FINANCIAL TIMES | VANESSA FRIEDMAN Big (literally) news on Monday in the FT that on Sunday, thanks to a government recalculation, Nigeria’s GDP has now become the biggest in Africa, and the 26th biggest in the world, valued at $509bn. Why do we (we luxury folks, that is) care?
“The revision will have a psychological impact. It underlines to foreign investors that this country has a large consumer base. It validates the investment thesis,” said Ngozi Okonjo-Iweala, the minister for economy and finance.
So will luxury, which has thus far been dancing around the edges of the country (only Zegna and Hugo Boss have standalone stores in Lagos, opened last year, and Diesel recently joined them), but which these days really loves a new consumer base, rush in?
I have to say, I doubt it – at least in the near term. I think they may look more carefully at the country, and perhaps even explore options, but my guess is they will remain wary, at least when it comes to the kinds of brands that line the Avenues Montaigne and Montenapoleone. Here are some reasons:
First, there are the logistical challenges, which are meaningful. Second, last winter I was having a conversation with the CEO of an enormously successful international accessory brand that will remain nameless, and the subject of Nigeria came up, but when I asked about it, he shook his head. Aside from systemic factors, he said he just didn’t feel comfortable with where a lot of the money was coming from. It was partly, he said, a moral decision.
Now, it would be completely fair to roll your eyes at this and point out morals didn’t stop luxury from running headlong into Russia or any number of other countries (including the US, back in the days when the robber barons ruled the economy); that often in history the cycle of wealth goes from the more oblique to the acceptable in origin, and luxury is, in fact, a crucial part of that cycle, but nevertheless, I believed him. Which was interesting. And I don’t think he’s the only one with such concerns, as the globe (above) at the Chanel show in March 2013 illustrating all its stores around the world via little lights, demonstrated: Africa was, in their terms, the dark continent.
Luxury is, after all, obsessed with its image. And this is, in some ways, a question of image.
On the other hand, that GDP number is a big figure. And the population of Nigeria – 169m – is also a big number. So it will be interesting to see which impulse wins out: the rush to numbers or the protection of image.
There is clearly a struggle going on, as we have been trying to get an executive to join our Business of Luxury summit, which is taking place next month in Mexico City and will look at markets of the future (I encourage everyone to sign up and come – it’s going to be great), to talk specifically about this issue and guess what: they are all scared. No one wants to commit publicly, because, I venture to guess, they can’t quite decide.
Of course, luxury also has that safety-in-number thing – as consultant Robert Burke once told me, for an industry obsessed with creativity, it is remarkably “conservative” – so if a few more stores enter the market the whole thing will probably tip, and they will all start to look for space. In the end, competitive instinct may be the deciding factor.
In the meantime, however, anyone else have any thoughts? Maybe Paddy Power should start giving odds.