Luxury Market in Nigeria and International Brands

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Executive Summary

The Nigerian GDP has reached $509 billion. At its current level, this makes the country’s GDP the 26th largest in the world-leading towards significant regional clout as the richest country in Africa based on GDP alone. As such, the purchasing power of the local population has increased due to positive developments to the local economy as a direct result of the strengthening or creation of numerous industries. This has influenced the rate by which people spend on luxuries instead of primarily on essentials. Recent data regarding Nigeria’s local luxury products industry has revealed that it is currently worth $213 million with a 10 to 15 per cent increase in domestic sales expected over the next five years based on sales forecasts and the fact that the local market is still relatively “untapped” so to speak.

Despite this apparent boom, there are still some notable issues in this industry that should be taken into consideration. The main issue that will be discussed in this project focuses on the fact that 90% of local buyers for luxury fashion brands within the country shop abroad for their needs. The reason for this is due to the relative absence of luxury fashion brands within the country which causes the local buyer to either resort to utilising purchasing services or going abroad to buy the brands that they want; it is the latter choice that is often the most prevalent among consumers. The primary question that will be investigated in this study is what practices within Nigeria have had positive or negative impacts on the introduction of luxury fashion brands within the country. This entails determining whether policies related to taxation, current infrastructure (real estate or corporate) have been conducive towards the development of the local luxury industry within the country.

The main purpose of this research project is to determine why luxury fashion brands from European fashion houses have little in the way of market penetration within Nigeria despite the high levels of demand within the country. If 90% of the luxury item consumer population within the country has to shop abroad to satisfy their demand for European fashion brands, this is indicative of a considerable market penetration issue. The main assumption of this study is that the necessary structures (i.e. luxury-oriented malls and shopping districts) and partnerships that would be conducive towards the development of the local luxury goods industry are simply not well developed enough or is absent which prevents proper market penetration by international fashion brands into the country. The following analysis of the impact of the luxury market in Nigeria from a customer analysis perspective will be conducted via questionnaire to collect participant data from knowledgeable research subjects who understand how this segment of the economy works and what factors need to be observed given their importance to how they impact the current growth of this industry.

Introduction

Luxury brands such as Louis Vuitton, Armani, Burberry, Christian Dior, Chanel and Gucci exemplify the concept of wealth, high fashion, extravagance and, of course, the exclusivity of possession which can only be accorded to individuals that are considered to be part of the “upper tier” of present-day society (Štrach & Everett 2006). It is due to this that possession of such brands is seen as a status symbol by many due to the extravagant prices these items are usually worth (Machan 2006). These characteristics (i.e. extravagance and status symbols) are important to take note of since they are often seen in individuals that are part of highly developed western countries that often have excess amounts of purchasing power to afford such luxuries; however, over the past decade, the same level of demand associated with western consumers in Europe and the US have slowly started to appear in Nigeria (Štrach & Everett 2006).

From 1960 till its democratisation in 1999, Nigeria has been immersed in a variety of internal conflicts that have crippled its national economy resulting in widespread poverty, a lack of sufficient public utilities and an insufficient level of industrial infrastructure to support advanced manufacturing processes (Taxing times for Nigeria’s luxury jet owners? 2013). It was due to these factors that Nigeria was often thought of as a “poor” country despite its vast natural resource wealth. This distinction impacted foreign direct investments into the country especially in the case of its luxury product industry for foreign goods which were nonexistent from the 1960s till the latter half of the 1990s (Taxing times for Nigeria’s luxury jet owners? 2013).

However, due to the country’s oil and gas industry being the “drivers for growth” so to speak, this influenced the development of nascent manufacturing and telecommunications industries to the extent that at present, the Nigerian GDP has reached $509 billion. At its current level, this makes the country’s GDP the 26th largest in the world-leading towards significant regional clout as the richest country in Africa based on GDP alone (Taxing times for Nigeria’s luxury jet owners? 2013). Looking at the work of Miller & Mills (2012) which delved into the interconnections between luxury purchases and economic development they that as the purchasing power of a local population increases due to positive developments to the local economy as a direct result of the strengthening or creation of numerous industries, this influences the rate by which people spend on luxuries instead of primarily on essentials (Miller & Mills 2012, p. 1473).

The sudden “boom” in demand can be described as a form of irrational exuberance that changes the perspective that consumers have towards the types of purchases they make wherein they start to place a greater level of value on items of distinction (i.e. luxuries) than on subsistence purchasing (i.e. only buying the essentials needed to survive due to the lack of substantial income) (Miller & Mills 2012, p. 1473). The concept of irrational exuberance can be defined as how people based their actions on the behaviour of other people; it is a form of emulation wherein people tend to follow trends based on observed behaviour (Jongwon, Kwak, Kyeongheui & Wyer 2014). In the case of a sudden influx of wealth for certain segments of Nigeria’s population, irrational exuberance takes the form of emulating people from western nations that consider high-end luxury products as being symbolic of the trappings of wealth and, as a result, this creates the demand for such items within Nigeria to how the “newly rich” perceive the need to distinguish themselves as being wealthy through status symbols (Jongwon et al. 2014).

Further analysis of the domestic luxury market in Nigeria reveals that it is currently worth $213 million with a 10 to 15 per cent increase in domestic sales expected over the next five years based on sales forecasts and the fact that the local market is still relatively “untapped” so to speak (Jacobs 2013). The reason behind this assertion lies in the fact that nearly 70% of all luxury product sales within the country are primarily concentrated on automobiles. This entails not only sports cars, luxury automobiles and SUVs (sports utility vehicles) for the upper class of society but also for members of the growing middle class of the country (Jacobs 2013).

For the extremely rich, up to 12 per cent of the Nigerian luxury industry focuses on private jets (i.e. renting or buying private jets) while for the middle-class sales of expensive watches, wines and spirits (mostly champagne) encompass 5 per cent of total sales for luxury items. Going over the sales data, it can be seen that 87 per cent of the local luxury goods industry focuses primarily on a select group of products, namely: automobiles, private jets, watches, and luxury wines and spirits (Giovannini, Xu & Thomas 2015, p. 27). On the other end of the spectrum, luxury branded goods encompassing fashion (ex: Louis Vuitton, Christian Dior, etc.), jewellery, and premium banking options (i.e. American Express), only encompass 13 per cent of the local luxury industry and are the least developed in terms of the number of shops and options available to local buyers (Giovannini, Xu & Thomas 2015, p. 27).

Based on the analysis of Giovannini, Xu & Thomas which examined the sales of luxury products in various markets, the skewed nature of Nigeria’s local market is highly unusual since it is usually the case that fashion brands would, on average, encompass 45 per cent of the local luxury goods market within a country. Giovannini, Xu & Thomas help to explain this by pointing out that compared to cars, jets and other types of luxury items (except for some high-quality wines and spirits), high-end fashion brands are more accessible. This is due to the purchasing power associated with the middle class wherein due to their lower level of income as compared to the upper tier of their society.

They can only afford a limited quantity of truly expensive luxury goods (i.e. cars) (Hagtvedt & Patrick 2009, p. 616). As such, it is this consumer class that usually makes up a large percentage of the consumer market for high-end fashion brands since it is in this type of product market that the middle class tends to spend their excess income. Thus, it is highly unusual that the local market for high-end fashion brands is the least developed aspect of the Nigerian luxury goods industry (Hagtvedt & Patrick 2009, p. 616). It would be understandable if it were primarily based on low levels of demand for branded fashion within the country; however, based on surveys and reports analysed by Hagtvedt & Patrick, it was noted that there is a significant level of demand for branded fashion goods, particularly those of European brands, within Nigeria.

