments and be seen — or not be seen, as is the case for some of Alali Hart’s more discreet clients, who have been known to bring an entourage of twenty staff and rent out the entire facility to escape the prying eyes of other high-society matrons.
The founder and CEO of this beauty retailer, wholesaler and wellness spa has been in business since 1995, after a meeting in Paris with executives from Clarins led to a deal for Hart to represent the brand in the Nigerian market. Selective distribution channels were “pretty much non-existent” at the time, she says, so the only way to make the opportunity work was to build the retail network herself.
Today, Montaigne Place stocks over 80 global brands including marquee fragrances from Chanel, Armani, YSL, Lancôme and Bulgari and niche fragrances from Creed, Roja Parfum and Amouage. It exclusively distributes skincare and cosmetics giants such as Clarins and Yves Rocher. “Our offering also includes brands like Flori Roberts and two standalone Black Up boutiques in Lagos,” Hart says.
American and European beauty brands’ perspectives on the Nigerian market seem to fall into two distinct camps: some are pursuing local leaders like Hart from Montaigne Place or her direct competitor Abiola Kasumu from Essenza because they see the importance of gaining a foothold in this emerging market with huge long-term growth potential, while other brands, as Hart puts it, have “classified Africa and Nigeria as a no-go area despite the potential opportunities.”
“It’s sometimes frustrating when people have chosen to make up their minds even without listening to what you have to say. But gratifyingly, more and more brands are seeking us out,” she says. The luxurious potions, pampering and makeovers that Hart provides at Montaigne Place have since proved popular enough to warrant opening branches in the capital Abuja, Port Harcourt and other cities.
Africa’s largest economy clearly has a lot to offer. The Nigerian beauty and personal care market is currently worth more than $1.256 billion at retail and is forecast to reach more than $1.311 billion next year, according to Euromonitor International. The country’s beauty sector appears to be more resilient to the impact of the pandemic than its fashion sector, though both were hit hard by the Nigerian recession. Fortunately, the economy is now creeping back into growth and many retailers are operating with Covid-19 measures in place.
The premium and luxury segments are especially attractive in a country with more than 43,500 high-net worth individuals (US dollar millionaires), according to Knight Frank’s latest wealth report. Investors should note that the affluent demographic is only growing in this market of extreme wealth and poverty. With the number of millionaires forecast to increase 19 percent between 2020 and 2025, Hart can expect even more VIPs like the businessman client she has “whose love for fragrance is legendary,” compelling him to buy 40 bottles of perfume from her in a single visit.
Nigeria’s soft power in the film and music industries means that some of the celebrity clients buying beauty brands at retailers like Montaigne Place must be influencers with millions of followers across the continent. And as the local fashion industry continues to evolve, Hart says that buzz about Lagos Fashion Week, which kicked off this week, provides a “cascade effect” in the beauty market.
Yet there’s no getting around the fact that the Nigerian market presents international brands with barriers to entry and a host of operational challenges.
“The business environment here is getting tougher and somewhat riskier owing to policy frameworks that are often arbitrary and that hamper ease of doing business,” Hart concedes, adding that the government’s recent exchange rate policy isn’t the only thorn in her side. The real “menace” though, as she calls them, are the parallel market vendors who are regularly targeted by her lawyers after having been instructed by Hart to write stinging cease-and-desist letters to keep them at bay.
While Hart remains bullish about the Nigerian beauty market, she is also casting her eye beyond the border. “It begins to make more sense as a risk diversifying measure to look at other African markets; this is something we’ll be pursuing in the near term.”
But back in Nigeria, she counsels, long-resistant brands would be wise to reconsider their stance on Africa’s powerhouse and those already active in the market had better up their game.
“Recently, we see homegrown Nigerian and African brands giving the big guys a run for their money especially as they’re more agile and adept at jumping on micro trends and capturing the zeitgeist.” Now more than ever, she warns, “the advice ‘think global, play local’ really holds true here.”
The Bottom Line: The Nigerian beauty opportunity is too big to ignore, and the dynamic market underpinning it will move forward with or without global brands hesitant to invest. The operational challenges that the market presents should compel brands to seeks partnerships with local industry leaders who can insulate them from some of its instability and provide strategic counsel.
