Deremi Ajidahun, CEO of Hole19 Group and Zakaa retail stores, is determined to change the way Nigerians purchase fine watches and is often congratulated by Swiss CEOs on the appetite of Nigerians vacationing in Paris, London or New York for these luxury goods.
The African retailer responds to this observation by expressing regret that they are not purchasing the watches at home, in Lagos or Abuja. The system is going round in circles, and Africa, despite its demographic potential (180 million inhabitants in Nigeria alone) and the eternal promises of development, today accounts for scarcely 2% to 3% of luxury purchases worldwide.
On the subject of Africa, many a watch company CEO talks of a continent in transformation, a young, fast-developing land, a future El Dorado of luxury even. But when it comes to action, investing in the luxury distribution network on the continent, is another matter.
So why build a boutique in Lagos, Nigeria when the richest residents spend most of their time in the major European capitals, where they do not skimp when it comes to buying luxury watches? Deremi Ajidahun, with seven boutiques in Nigeria and a group that sells far more than just watches, has still not found a solution to this problem. So he listens attentively, without falling for it, to the enthusiastic talk of the watch company CEOs, waiting to throw it back at them at the negotiating table.
The local African retailers are the good-natured muffins who promote the watchmaking industry and companies while missing out – along with the entire local economy – on actual sales.
An African-style Chinese crisis
Last year was a very difficult year for purchasing watches in Nigeria. This was because of an African-style “Chinese crisis”. A new government set up a “clean hands” policy and an anti-corruption campaign which, as in China, severely restricts gifting. Up to that time, these favours between good friends from the worlds of politics and business, often in the form of luxury watches, represented over 60% of the retailer’s turnover from watch sales alone.
In 2016 Nigeria also entered the deepest recession of recent decades owing to the drop in the price of oil, of which the country is a major producer.
Luckily for him, Deremi Ajidahun has more than one string to his bow, since the business on which his group Hole19 (founded in 1987) was built – BtoB marketing in the golfing sector – continues to bolster his sales figures. As does the sale of luxury property, in a group with very diverse assets. He himself has launched his own clothing line.
But the blow to his watch boutiques was tough. He has two multibrand boutiques, in Abuja and Lagos, where he is an agent for brands of the LVMH Group, as well as for independent brands such as Louis Moinet, Louis Erard and Seven Friday. The retailer also runs two Hublot boutiques, two TAG Heuer boutiques and one Ulysse Nardin boutique.
“About ten years ago, my wife had the idea of expanding into the luxury market. Since I love watches as much as golf, watches were a natural choice,” explains Deremi. The retailer has even created a magazine devoted to the subject to raise the profile of luxury watches in the country: “There isn’t really any specialist press here – and as a general rule, Africa is always under-represented in the big luxury magazines.”
Keen buyers of luxury watches…in Europe
Until last year, growth was steady. The customer base of the Zakaa chain – the name of the group’s luxury watch arm – is largely local. While brands like Hublot met with immediate success in the country, Deremi Ajidahun explains that by contrast, “selling an affordable, less well-known luxury brand such as Louis Erard was not easy at the beginning”. It was the elegant women’s watches offered by this independent Swiss brand that eventually saved the day.
Faced with the crisis that broke out last year, the retailer was forced to offer huge promotions in his stores, “of around 50% to 60%”. But, he emphasizes: “On the other hand, we were determined to keep all our staff. We didn’t introduce any new brands and we held multiple local events. We used to hold big events in the past, but we realized that the return on investment wasn’t as high as for more targeted public events.”
The retailer cannot count on any kind of economic patriotism from his fellow citizens to get back on track. Although Nigerians “adore” watches, some “80% of their watch purchases” are made abroad. “We’re trying to shift purchasing back to the domestic market. If we had a critical mass of models and brands here, it would be much easier to consolidate the market. In that respect, I have to pay tribute to LVMH, who were pioneers for the watch industry in Africa.”
Counterfeits and lack of cash
There definitely exists potential for growth – and not solely by expanding into South Africa, the continent’s strongest economy, for example. “We’ve got enough scope for development in Nigeria, a country of 180 million inhabitants! I believe we haven’t even attained 20% of our potential.” That is on condition that the watchmakers play fair and begin to flesh out their distribution networks in Africa. “Richemont is a group with African origins. They could do more on the continent!”
But there are two major stumbling blocks on the path to watch sales growth in Africa. Firstly, the weak banking system obliges local retailers to develop almost solely on the strength of their own equity, which restricts their growth. “We haven’t borrowed a single penny,” underscores Deremi Ajidahun. “The number one obstacle to business in Nigeria, as on most of the continent, is the banking system. They won’t give you a loan to let you develop.”
Another huge problem is counterfeiting, which is deeply rooted in society and the local economy. “You would find 3 star hotels in Nigeria where counterfeit watches are on display… There is no law that effectively combats the problem and the market is flooded with counterfeit Chinese watches. It’s rife in all sectors: I even see counterfeit golf balls!”
As for e-commerce, it too is flooded with counterfeit watches… “That is why we do not invest in online sales,” says Deremi Ajidahun. “We’re prioritising education first of all, so that people don’t imagine they can pick up a Patek Philippe for less than 2,500 dollars.”
In the space of a decade, the retailer has already traced out a possible pathway for luxury watches on the continent. But he has no intention of stopping there: “I think, for example, that it might be possible to double the number of boutiques of a brand like Hublot in Nigeria in the next few years!” Africa is probably not the El Dorado some people talk of, but a more realistic vision of its potential could allow it to gain a few percent real growth – on the continent itself.