Hagtvedt & Patrick even noted that demand was so high that consumers within Nigeria chose to travel abroad and make their purchases there due to the lacklustre nature of the local shops in its prime business districts. At times, local consumers even resorted to utilising local purchasing services who buy the product on behalf of the customer. Taking all these factors into consideration, it can be seen that there is an issue when it comes to capacity for luxury fashion brands to penetrate Nigeria. However, there is a significant level of demand within the country (Hubbard, 2013).

It is based on this that this paper will determine what issues are preventing the entry of international luxury fashion brands into Nigeria and what are the overall opinions of local buyers regarding the state of the local fashion industry. It is expected that through this examination, the problems that are preventing the penetration of international fashion brands into the country can be identified so that a proper recourse can be developed to resolve the issue. This paper assumes that the lack of significant local infrastructure in the form of financial, corporate and commercial ventures geared towards the rich prevents fashion brands from properly establishing themselves within Nigeria.

Background of the study

The main issue that will be discussed in this project focuses on the fact that 90% of local buyers for luxury fashion brands within the country shop abroad for their needs (Hanslin & Rindell 2014, p. 150). The reason for this is due to the relative absence of luxury fashion brands within the country which causes the local buyer to either resort to utilising purchasing services or going abroad to buy the brands that they want; it is the latter choice that is often the most prevalent among consumers (Ciornea 2013, p. 51). This case is interesting since it delves into the fact that despite the increasing level of purchasing power within the country that would normally create an increased presence of luxury brands; there is a relative absence of such companies within Nigeria (Hanslin & Rindell 2014, p. 154). This is although the local luxury market within the country is a multi-million dollar industry with luxury automobiles, watches and even planes being the most developed sectors for this particular aspect of the Nigerian economy. Studies such as those by Uggla & Lashgari (2012) explain that as the purchasing power consumers increase, this results in a greater demand for products and services beyond subsistence (i.e. basic needs) which manifests in the form of luxury products due to the social distinction attached to them (Uggla & Lashgari 2012, p. 21).

High-end fashion items, which in this case come in the form of European fashion brands due to the high level of demand for such items within Nigeria, are normally the first trappings of wealth and success that are purchased by individuals with higher levels of purchasing power (Uggla & Lashgari 2012, p. 21). It is due to this that luxury fashion brands are normally the companies that pioneer entry into new markets since they are normally the least expensive extravagances as compared to cars, homes, and private planes. Arghavan & Lynne (2000) explain that the development of other aspects of the luxury industry market, such as cars, private planes and palatial homes, are the result of progressive buying behaviour on the part of consumers (Arghavan & Lynne 2000, p. 485). This behaviour can be described as a natural progression brought about by declining marginal utility as explained in the theory of consumer behaviour that will be discussed in the literature review section of this paper (Chen & Sethi 2007).

Further examination of the issue utilising other cases such as the examples of China, the Philippines and UAE all had developing economies at some point. Yet, they did not experience the same issues when it came to the market penetration of luxury fashion brands into the country (Chen & Sethi 2007). Their ease of transition was relatively straight forward, and local consumers were more than satisfied with the sheer amount of luxury brands that were available to them (Ko & Megehee 2012). Thus, when examining the situation found in Nigeria, there are factors at work that are causing international luxury brands to either have a hard time penetrating the local market or would cause significant issues that it discourages them from going into this market (Ko & Megehee 2012). It is based on these aspects that this study will delve into these factors and attempt to discern the origin of such issues within the local luxury product market within Nigeria.

Problem Statement

The primary question that will be investigated in this study is what issues are preventing the entry of international luxury fashion brands into Nigeria. In contrast, the second question will entail investigating what the overall opinions of local buyers regarding the state of the local fashion industry are.

Aim

The primary aim of this study is to examine what factors are at play when it comes to the lack of sufficient penetration of luxury fashion brands into the country despite high levels of local demand.

Objective

The primary objective is to investigate what issues are preventing the entry of international luxury fashion brands into Nigeria and what are the overall opinions of local buyers regarding the state of the local fashion industry.

Purpose

By the end of this study, the researcher will utilise the accumulated data to make recommendations to improve the rate of market penetration for international luxury fashion brands within the country to satisfy local demand. It is expected that this research should have a significant impact on understanding the various issues surrounding the penetration of luxury fashion brands into developing economies that have increased rates of consumer purchasing power.

Research Question and Hypothesis

The hypothesis of this study is that the lack of significant local infrastructure in the form of financial, corporate and commercial ventures geared towards the rich prevents fashion brands from properly establishing themselves within Nigeria. To address the primary objectives of this study, the following research question has been developed: what issues are preventing the entry of international luxury fashion brands into Nigeria. Qualitative questioning in the form of questionnaires with local consumers within Nigeria as well as interview responses will be used as a primary method of data collection while supporting details for the paper will be collected via document analysis. It is assumed that through the use of the chosen methods, this paper will be able to examine the topic properly and devise adequate solutions to the identified issues.

Research Methodology

The following analysis of the impact of the luxury market in Nigeria from a customer analysis perspective will be conducted via questionnaires and interviews for the purpose of collecting participant data from knowledgeable research subjects who understand how this segment of the economy works and what factors need to be observed given their importance to how they impact the current growth of this industry. The justification behind the choice of a questionnaire and interview-based approach for this particular project was due to the capacity of the participants to respond to the researcher’s questions more directly and thus provide more information that would have otherwise escaped the notice of the researcher.

Furthermore, an analysis of related literature will be used to compare the study findings with the questionnaire and interview results to develop accurate assumptions regarding the current state of the Nigerian luxury market. Data collection for this project will consist of gathering 25 to 35 respondents from the local population in Nigeria, and they will be questioned based on the factors that will be decided. Overall, this research methodology was chosen due to a large amount of information that can be obtained within a short period and can be considered as being fairly accurate when it comes to the conclusions that can be drawn from the data. By utilising the framework of grounded and attribution theory to examine the interviewee responses and the data from the literature review, the researcher will be able to adequately examine the various issues that are currently impacting the luxury fashion industry within Nigeria.

Assumptions

The main assumption of this study is that the necessary structures (i.e. luxury-oriented malls and shopping districts) and partnerships that would be conducive towards the development of the local luxury goods industry are simply not well developed enough or is absent which prevents proper market penetration by international fashion brands into the country. While there are other possible factors that contribute to the problem of local market penetration by international fashion brands (i.e. the 60% tax rate on luxury goods being imported into the country), this study assumes that it is the lack of real estate development for luxury shopping as well as the absence of experienced local partners that is at the core of the issues plaguing the Nigerian luxury goods industry.

Research Design

Based on assessing the needs of this study, it was determined that a qualitative research study would be the most appropriate when it comes to the type of data that needs to be gathered. Qualitative research can be defined as a type of exploratory research that tries to examine and explain particular aspects of a scenario through an in-depth method of examination. This type of research approach is normally applied to projects that attempt to explain human behaviour and the varying factors that influence and govern such behaviours. It is due to this aspect that it makes it an ideal research method since this study will be delving into consumer perspectives regarding the current status of the luxury market in Nigeria. Since qualitative research focuses on exploring various aspects of an issue and developing an understanding of phenomena within an appropriate context, this makes it the best method of delving into the issues that will be examined and developing the necessary observations and conclusions based on the data that has been gathered.

Another aspect of the data gathering process that will be implemented within this paper focuses on the use of document analysis in the literature review section. A document-based method of data gathering is primarily concerned with an examination of various academic texts, online articles, reports and various government websites from Nigeria that detail its luxury industry. The reason this method was chosen to be included in the study is that document analysis is far easier to do and has a high degree of academic veracity given the findings that have been verified and properly vetted by previous researchers. As such, the findings from this part of the research should help considerably in supplementing the findings through the questionnaires.