The Brazilian Retail Dynasty on a Fashion Buying Spree
Who: At family firm Magazine Luiza, billionaire businesswoman Luiza Trajano serves as chairwoman, while third-generation Frederico Trajano is the company’s current CEO
What: Magazine Luiza, also known as Magalu, is one of Brazil’s largest multichannel retailers offering products and services including groceries, electronics, home goods and fashion, through its chain of 1300 stores nationwide and e-commerce arm Magazineluiza.com.br
Where: São Paulo, Brazil
To many in their home country, the Trajano family is to Brazil what Walmart’s founding family the Waltons were to America. Since Luiza Trajano’s aunt and uncle started Magazine Luiza in 1957, it has grown from a small gift shop in Franca to a brick-and-mortar empire with more than 1300 stores across 21 of Brazil’s 26 states. Its sophisticated e-commerce business is complemented by financial services.
Magalu, as the retailer is known colloquially, has grown incredibly fast in recent years and is now squaring up to long-standing rivals B2W, Via Varejo and Latin American e-commerce behemoth Mercado Libre. But Magalu’s impressive digital growth shouldn’t come as a surprise, considering the firm launched its website as early as 2000 and pioneered a network of micro shops prior to that, in the 1990s, where customers could order from a computerised catalogue for home delivery. No wonder some in Brazil’s business community consider the firm’s current chairwoman Luiza Trajano to be a maverick.
It appears that Magalu wants to create a super-app for Brazilian consumers that consolidates all the company’s channels and services while boosting its online advertising reach. Over the past two years, it has gone on an acquisition spree, snapping up several online businesses including last week’s purchase of a notable multimedia platform. The deals for e-commerce site Netshoes (Zattini) and shoppable content platform Steal the Look have helped strengthen Magalu’s position in fashion’s mass market. And since the firm’s 2020 total sales increased by more than 59 percent year-on-year to 43.5 billion reais ($7.8 billion), Magazine Luiza can afford to carry on shopping.
The Bottom Line: Magazine Luiza may be a general merchandiser but it has earmarked fashion as a growth category and brands like Adidas and Calvin Klein are already available on its e-commerce platform. Its colossal size, ambitious digital strategies, impressive distribution network across Brazil and financial performance make it an important player for all fashion and beauty brands to watch.
Russia’s ‘Modest Fashion Capital’ Is a Growing Luxury Market
Who: Lada Sergunina, the Russian fashion designer showing remotely this week during Mercedes-Benz Fashion Week Russia
What: This season’s Russian fashion week is taking place in Moscow, but designers are showing remotely from five other Russian cities and more than a dozen countries
Where: Kazan, Tatarstan, Russia
It may be 700 kilometres east of Moscow, but Kazan has good reason to call itself “the third capital of Russia.” Thanks to the vibrant culture and distinct language of Tatarstan, where it is located, the ancient city of Kazan is a tourism hotspot in normal times. With a local branch of luxury department store Tsum and more than a half-dozen shopping malls full of international brands, this city of 1.2 million people has been attracting domestic and foreign investors keen to gain exposure to this urban market that’s also a rapidly evolving hub of finance and industry.
“It’s well developed and quite rich,” says Alexander Shumsky, president of Mercedes-Benz Fashion Week Russia, an observation that explains why he chose Kazan to be one of five Russian cities to host designer shows outside Moscow this season (along with St Petersburg, Nizhny Novgorod, Kazan, Sochi, and Chelyabinsk). Russia’s major fashion week, which is taking place this week, will see Lada Sergunina show in Kazan, where her business is based. “Kazan is a city where traditions and cultures of ‘the big east’ and ‘the big west’ are surprisingly intertwined — and that inspires me a lot,” she explains.
As the capital of Tatarstan, the city has one of the highest Muslim populations in the country. “That makes Kazan a capital of Russian modest fashion,” says Shumsky. “There are a lot of designers in the region who follow principles of modest fashion,” albeit a more liberal interpretation than in some other global markets, he adds. But this boomtown in the Volga federal district also represents a potentially attractive market for the broader fashion and luxury industries.
