The Stitch Times has been publishing, from time to time, on the growth potential of Middle East and African markets, particularly the latter markets. This has been confirmed by a recent study. Valued at US$87.0 billion, the Middle East and African apparel market accounted for just 5% of total global apparel value sales in 2012. Nonetheless, it was the second fastest-growing region globally in 2012, following Latin America, and is a valuable area of consideration for mass and luxury fashion brands alike, according to Euro monitor International.

Steady retail modernisation in sub-Saharan Africa

There has been a lot of talk about Africa being fashion's final frontier. Indeed, the size of the region, housing over 820 million people, makes it a hard opportunity to ignore. But sub-Saharan Africa has been no easy nut to crack. While the middle class is growing, poverty remains widespread, with price trumping branding and style when it comes to fashion purchases. Weak infrastructure, underdeveloped retail markets, and political instability add to the complexity of setting up shop. Growth remains confined to certain pockets, leading to a clustering effect when it comes to the activity of international brands.

South Africa has been a prime example of this. The country remains the continent's most affluent market, with apparel sales per capita totaling US$362 in 2012, which is ten times those of Egypt. This makes it a natural stepping stone into the continent for globally renowned apparel brands including Gap, Zara, and Topshop, all of which launched stores there in 2012, with H&M next on the agenda in 2014.

Nigeria has also emerged as a hotspot for activity, with brands taking advantage of the lifting of the ban on textile imports. The entry of players like Woolworths, Hawes & Curtis, and Mr. Price, while as yet limited in their impact, is certainly heralding a shift toward modern and formal retailing. As one of the world's fastest-growing markets for champagne, Nigeria has also become an unexpected magnet for luxury brands, reflecting the country's growing appetite for premium products.

Demographic dividend

Sub-Saharan Africa's main point of attraction lies with its youthful demographic composition - a blessing for apparel retailers centered in North America and Western Europe, who are battling with aging populations and shrinking workforces. Young adults and teenagers are a core target market for many apparel brands, due to their high propensity to spend on fashion and their appetite for labels. Additionally, a youth culture heavily shaped by the West paves the way for American and European fashion brands in this market.

A youth-driven population has been evident in Middle Eastern markets too, which have become fertile ground for children's wear players. In Saudi Arabia, 0-4-year-olds accounted for 11 % of the population in 2012, while those aged 5-14 years accounted for a further 19% share. This youthful profile is likely to be sustained going forward by the large share of the population also being of child bearing age. In the UAE, designer children's wear was the most dynamic designer apparel category in 2012, increasing in value by 12%. This is due mainly to the extremely high levels of brand consciousness among the country's young parents, many of whom wish to dress their children in their favourite luxury brands.


Middle Eastern Attraction


From luxury to private label, the Middle East is high on the agenda for apparel brands from all ends of the price spectrum. Israel was also a popular choice for a multitude of international brands in 2012, with Victoria's Secret, American Eagle Outfitters and Forever 21 entering the market. No longer considered small and insignificant, Israel's allure lies with its globalised consumer base, which enjoys mid-range per capita GOP and high awareness of fashion trends. The region's leading domestic retailers will be keen to further expand their franchise portfolios to maintain their competitive advantage, focusing on international brands with a unique positioning.


UAE, a global shopping haven


With its ornate destination shopping centers, shopping festivals, a bevy of international brands, and highly competitive prices, it comes as no surprise that the UAE remains one of the world's ultimate shopping havens. Domestic demand is augmented by high tourism flows, with the country being perceived as an area of stability in the midst of the Arab Spring uprisings. Tourist arrivals amounted to 10m in 2012, up by 7% on the previous year. Luxury apparel in particular has benefited from the strong increase in tourist arrivals from emerging markets such as Russia and China. For example, the number of Chinese tourists has more than doubled since 2009, reaching over 300,000 in 2012. As a result, many brands have hired Chinese-speaking sales staff.


In a similar fashion to Hong Kong, the cities of Abu Dhabi and Dubai remain of strategic importance for international brands looking to make their mark globally, due to their position as prime travel hubs.

 

Fading cultural nuances


In the Middle East, a highly conservative dress code remains a key concern for Western fashion brands, as traditional clothing such as abayas or thobes will continue to have a firm place within the apparel market. Nonetheless, the proliferation of the internet and social media is playing a noteworthy role in shaping lifestyle trends, with consumers increasingly taking cues from Western fashion and celebrities.


In Iran for example, while women are expected to cover their heads, they are nonetheless keen on expressing their personal style through on-trend accessories like belts, shoes and bags. Traditional head to-toe chadors have paved the way for a more modern take: short knee-length coats known as mantos. Iran is set to overtake South Africa to become the region's biggest market for apparel specialist retailers by 2017, generating US$16.8bn in value sales (excluding VAT). An increasing number of women entering the workforce is also influencing category performance. In Saudi Arabia, the employed female population rose by a further 1 % to reach 1.1 m in 2012. This in turn supported sales of women's suits, and women's jackets and coats, which increased by 11 % and 10% in current value terms, respectively, in 2012.


Political unrest


However, North Africa has been deeply impacted by the Arab Spring and its legacy. Egypt's apparel market, once expected to become one of the fastest developing industries in the region, is suffering on account of continuous protests. Shops closed their doors, imports rapidly declined and labour strikes disrupted local production as urban centers became battlegrounds between protestors and police. Morocco has fared better, having weathered the Arab Spring relatively well. The Moroccan government has invested in a series of policy measures to improve the local business climate and social conditions. Consumer confidence has been on the rise on account of stable economic indicators; real GDP grew by 4% on an annual basis over 2010-2012, with inflation of 1% or less.


A complex but rewarding market


Apparel value sales in the Middle East and Africa are forecast to grow by a further US$18.0bn over 2012-2017. Sub-Saharan Africa's demographic dividend presents a sizeable opportunity for international apparel brands, but one which remains latent due to a weak retail infrastructure outside of South Africa. Nonetheless, opportunities remain in establishing a first-mover advantage. In the Middle East, ongoing population growth coupled with a strong economic framework is expected to boost performance within apparel during the forecast period. The region's importance as a travel destination and shopping paradise will continue to sustain the influx of multinational brands into the market.


This article was originally published in the November issue of the Stitch Times Magazine.