Variables

The independent variable in this study consists of the, and the dependent variable will consist of the responses gained from the various research subjects who will be recruited for this study. I anticipate that through a correlation between the researched econometric data and the responses of the research participants, I will in effect be able to make a logical connection regarding the positive or negative effects of regional integration on trade and human migration.

Demographic

The demographic that will be examined consists primarily of upper to middle-class earners within the Nigerian luxury brand market. These individuals have high incomes and normally spend excess money on luxury purchases. Due to their experience in purchasing products from the local luxury market, this population set most likely has a more “in-depth” perspective regarding the issues that they would encounter when it comes to buying particular types of fashion.

Limitations

As mentioned earlier, this study will limit itself to primarily distributing questionnaires and conducting interviews to members of the urban populace within Nigeria. Aside from this, the research will avoid an examination of the other states within Africa that have undergone similar changes to their purchasing power and have seen a rise in local demand for because of the necessity of having to create an even more expansive literature review and population examination that would go beyond the initial premise of this examination. To the econometric data, I will examine, the research will primarily confine itself to 10 years, starting from the latest available data and going back ten years from that particular point. Although it may be true that econometric data spanning a far longer period is available, the researcher decided that a 10-year period would suffice for the needs of this study.

Research Constraints

The main research constraint of this study is its reliance on questionnaire and interview results as the main source of data regarding customer perspective on the current state of the Nigerian luxury market. The inherent problem with utilising this type of research method is that there is always the possibility that some of the research subjects could either be lying about their knowledge on the luxury industry or could be answering questions at random. Such issues can be partially resolved by utilising relevant literature to ensure the veracity of the data that is presented; however, it is still a concern.

Study Delimitations

Overall, the data-collection process is not overly complicated and will consist of the researcher utilising online questionnaire services such as surveymonkey.com to create the needed online questionnaire for the research subjects to fill out. Given the time constraints associated with this paper, it is anticipated that 25 to 30 respondents should be sufficient to get all the necessary data for this paper.

Significance of the Study

The significance of the study lies in its potential to highlight the issues that currently plague the luxury retail industry within Nigeria, what customers think of such issues, and what methods could be implemented to resolve them. Through this study, an accurate overview of the current situation in Nigeria can be developed which would enable local government agencies to determine what programs need to be put in place in order to encourage the entry of luxury foreign brands into the country in order to satisfy local demand for the items in question. All in all, this project can substantially help the Nigerian government determine where more investments need to be made concerning retail infrastructure and foreign direct investments to help boost local spending into luxury goods which would help the government given the high rate of taxation associated with the importation of such products.

Project outline

The project will consist of the following parts:

Chapter 1 will contain the introduction, background of the study, the study limitations, as well as its aims and objectives. This section primarily explains the reasons why this study was undertaken, the means by which the topic will be investigated and what the inherent limitations behind the study are.

Chapter 2 consists of literature review that details various aspects related to the luxury market in Nigeria, what factors influence consumer purchasing behaviour, supporting details to help explain the current situation involving the penetration of fashion brands and other notable aspects that contribute towards an understanding of the issue that is being investigated in this project.

Chapter 3 will consist of the methodology that will be utilised in the project.

Chapter 4 will contain the results of the study and will discuss the implications of the results.

Chapter 5 will consist of the conclusion and recommendation section of the paper of the conclusion and recommendation section of the paper.

Literature Review

Introduction to Literature

This section reviews and evaluates the literature on the luxury industry within Nigeria, the factors that have contributed towards its development, what are its main influences and what are the limitations that continue to plague it as interpreted by various experts in the field on the subject. The primary aspect that will be focused on is the issues preventing European fashion houses from properly penetrating the Nigerian market. The reason behind this selection is based on high local demand for European fashion brands (the basis behind this specific demand is discussed in the literature review) which would normally result in such brands clamouring to penetrate the local market yet such actions have not come to pass despite having a sufficiently strong upper and middle-class consumer market for such products. Through this section, readers will be able to understand the background of the issue better and make succinct conclusions regarding what can be done to resolve the issues that have been identified thus far. It is anticipated that such an understanding would be able to contribute towards the views and ideas expressed by the research subjects that are a part of this project.

The literature in this review is drawn from library articles, article databases such as Jstor and various internet sources when applicable. Keywords used either individually or in conjunction include: high import tariffs, scams in Nigeria, theory of consumer behaviour, belief in European luxury, Nigerian upper and middle class, the theory of consumer behaviour, Chinese wealth, experienced local partners, and sufficiently developed real estate within the country.

Nigeria and Luxury Fashion Brands

The case of the sudden increase in purchasing power impacting the attitude of local Nigerian’s towards buying substantial amounts of luxury items is not without some level of international precedent, this was seen in the case of China wherein the influx of wealth as a direct result of the development of its industrial manufacturing capability lead towards the development of a new upper and middle class within the country. (Stokburger-Sauer & Teichmann (2013) explain that this new upper and middle class within the country was unfamiliar with the concept of wealth and privilege due to the previous economic and development policies within the country and, as such, they subsequently modelled their spending habits on that of the western world ((Stokburger-Sauer & Teichmann 2013).

This is similar to the case of newly wealthy Nigerian consumers, wherein they subsequently modelled their spending habits on the western world with the main difference between the two is that China focused more on luxury American goods. At the same time, Nigeria is more along the lines of European luxury brands (Saayman & Cortés-Jiménez 2013, p. 538). Unfortunately, in the case of Nigeria, the development of its luxury goods industry within the country has not kept pace with the affluent/middle-class population growth. While its luxuries related to automobiles, watches, and wines have somewhat kept pace with the growth, the development of other segments such as the potential influx of high-end European fashion brands has not (Saayman & Cortés-Jiménez 2013, p. 540). In comparison, during the early onset development of China’s luxury industry, this was not the case since international fashion brands were able to keep pace with local demand for their products (Saayman & Cortés-Jiménez 2013, p. 542).

To understand why this occurred in China and is not occurring in Nigeria, it is important to note that one of the main differences between the two lies in the attitude of local real estate developers and how they influence the perception luxury brands have towards the country. Kapferer (2012) states that during periods of industrial growth (or market growth as its differs on a case by, the local economy of a country improves significantly and this influences the size and price of average homes (Kapferer 2012, p. 453). This is due to the perception of developers that as local consumers have higher levels of purchasing power, they can thus afford to have better houses and have access to more resource-dependent amenities (i.e. clubhouses in exclusive communities) (Kapferer 2012). This orientation, as seen in the case of China, Japan, the US and other countries during their industrial growth periods, saw local real estate developers attempting to fill in the demand by individuals for ever-increasing amenities by developing relationships with local and international retailers to justify the creation of malls that specifically catered towards the middle and upper-income portions in society (Yajin & Griskevicius 2014).

For instance, the various luxury fashion brands within China that can be seen in malls within Beijing, Qingdao and Shang Hai were not the direct result of fashion brands simply setting up shop within these malls; rather, they are the result of these international brands establishing relationships with local business groups to handle their products for them (Yajin & Griskevicius 2014, p. 835). This is because local businesses are more aligned with the attitudes and desires of the local populace and are more capable of knowing how best to maximise the sale of luxury items to them. This particular relationship can also be seen in the case of the Philippines wherein due to its burgeoning economy that has continued to grow significantly over the past decade; this has increased demand for luxury brands within the country. International luxury brands followed the same strategy that they did in China wherein they established relationships with local business groups that have experience in the sale of luxury items and then let them handle the sale of their products.

Thus, when examining both the case of China and that of the Philippines, it can be seen that the development of partnerships between local retailing groups and international luxury brands is an important facilitator for the entry of such brands within a country. Yang & Mattila (2014) help to further explain this relationship by stating that unlike other brands within the fashion industry, luxury brands place a significant level of importance on perception, exclusivity and its capacity to be correlated with the rich and famous (Yang & Mattila 2014, 526). Since the markup price for their products can reach 400% or more, the justification they have towards selling products at this cost is connected to how they market themselves as being the type of stores that only the rich go to.