The Bottom Line: While larger cities like Novosibirsk and Yekaterinburg are already an important part of the Russian retail network for global brands growing their footprint out from core operations in Moscow and St Petersburg, cities like Kazan and Nizhny Novgorod should be part of most expansion plans alongside other urban markets like Samara, Rostov-on-Dom and the resort town of Sochi.
GLOBAL MARKETS NEWS IN BRIEF
FASHION, BUSINESS & ECONOMY
Afghan E-Tailer Connects Female Designers to Global Market. A locally grown e-commerce platform in Afghanistan is connecting vendors with customers around the world, providing an important opportunity for the war-torn economy and inspiring a new trend of young women starting up their own small businesses.
China’s GDP Grows 18.3 Percent in Q1, March Retail Sales Up 34.2 percent. This represents a 0.6 percent slowdown compared with the fourth quarter of 2020. China’s first quarter is traditionally a time of lower economic production, due to an extended break for Chinese New Year, which this year fell in February.
Judith Leiber Apologises After Ganesh Bag Causes Offence. “We are deeply sorry to hear that our Ganesh bag has caused offence to the Hindu community,” Lela Katsune, president of Judith Leiber Couture, said in a statement quoted by The Economic Times.
The Middle East’s Largest Mall Operator Plots Expansion. Majid Al Futtaim, the owner of retail and lifestyle properties including Dubai’s Mall of the Emirates, is moving ahead with plans to open its biggest mall ever, as vaccine rollouts and the region’s faster than predicted recovery spurs optimism, AP reports.
South Africa’s February Retail Sales Up 2.3 Percent. The county’s retail sales beat last year’s figures after a 3.7 percent contraction in January, Reuters reports. The boost, revealed by Statistics South Africa this week, marks South Africa’s first retail sales growth in 11 months. Sales were up 6.9 percent from January.
Report: Brazil’s Lojas Renner to Launch 4.5 Billion Reais Share Offering. The company plans to use the proceeds to fund its growth plan, including potential mergers and acquisitions.
Local Lockdowns Cut India’s National Retail Revenue in Half. Curfews and restrictions on public activities in cities such as Mumbai, alongside localised lockdowns in various Indian states, including Delhi, have already cut revenues for organised retail countrywide in half over the last month, according to the Shopping Centres Association of India (SCAI) as reported by the Press Trust of India.
Japanese Retail Giant Adastria’s Annual Sales Drop 17 Percent. The 68-year-old Tokyo-based company reported that sales declined to 183.8 billion yen (around $1.7 billion) for its fiscal year ending February 28, down from 222.3 billion yen ($2 billion) the previous year, Fibre2Fashion writes.
China’s Ellassay Sees Q1 Recovery Following a 25 Percent 2020 Revenue Drop. Ellassay Group – the Chinese womenswear giant that includes its own Ellassay brand, as well as Laurèl and IRO Paris, Self Portrait’s mainland China business and Ed Hardy in Greater China – saw overall revenue drop 24.9 percent to 1.96 billion yuan ($301 million) last year, according to its annual report.
Chinese Retail Giant Metersbonwe’s 2020 Revenue Drops 30 Percent. The company says the decline was mainly due to the impact of the pandemic on its operations. Its 2020 revenue fell 30.1 percent to 3.82 billion yuan ($584.89 million) last year, while net profit fell 3.5 percent to a loss of 854 million yuan ($130.79 million).
Li Ning’s First Quarter Revenue Rises Over 80 Percent. In the first quarter of the year to March 31, Li Ning’s offline retail business saw “low-eighties growth” on a year-on-year basis, while e-commerce registered around 100 percent growth on the year, the Chinese sportswear giant reported in an operational update.
Hong Kong Billionaires Weigh Delvaux Sale. Hong Kong billionaire brothers Victor and William Fung have reached out to prospective buyers as they look to sell their stake in the 192-year-old Belgian luxury bag brand, Delvaux, according to a Bloomberg report. The brothers are working with advisers on a sale that could value Delvaux at between $500 million and $600 million, according to unidentified sources cited by the report.
Jeweller Chow Tai Fook Sees Sales Surge 153 Percent. Hong Kong-based jewellery giant, Chow Tai Fook, saw retail sales climb 152.6 percent year-over-year during the three months ending March 31, the company said in an operational update.