The result is that their stores ranging from Tokyo to New York tend to have similar price ranges and store formats. What must be understood is an exclusivity is a form of brand protection for luxury brands since it is what keeps them in business and helps to justify their high prices, without such a selling point in place, it is unlikely that they would be able to convince customers to buy what they are selling. It is from this line of thought that Boonghee & Seung-Hee (2009) explain that the business model of luxury fashion brands often requires spaces that are oriented towards the rich and in places trafficked by the rich both due to the necessity of being near places where there are likely customers as well as to enhance further the feeling of exclusivity attached to their products (Boonghee & Seung-Hee 2009, p. 284).

Unfortunately, further examination of the case of Nigeria reveals a distinct lack of sufficient investments into infrastructures and retail blocks that are exclusively for the rich. What are present are malls and retail locations that are oriented more towards mass-market appeal than they are towards catering towards the rich. Examples of retail areas that focus on selling high-end fashion brands to consumers come in the form of the Gangnam district in South Korea, 5^th Avenue in New York, Rodeo Drive in Beverly Hills, Shinjuku in Japan and Greenbelt in Manila. These areas have malls, shops and areas that are all oriented towards the upper and middle class of society and have been planned and created by developers specifically for this purpose.

However, when examining the case of Nigeria and areas where there are greater concentrations of affluent individuals such as Lagos, there is the relative absence of sufficiently developed locations and malls that cater specifically to individuals that have high levels of purchasing power. Going back to the case of China, one of the advantages of state-sponsored construction industries is that they tend to follow plans set forth by the government based on long term goals. It was due to this that shopping areas specifically created for the rich were part of the expansion and redevelopment efforts that were seen in China’s major cities following the development of its manufacturing industry. This helped immensely in developing the local luxury industry for fashion brands since specific locations, along with organisational support from local business groups, helped them launch their products with local partners to properly reach their customers.

Yann, McColl & Kitchen (2010) state that the relative absence of this method of planning by local construction companies within Nigeria can be considered as a contributing factor behind the reluctance of various international brands of expanding into the country despite the high levels of demand. The areas where they are used to operating in, based on their business model, are simply not present and, as such, this creates a considerable level of reluctance since opening a store in an area that is oriented towards the mass market would detract from the reputation of the company as a whole (Yann, McColl & Kitchen 2010, p. 349). Based on what has been presented in this section thus far, it can be seen that in comparison to the case of China, Nigeria lacks sufficiently experienced local organisations as well as the necessary established infrastructure for luxury brand retail operations for it to be an attractive location for European based high-end fashion brands. While it is true that there are locations where establishing high-end fashion brands is feasible, such as the Hilton hotel in Lagos, the fact remains that the infrastructure of the hotel was never meant to cater to significant amounts of foot traffic as seen in the average mall and it is due to this their facilities are inadequate for the needs of European based brands. To resolve such an issue, it would be necessary for local real estate developers to start efforts to create areas that specifically cater to the newly rich and the middle class within Nigeria.

This would help to convince luxury fashion brands that the necessary infrastructure for proper stores does exist and they can take advantage of it. The second solution would be for local business organisations to hire international consultants to help them develop the necessary expertise in the form of training, people and systems to make them attractive partners for international luxury brands. With the greater levels of purchasing power now available to the local population and the creation of the Nigerian middle class, these concerns are not as valid as they used to be. However, despite such changes, real estate developers are changing their outlook at a glacial place and, as such, this impacts the development of the local luxury industry as developers continue to focus on mass-market appeal over niche market segments. To resolve such an issue, it would be necessary to change their current orientation via government contracts or other similar methods so that they may realise the advantages associated with creating shopping areas that specifically cater to a segment of the population. The next section will delve into issues related to high tariffs and how they impact the price of imported luxury goods into Nigeria.

High Import Tariffs

One of the possible reasons why luxury fashion brands have been relatively few within Nigeria can be connected to the fact that there is a 60% import tax placed on luxury products that enter the country. To understand its continued impact on the development of certain segments of the Nigerian luxury industry, it is important to analyse how adverse taxation impacts the development of industries, why they are implemented in the first place and whether such reasoning is justifiable in the case of Nigeria. Import taxation is implemented either as a form of income for the government or as a method of protection for local companies due to the competitive advantage inherent in the manufacturing capabilities of other countries. For instance, due to the CARP (Common Agricultural Policy) in states belonging to the European Union, farms within that region of the world are often given substantial subsidies which allows them to produce agricultural products at a loss and still gain a profit.

Excess stock is often sold at prices that are far lower than what is produced in other countries which leads to the potential for product dumping in some cases. Since farms in other countries are often not subsidised by their respective governments, this results in them competing against products that are priced at far lower than their own. It is due to this that protectionist measures are often implemented for certain product types to ensure the survival of local industries. When examining the case of the protectionist measures implemented in Nigeria, it must be questioned what are they attempting to protect in the first place? Nigeria does not have any local luxury brand producing industries and, as such, implementing protectionist measures does not seem to make much sense given the lack of local competition.

It should also be noted that protectionist measures are often implemented on mass-market products and not necessarily nice small industries. As such, when looking at the case of Nigeria’s luxury goods tax, it is simply there as a means of gaining more money for the government. The examination of Ponticelli, Mininno, Dulmin & Aloini (2013) which briefly mentioned areas, where Nigerian’s were most likely to shop, showed that places like Abu Dhabi, Dubai, and Qatar where there was no taxation whatsoever for luxury goods entering into the country. Other countries of the note consisted of France, the UK and even China to a certain extent due to low levels of taxation on imported foreign luxury items. When going over this example and taking into consideration the fact that nearly 90% of Nigerian buyers of high-end fashion have to go abroad just to get the type of product they want, this shows that the current system of protectionism within the country when it comes to luxury fashion brands causes more harm than good. The 60 per cent encourages Nigerians to spend their money elsewhere and prevents the development of a local industry that could bring in millions in taxes for the government based on the number of sales created.

Theory of Consumer Behaviour

Before proceeding to the next section, it is important to take note of the theory of consumer behaviour and how it impacts sales of luxury goods (especially high-end fashion) in Nigeria. The first aspect that is taken into consideration is the assumption that consumers pass through distinct stages before, during and after the process of product or service utilisation. For instance, in the case of consumers of high-end fashion in Nigeria, they tend to evaluate the cost of the product, whether its style is appropriate for them and what the brand is in correlation to the image that they are trying to present. This shows that customers in Nigeria can be influenced by different factors that impact how they patronise a particular product.

For instance, there are psychological reactions which are based on brand perception and how customers think about a product. This manifests in the cultural perception within Nigeria that places high-end European brands as being the ideal type of status symbol. One example of this, aside from the case of Nigeria can be seen in China wherein instead of European based products being a status symbol, American brands are preferred. Going back to the concept of luxury product shopping, Beverland (2005) explains that since buying such items are not classified under the category of necessities since luxuries are not necessary to live; rather, the type of purchasing behaviour associated with this type of product entails fulfilment of what can be described as a “higher need” based on cultural and social identification (Beverland 2005, p. 1003).

What this means is that purchasing luxury items is due to the inherent desire of consumers in higher income brackets to showcase how much they different or at times “superior” they are to other members of society by their purchasing power. As such, while concepts related to price, demand and supply still do impact the consumer decision-making process, it is far different than the mindset that encompasses people that pay for necessities such as food, shelter, normal clothing etc. (Beverland 2005, p. 1005). For instance, product choice in the case of luxury products is not necessarily governed by just price and quality; instead, it is also subject to the processes that go into the creation of a product that consumers with high levels of purchasing power take into consideration before purchasing certain brands from a particular company.

One concept behind this is the marketing tactic of advertising some high-end fashion products as being handmade or that they were crafted by traditional experts of that particular product (‘Europeans Dominate Online Luxury Survey 2015). This is a common marketing tactic used to justify the prices of certain luxury goods as if to indicate that by the product being made by human hands it is thus superior to similar products that are made from factory designs. The inherent problem with this assumption is that studies such as those by Socha (2009) have shown that the difference in quality between handmade luxury fashion items and those that come straight from a factory is relatively small and hardly noticeable by the naked eye. As such, even though such items are considered far superior to their counterparts; the truth is far from the reality that is being espoused (Socha 2009, p. 13).

Theory of Consumer Behaviour and the Nigerian Luxury Product Industry

Based on the needs of this study, it was decided that the theory of consumer behaviour will be utilised to create a framework to understand the actions of Nigerian consumers in the country’s luxury goods industry. First and foremost, it is important to note that the theory of consumer behaviour revolves around the concept of perceived value or satisfaction. This particular feeling is derived from the consumption of a particular commodity which in this case comes in the form of luxury goods. For this analysis, the first aspect that should be noted is that theory of consumer behaviour uses two distinct methods of measurement: Total Utility (TU) and Marginal Utility (MU) (Fionda & Moore 2009).

Total utility is the total level of satisfaction that a Nigerian high-end fashion consumer can derive from buying particular luxury items. Marginal utility, on the other hand, is considered as an add-on to total utility, wherein it is the additional form of satisfaction that a Nigerian customer can get from purchasing a particular luxury item (Hennigs, Wiedmann, Behrens, Klarmann & Carduck 2013). For example, by purchasing a bag from Hermes, a local consumer can satisfy their total utility from purchasing a bag; however, the marginal utility, in this case, comes in the form of the exclusivity attached to the purchase as well as the level of brand awareness by observers regarding the brand itself.

Thus, total utility and marginal utility for luxury goods buyers come in the form of ownership and the awareness of other people regarding the exclusivity of what you purchased. Going further, along with the theory of consumer behaviour, while total utility can increase with the amount that is purchased, there is a point where due to the continuous purchase of a particular brand of a luxury good, the overall yield experienced by the Nigerian consumer will result in lower levels of additional utility towards the luxury item that they are purchasing (Okonkwo 2009, p. 305). This particular idea has its origins on the notion that continuous consumption of a similar product type (or the same product) would eventually cause a consumer to eventually get tired of consuming it. The result would be a decline in the perceived marginal utility obtained from the consumption.

Do note though that in the case of individuals with high purchasing power Ko & Megehee (2012) explain that while the influence of marginal utility does work wherein consumers eventually get progressively fewer returns from purchasing the same product, what also occurs is also a gradual progression towards increasingly varied and more expensive purchases based on the diminishing returns from the marginal utility (Ko & Megehee 2012, p.1395). In the case of luxury product consumers, this means that their consumption of such goods gradually progresses over time into more diverse and more expensive types of goods as compared to their initial consumption of luxury items. Such a method of consumption manifests through the desire to buy from different brands and get more exclusive items.

One example, in particular, comes in the form of the desire to “match the season” so to speak when it comes to the type of fashion item that they are purchasing (“Bravo” for Burberry: From bust to boom – creating a luxury fashion brand 2005). This form of purchasing behaviour evolves from merely purchasing luxury fashion brands for the sake of appearance and instead changes into the desire to stay in line with the latest fashions and expected trends associated with seasonal weather changes. Such a manifestation, Ehbauer & Gresel (2013) explain, manifests as a result of the declining marginal utility associated with purchasing luxury fashion brands based on their method of setting them apart from the masses to the desire to set themselves apart from other people within the same income level by showing how more in line they are with the concept of exclusivity (Ehbauer & Gresel 2013, p. 339).

This desire helps to explain why consumers of luxury fashion brands within Nigeria are willing to travel to other countries to buy such items. Simply put, the marginal utility that they derived from local stores within the country that had limited options had already begun to decline, and they attempted to rectify this situation by appeasing their demand by going abroad and getting the latest type of luxury fashion. Thus, the assumptions made by Ehbauer & Gresel (2013) are proven correct wherein the continuous consumption of certain products would decrease the marginal utility over time resulting in the development of actions to rectify such a situation whether, through reduced consumption of that item type or further diversification since once a decrease in marginal utility has been met, consumers will switch to another product type where they can derive more marginal utility which in this case can only be found abroad (Cailleux, Mignot & Kapferer 2009).

To better understand how such a concept applies to consumer behaviour in the case of Nigeria, it is necessary to examine it from the concept of rational behaviour. This concept assumes that all consumers act rationally and, as such, use their income to derive the greatest amount of satisfaction from a purchase. What this means is that rational individuals under the theory of rational behaviour would purchase items that have a specific total utility or marginal utility that they can make use of. This comes in the form of basic necessities which people need to survive or for luxury items which some people consider as a necessary aspect of establishing their social status. Purchases, based on this interpretation, thus have a purpose despite the price attached to them wherein rationality is based on the perceived value placed on the product being bought (Jung, Lee, Kim & Yang 2014). From this aspect, it can be interpreted that rational consumers would attempt to maximise their income through rational buying behaviour to properly utilise the total utility that they can derive from the purchase of that product. In the case of this paper that focuses on the luxury market in Nigeria, the perceived value comes in the form of the limited choices for luxury fashion goods that are available (Mayer & Cashman-Pugsley 2013, p. 71).

The perception of local consumers is based on the notion that European based luxury brands are superior and, as such, despite the presence of local alternatives, it is determined by Nigerian consumers that this is not an effective maximisation of total utility as per the theory of rational behaviour which culminates in them going abroad to satisfy their desire for the maximisation of their total utility through the purchase of quality European fashion brands (Pike 2013). This perspective helps to explain why, despite the issues related to travelling abroad and the inherent cost of the effort, these consumers continue to perform such an activity. This is because they would desire to get what they want, despite the inherent cost, instead of multiple items that they would not even desire from local sources. This form of rational purchasing behaviour is based on the notion that consumers act in an economically competitive manner and purchase what they want (based on need) and not buy something that they have no need nor desire for (Kapferer & Michaut 2014). It is through this theoretical examination of consumers in Nigeria that the analysis of consumer patronage of luxury goods will be elaborated on in the discussion section of this study.

Aside from rational behaviour, it is also important to take note of aspects related to the limit of consumer demand and how consumers obtain total utility. First and foremost, all customers have what can be described as a “limit” to the amount they are willing to pay on products (Carcano 2013, p. 38). This is an inherent aspect of the consumer buying experience due to the finite levels of income all buyers are subject to. While the rich have a higher limit, such a threshold continues to exist. It is the basis behind the desire to maximise total utility since if there is a finite level of buying power, consumers will choose to maximise the experience or method of consumption of whatever it is they are buying. This particular notion helps to open up to the topic of consumer preference which states that all consumers have their personal preference towards a product that is currently available in the market from which they can derive the greatest amount of total utility (Younghee, Won-Moo & Minsung 2012).

Thus, despite the availability of different product types or alternatives, consumer preference still dictates that demand will focus on what consumers want and not necessarily on the potential substitutes that are present within a given market. This helps to explain why consumers of luxury products within Nigeria are so adamant about buying European based fashion brands instead of simply sticking to what is available locally. Simply put, the purchase of local fashionable items that are not of European origin is not an effective maximisation of total utility since consumers are not getting what they want at all (So, Parsons & Yap 2013). It is this interaction between the lack of local ability, significant levels of demand from luxury brand consumers and high levels of purchasing power that creates a situation where 90% of a local consumer segment chooses to go abroad just to acquire a specific type of product.