China’s E-Commerce Market Forecast to Hit $3 Trillion by 2024. This year alone, e-commerce sales in China are expected to register growth of 17.2 percent and, according to an eMarketer report released earlier this year, will surpass offline sales for the first time. In 2021, it predicted, 52 percent of China’s sales will take place online, up from almost 45 percent in 2020.
Tokopedia and Gojek to Form GoTo in $18 Billion Merger. The Indonesian e-commerce and ride-hailing start-ups have confirmed their proposed deal and will create a new entity called GoTo. The company could be valued at up to $40 billion, DealStreetAsia reports.
Brazil’s Iguatemi Group Expands Luxury Offering. Just this week, its JK Iguatemi mall in Sao Paulo opened Balenciaga’s first retail outpost in South America and the brand is also now available through the mall operator’s online platform, Iguatemi 365.
Mercedes-Benz Fashion Week Russia Kicks Off. MBFW Russia began its six-day run yesterday with a show from local womenswear brand, Ruban. This edition is set to combine physical runway shows in the Museum of Moscow as well as livestreams from other Russian cities and abroad.
South Korea Rises in World Luxury Sales Rankings. Luxury leather goods, jewellery and watches generated $12.5 billion in sales in the country last year — roughly in line with the previous year, according to Euromonitor International.
THE BUSINESS OF BEAUTY
L’Oréal Revenue Recovers Thanks to Help From China. Lancome maker L’Oréal reported a stronger than expected 10.2 percent rise in comparable first-quarter sales from a year earlier, helped by strong growth in China.
Estée Lauder Appoints Koki Global Brand Ambassador. The Japanese model, also known as Mitsuki Kimura, will front the beauty giant’s media campaigns worldwide. She is currently the face of Valentino and has also nappeared i campaigns, front rows and runway shows for Fila, Coach and Chanel.
‘Lipstick King’ Li Jiaqi Reveals Future Brand Ambitions. In the future, Li Jiaqi can envision himself building a beauty conglomerate similar in size and scope to Estée Lauder or L’Oréal Group, the livestreaming superstar said in an interview with domestic media platform, Sina.
Valentino Taps New Greater China CEO. The Italian luxury house has named Mitchell Bacha its chief executive officer for Greater China, according to a statement from Valentino. Bacha will be in charge of Valentino’s retail channel and online business, as well as continuing to raise the brand’s profile and strengthen its e-commerce presence in China.
South African Retail Giant Truworths Appoints New CFO. Cristaudo has taken on both executive and director roles at Truworths in the last 16 years. He replaces David Pfaff, effective July 1, who resigned in February, and will work to help the company recover from losses suffered during the pandemic by growing its budget clothing business.
Jackson Yee Gets a Promotion From Tiffany & Co. Yi Yangqianxi, also known by the English name, Jackson Yee, has proven such a hit as Tiffany & Co.’s regional ambassador in China since his appointment last June that he has now been promoted to a global ambassador role, according to an announcement on the jeweller’s official Weibo account posted today.
Blackpink’s Rosé is Tiffany & Co.’s New Global Ambassador. Rosé (full name Roseanne Park Chae-young) has also been named a global ambassador for Tiffany & Co. and will front a campaign for the brand’s HardWear collection, due to be released on Friday.
Aspiring Yemeni Model Taken By Rebels Now Faces Prosecution. Her lawyer, Khaled Mohammed Al-Kamal, told the media outlet he has been informed that a prosecutor from the rebel-controlled West Sanaa court will question Al-Hammadi on Sunday.
SUPPLY CHAIN & TECHNOLOGY
China is Creating an Alternative Standard to BCI Cotton. A Beijing-based cotton service provider, Zhongnong Guoji, which is also responsible for the Xinjiang Digital Cotton Research Centre, is leading the initiative in co-operation with the China Fashion Association and the Ministry of Finance-backed Modern Seed Industry Development Fund.
Rakuten and Tencent’s Mega Deal Comes Under Regulatory Pressure. WeChat owner Tencent Holdings’ investment in Japanese e-commerce and IT giant Rakuten, which saw Tencent become the latter’s majority shareholder with a 3.65 percent stake, is drawing scrutiny from both the Japanese and US governments due to fears that Beijing will gain access to users’ private information, The Japan Times reports.