Belief in European Luxury and the Impact of Popular Culture on Consumer Demand

While this paper has so far discussed the theoretical basis behind the demand of luxury fashion brands within the country, it is also necessary to delve into the social aspect behind and understand how it influences consumer buying behaviour. Through the study of Carcano (2013), it was noted that, whether intentional or not, cultures than to have some form of cultural exchange resulting in the adaptation of new behaviours and ideas. While this can manifest in more obvious examples such as borrowed phrases, another of the possible developments is influencing the perception of consumers regarding the value of particular products (Carcano 2013, p. 40). In the case of Nigeria and the development of its social structure, this came in the form of regarding European products as being associated with wealth and influence. Fuchs, Prandelli, Schreier & Dahl (2013) state that this is a cultural holdover from the time of European expansion into Africa which continues to influence societal perceptions within the country and results in the demand for European luxury fashions.

This attitude is not limited to individuals from higher-income thresholds; rather, it extends to the working class of Nigerian society as well and manifests through locals buying imitations instead of the originals due to the inherent price gap between the two types of product (Fuchs, Prandelli, Schreier & Dahl 2013, p. 79). For those buying imitations luxury brands, the total utility is based on the appearance of the product and not the quality of the luxury fashion brand in question. As mentioned earlier on in this paper, when it comes to luxury fashion brands, it is the appearance and not necessarily the practicality of the product that is focused on. The one saying that seems to justify such purchases is that “appearances are everything”, wherein consumers within Nigeria derive some level of satisfaction from appearing that they are rich. However, they are not (Kapferer & Bastien, 2009). To properly understand this inclination and how it influences demand for luxury fashion brands within Nigeria, it is necessary to examine the origin of the behaviour.

First and foremost, it is important to note that the association of luxury goods with wealth and high society is the result of the influences of popular culture. This is evidenced by the various advertisements that can be seen in popular magazines, TV shows (ex: the illogical placement of characters surviving a zombie apocalypse in The Walking Dead yet are driving cars models that will be released next year) and even movies which show instances of product placement (ex: the Transformer movies which showcase numerous instances of product placement seen throughout the entire film) (Cavender & Kincade 2014, p. 235). Within the context of consumer buying behaviour, it is necessary to understand that pop culture has such an effect on society to the extent that people view their favourite actors and actresses want to emulate their outfits, buy what they buy and do what they do. This is under the assumption that since actors and actresses are at the “top of the social ladder” so to speak then what they buy and the services they utilise must be what people should wear to emulate the most prestigious aspect of society (Hasenfuss 2009, p. 39). Unfortunately, the amount of money needed for such an endeavour frequently exceeds that of an ordinary individual. This is one of the reasons why, despite the lower quality of fakes, the underground business in Nigeria that focuses on the sale of such items continues to thrive.

The development of a Nigerian Upper and Middle Class

Aside from aspects related to the theoretical origin of the demand for luxury products and its sociological connection to popular culture, it is also important to delve into its socio-economic origins as well to better understand how demand will grow in the coming years and what other aspects influence local demand for luxury goods that have not been tackled in the previous sections. First and foremost, Stoner & Yajin (2014) note that one of the underlying theoretical precepts under the field of socio-economic science is the connection between higher purchasing power and the creation of a nascent middle class that helps to support and boost the local economy as well as increase local demand for increasingly complex goods and services (ex: luxury products) (Stoner & Yajin 2014, p. 207). As Keane & McMillan (2004) explain, as developing economies become more industrialised and create more opportunities for residents, this creates the opportunity for growth not only in an economic sense but in a sociological sense as well based on substantial increases in the purchasing power of certain segments of the local population. This leads to the development of a new economic class in the form of a middle class within the country (Dinoto 2010).

This is an important aspect to take note of when it comes to the theory of consumer buying behaviour and its connection to the development of social classes within a developing country. The first theoretical connection is related to total utility and marginal utility where, in the previous sections of this paper, it was explained that consumers experience declining marginal utility the more they buy a product with all customers seeking to maximise their respective total utilities based on the theory of rational behaviour. Along this line of thought is the assumption that all consumers experience finite levels of income and, as such, when combined with aspects related to declining marginal utility it can be assumed that consumers within a certain country can only buy so much of a certain product (Granot, Russell & Brashear-Alejandro 2013).

From the perspective of the luxury market industry, this viewpoint can be interpreted as consumer groups having relatively finite levels of actual demand versus the apparent theoretical demand that exists. Steinhart, Ayalon & Puterman (2013) help to explain such concepts by stating that “actual demand” refers to demand as seen through sales invoices, receipts, amount of purchases made within a particular sales quarter or other such quantitative data that reflects the number of sales made within a given period (Steinhart, Ayalon & Puterman 2013, p. 281).

This data helps to show demand as evidenced by sales while on the other end of the spectrum. Theoretical demand is based on assumed future demand based on an examination of current customer views regarding particular products and potential future sales as reflected by these consumer groups (Steinhart, Ayalon & Puterman 2013, p. 282). These are important factors to take into consideration for luxury fashion brands when they attempt to penetrate new markets since actual demand is far more accurate as compared to theoretical demand. The connection these types of demand have to the theory of consumer behaviour is connected to the finite nature of sales and marginal utility. In the case of the Nigerian luxury product market, it can be stated that rich customers have a finite level of marginal utility for certain product types (Steinhart, Ayalon & Puterman 2013, p. 283).

This follows the rule that the amount of utility derived from repeated purchases declines despite the presence of higher levels of purchasing power. It is based on this that when presented with a small population of rich individuals, it is not surprising that the overall level of anticipated actual demand with being lower as compared to the theoretical demand that states that there is a high level of demand for certain types of luxury products based on cultural aspects connecting European luxury fashion brands (Grier 2009). Thus, despite the presence of a wealthy local population, if the actual demand within that area is negligible, then it is unlikely than steps towards greater market penetration would occur (Steinhart, Ayalon & Puterman 2013, p. 285).

This is due to the fact that, combined with the 60% tax on luxury goods within the country, there are still factors related to operational costs, issues with proper infrastructure and the proliferation of fakes within the local market that would dissuade most companies from investing significant amounts into the country. However, Chen, Teng, Liu & Zhu (2015) explain that one mitigating factor to declining marginal utility for luxury brands when it comes to the finite amount of goods that are purchased by the rich comes in the form of the middle class of a country comes in the form of the development of a middle class (Chen, Teng, Liu & Zhu 2015, p. 511). As Chen, Teng, Liu & Zhu explain, the middle class acts as a secondary source for high-end luxury fashion purchases and, due to their greater numbers, helps to substantially prop up the sales of luxury fashion brands.

This is because, despite the relatively few purchases they make of such products because of their limited income, their sheer numbers equates into more products sold within this consumer sector resulting in good profits for luxury companies. It is through this interpretation that studies such as those by Godey, Pederzoli, Aiello, Donvito, Chan, Oh, Singh, Skorobogatykh Tsuchiya & Weitz (2012) explain that the presence of a sufficiently large middle class within a country would help to increase the presence of luxury companies within a country. However, Dion & Borraz (2015) also points out that the opposite is also true wherein despite what can be defined as high levels of local demand for luxury fashion brands within a country, if a sufficiently developed middle class is not present, then it is unlikely that they would penetrate such a market.

When examining the case of Nigeria, it can be seen that its resurgence is specifically due to its rich natural resource wealth and growing services sector (Dion & Borraz 2015, p. 77). Natural resource companies that focus on the extraction of oil and gas have become one of the main sources of wealth within the country with its telecommunications and services sector considered as being the fastest growing within the region; this has resulted in the steady growth of the middle class of the country (Jacobs 2014). However, one of the main problems that Park (2014) points out is that while purchasing power may increase within a country and a middle class may develop as a direct result, this does not mean that it would result in it becoming substantially large enough to justify significant market penetration (Park 2014, p. 252). For instance, when examining places such as the Philippines, Malaysia and Indonesia Apple Inc. which is considered one of the most valuable companies in the world has not established a local store in any of these locations despite the increased amount of purchasing power by the local citizenry due to their developing economies. Instead, these companies rely on third party retailers in these countries to sell their products (How affluent face luxury choices User and usage score over “personality” 2013).

The reason behind such actions was due to the lack of a sufficiently developed middle class that could have bought sufficient quantities of Apple products to justify their direct sale within the company. The use of third party retailers helps to “shield” Apple, so to speak since they are not directly establishing operations within the country. When examining these factors, it can be assumed that one of the potential reasons as to why there is a lack of sufficient penetration of luxury fashion brands in Nigeria is due to the country’s middle still being relatively new and not so well established (How affluent face luxury choices User and usage score over “personality” 2013). As such, luxury fashion companies would interpret this as a serious issue towards their potential expansion into the country and, as such, would delay in establishing shops within the region.

Summary

The initial objective of this study was to determine what issues are preventing the entry of international luxury fashion brands into Nigeria. It can be assumed that it has been successful in this endeavour since it was shown that aspects related to the lack of necessary local infrastructure, problematic government policies, a lack of credible local partners as well as issues related to the proliferation of fake goods all conspire to discourage foreign direct investments from luxury brands from entering into the country. One aspect that will be delved into in the succeeding sections of this study related to the overall opinions of local buyers regarding the state of the local fashion industry. This entails questioning what consumers think about the lack of sufficient investments into infrastructures and retail blocks that are exclusively for the rich, the excessive taxation that would discourage local purchases, whether they are under the belief that there are sufficient or insufficient luxury shops within the country and if they find it difficult or easy to purchase luxury goods locally or if they have to go abroad to satisfy their desire for European luxury brands.

To properly answer these questions, it may be necessary to not only tap the local consumers within Nigeria but to also get in touch with local government officials to obtain their perspective on the questions presented. However, when taking into consideration the fact that government officials within Nigeria are normally quite busy, the researcher may not be able to get in touch with them so that a face to face interview can be conducted. Some attempts will be made, but this study will not guarantee that they will respond. Overall, what the literature review has revealed is that there are considerable barriers to entry that are due to structural inadequacies, a lack of government support and issues with the local market involving the proliferation of fake products. It is based on this that the next section will delve into consumer perspectives on the issue which will be utilized in conjunction with the literature review to help shed more light on the case of European luxury brand penetration in Nigeria.

Methodology

Introduction to Methodology

This section aims to provide information on how the study will be conducted and the rationale behind employing the discussed methodologies and techniques towards augmenting the study’s validity. In addition to describing the research design, this section will also elaborate on instrumentation and data collection techniques, validity, data analysis, and pertinent ethical issues that may emerge in the course of undertaking this study.

Research Method

After going over the needs of this project, it was determined that utilising a qualitative research methodology would be the most effective style when it comes to examining the luxury market in Nigeria from a customer analysis perspective. The reason behind this choice is because qualitative research is a type of exploratory research that tries to examine and explain particular aspects of a scenario through an in-depth method of examination. It is applied to explain human behaviour and the varying factors that influence such behaviours. This is particularly important since the main method of data collection would be to develop the necessary questions to ask residents in Nigeria in such a way that it enables an accurate collection of data. It would be necessary to gauge their opinions regarding the current state of the Nigerian luxury brand industry, what difficulties they experience when it comes to purchasing products, what is their opinion regarding current purchasing practices and other pertinent forms of information that can contribute towards the research requirements of this study. It is based on these needs that the chosen method of data gathering will utilise questionnaires, interviews and document analysis to obtain the necessary information for the study.

Data Gathering

Questionnaires

Based on the requirements of the paper, one need that arose was the necessity of conducting some method of examination where a researcher can directly get the necessary information from the research subjects quickly and effectively. As such, it was determined that through the use of questionnaires, the researcher would be able to acquire far more accurate accounts regarding the luxury market in Nigeria from a customer analysis perspective from multiple sources instead of a single primary source (i.e. analyzing the topic from a single case study of a company). The advantage of this type of approach for this project lies in the fact that questionnaires would allow a researcher to directly analyze the opinions of research subjects in a way that can be easily interpreted (ex: through graphs). This would enable the creation of a far easier method of data interpretation regarding the subject that the researcher is analyzing. These noted advantages make questionnaires a decidedly superior method when it comes to instances where a researcher is trying to develop a more in-depth perspective about a particular population that is being examined expediently. Based on this evaluation, it becomes evident that a questionnaire-based method of examination would be the most suitable for this project.

Research Basis behind Questionnaire Design

The questionnaire design will follow the work of Dall’Olmo, Pina & Bravo (2013) and Kim, Ko, Xu & Han (2012) which utilised questionnaires to gauge the reactions of consumers to the development of luxury product industries. While this study will not outright copy the questions utilised, the methodological process utilised behind their creation as well as the type of information that they were supposed to be after will be examined and subsequently modified for use in this study. The basis behind this approach lies in the fact that the approaches used by Dall’Olmo, Pina & Bravo (2013) and Kim, Ko, Xu & Han (2012) were effective in their approach and the data gathered closely resembles the type of outcome that this study is after.

It is due to this that these two academic articles should prove to be excellent references for the creation of the questionnaire. Do note though that aside from utilising the articles mentioned above for the questionnaire, this study will also utilise attribution theory and grounded theory in order to ensure the questionnaire is developed properly. These two theoretical approaches will help guide the design of the questionnaire since both have been noted as effective research frameworks, especially in instances involving investigating and generating responses from research subjects to gauge their opinion regarding particular events, products, or other similar aspects involved in examining personal opinions. These theoretical frameworks will be elaborated on in the latter half of the methodology.

Research Basis behind Interview Design

The design for the interview of this study follows the work of Uggla & Lashgari (2012) and Mayer & Cashman-Pugsley (2013). Both studies utilised interviews as a means of investigating issues related to luxury brand penetration and consumer preference and, as such, both studies acted as guides towards the formulation of the interview strategy and the subsequent questions that were used. Through the studies mentioned above, the chosen interview method took the form of a one on one interview with several of the research subjects that had filled out the questionnaires. While a focus group type interview setting could have been utilised to save time, the fact remains that the very nature of the study respondents (i.e. upper to middle-income consumers) makes it unlikely that they would sit down in a group and answer questions. This particular issue was pointed out by Mayer & Cashman-Pugsley (2013) when they conducted an examination of the Nigerian luxury product market and noted that for upper to middle-income consumers, they are more likely to join in on short interviews and relatively short questionnaires as well rather than allocate large amounts of time towards lengthy interviews. Mayer & Cashman-Pugsley (2013) suggest that interviews should be no longer than 5 to 8 minutes long when it comes to acquiring information from this consumer segment in order to retain an interest in actually continuing with the interview.

Role of the Researcher

For this study, the primary role of the researcher will consist of being a recruiter for the research subjects and compiling/analyzing the data that is gathered. The researcher is thus the primary point of contact for the research subjects when it comes to explaining what the subject is about, what is sort of answers are expected and how the study is supposed to proceed. All these aspects are needed to obtain the research data that will be necessary to examine all the goals of this study.

This study accepts the notion though that some problems may occur due to language barriers; however, since English is the official language there and only a select few prefer to speak Hausa, Igbo and other native languages, there should not be too many issues when it comes to this aspect of the study. Aside from this, since the researcher will be the primary point of contact an aggregator of data for the issue, this creates the issue of possible interpretation bias in the study where the data may be subject to undue manipulation by the researcher to favour the desired research outcome. To prevent such a situation from manifesting, all the data will follow an “as is, where is” policy where the main data segments will not be subject to change aside from placing it in graph form when needed. All of the indicated processed will help to ensure that the research data is consistent with proper academic ethics

Instrumentation

This project will utilise a set of questionnaires to examine the luxury market in Nigeria from a customer analysis perspective. This can consist of what issues they perceive, what factors they would like changed, what issues have been noted, what as well as other such factors related to the penetration of luxury fashion brands within the country. It is based on this that the research questionnaire will be geared toward members of urban populations within Nigeria and will focus primarily on pertinent issues encompassing the luxury goods industry and the current perception of consumers regarding it. Another factor that would be necessary for this study is to utilise research subjects who are more aware of the luxury goods industry within Nigeria. This selective form of data collection is a necessity given the fact that people with low levels of income are unlikely to know much about the current state of the luxury goods market within the country and this could adversely impact the outcome of the study since they may just lie.

Participants

The research subjects that will be used for this paper will consist of various individuals that will be recruited online or in Nigeria. 25 to 35 individuals will be recruited with a distinction being made based on their economic class. The reason behind this is related to the fact that the study is primarily concerned with the luxury market within Nigeria and, as such, only consumers from this market segment would have the necessary knowledge to pertinently answer the questions given by the researcher. As such, this project needs to be selective regarding the type of research subjects chosen since individuals from a lower economic class who do not have access to the same level of income as the needed research subjects will be unable to relate to the subject matter that will be presented to them. All participants will be given a consent form encompassing what the study entails as well as assuring them that all responses will be kept strictly confidential and will observe proper research ethics in terms of ensuring that the data will not be leaked to the general public. Once the research subject has consented to be part of the survey, they will be given the questionnaire for them to fill out online.

Theoretical Framework

This section of the project will elaborate on the use of attribution theory and grounded theory as the theoretical frameworks behind the research design and questionnaire development. These theories were selected based on their capacity to assist researchers in creating and developing the necessary research questions to properly delve into the desired topics. It is expected that through the use of these theories, the researcher will be able to address the research objectives of this project. The justification behind their lies is based on the fact that attribution theory focuses on the assumptions people have towards a particular product. This means that its use in questionnaire development focuses on determining how people would react to changes in the product or even what their current opinion is regarding the product or process in question.

The use of such a process should prove to be invaluable when it comes to analyzing the luxury market in Nigeria from a customer analysis perspective. In the case of grounded theory, this theoretical approach falls more along the lines of developing assumptions based on presented data. Its value is based on the application of the literature review in the question generation process of the research paper. Through the use of the grounded theory approach, the researcher will utilise information and opinions of researchers from the articles used in the literature review to formulate the questions of the paper. Such a process would help to speed up the questionnaire development and would have a substantial academic basis for the questions developed. Through the use of both theoretical frameworks, it can be assumed that this would result in a better examination of the responses of the research subjects.

Attribution Theory

Utilising attribution theory, the researcher will be able to design research questions that can properly delve into the opinions of the high-income earners in Nigeria in order to understand their current perception surrounding the local luxury industry market. This is possible since attribution theory focuses on the inherent assumption of a particular group of people regarding a product based on their experience in either its utilization or through them purchasing it. This theoretical approach is often useful in market surveys to gauge consumer reactions and, as such, it was decided that it would be an ideal methodological approach for use in this study. By utilising this particular theory as the secondary framework for this study, it can be assumed that this should lead to the development of an adequate questionnaire.

Grounded Theory

The four fundamental concepts of consumer choice must be taken into consideration when it comes to this study namely: rational behaviour, preferences, budget constraints and prices when trying to determine what drives the behaviour of consumers. As such, the advantage of utilising ground theory over other theoretical concepts when it comes to analyzing consumer decision making for luxury fashion brand consumers is that it does not start with an immediate assumption regarding a particular case. This study assumes that as income levels increase the propensity for consumers to go beyond the demographic of price and consider other factors in the decision making process. This comes in the form of localized availability of products which is assumed difficult to obtain. As such, utilising ground theory and the theory of consumer behaviour, the following questions will be focused on:

What is the main problem within the company for those involved?
What is going on?
What is currently being done to resolve this issue?
Are there possible alternatives to the current solution?

This particular technique is especially useful in instances where researchers need to follow a specific framework for examining a problem.

Questionnaire

Please select the level of ease when it comes to purchasing luxury fashion brands within the country?

Easy
Moderately Easy
Difficult
Extremely Difficult

Explain:

______________________________________________________________________

Do you believe there are sufficient shops for luxury fashion brands within the country to cater to your needs?

Explain:

______________________________________________________________________

Do you believe the pricing of luxury fashion brands within the country is fair as compared to other markets in other countries that you have experienced?

Yes
No
Not Applicable

Explain:

______________________________________________________________________

What factors dissuade you the most when it comes to purchasing a luxury fashion brand locally?

Lack of sufficient locations
Proliferation of fake luxury brands
Lack of local selection when it comes to available luxury brands
Concerns regarding purchasing products (i.e. possibility of being robbed)

Explain:

______________________________________________________________________

When it comes to a choice of luxury fashion, do you look for the price or do you examine what is available to be purchased?

Price
Availability

From among the following, what concerns you the most regarding patronising a particular luxury brand?

Ease of purchasing
Price
Fashion choices

Do you plan on shopping locally for your luxury fashion brand needs, or are you going to travel abroad to buy what you need?

Shop locally

Travel abroad

Research Question for Interviews

The following are the interview questions that have been chosen for the interview. These have been developed based on the needs of the study, along with the necessity of creating short yet relevant interview questions that can be done in 5 to 8 minutes.

What sort of difficulties do you experience when it comes to purchasing luxury products locally?
What is your opinion regarding the current infrastructure situation in Nigeria when it comes to the sale of luxury fashion brands in the country? (Infrastructure reviews to the buildings, malls, and locations where luxury brands can be bought within the country).
After informing the research subjects of the problem of the lack of penetration of European luxury brands into the local market, they were asked regarding their opinion on why this was occurring.
Would you prefer to buy your luxury fashion brands locally or abroad?

Data Analysis

The primary method of data analysis in the case of this study involves an individual review. The individual review will primarily be the researcher examining the collected response data from the research subjects that were questioned and comparing it to the data obtained from the literature review. The researcher will then review these main themes and use this information to assist in establishing the key findings of the study. This method of data analysis is appropriate for a qualitative design.

Study Concerns

One potential concern that should be taken into consideration is the potential that the responses given by the study participants are in fact, inaccurate or outright false. While the researcher is giving the passengers the benefit of the doubt, the fact remains that there is still the potential that the information being given has been crafted in such a way that it was made to ensure that it is false. Unfortunately, there is no way for the researcher to verify the information since only one research subject is being questioned. This methodology exposes the participant to an assortment of risks that need to be taken into consideration during the research process. The main risk the participants will encounter is if any of the answers that criticise or indicate dissatisfaction with the local system leaks. This may have consequences on the attitude and opinion of company officials towards them and can result in victimisation. To eliminate this risk, the responses will be kept in an anonymous location. This way, the only way to access the information will be through a procedure that involves the researcher. The project thus observes research ethics in sampling as well as during the data collection process.

Validity

This concept refers to the academic veracity of the research information that is utilised in the study. In other words, this aspect of the study focuses on whether the information that was utilised is credible in terms of its accuracy in the face of inquiry. It is based on this that all information that was utilised in the development of this study was from academic journals whose information was properly vetted and examined before the addition to the study. Through such a process, this study can be stated as having followed proper academic writing procedures.

Reliability

The concept behind research validity focuses on how the results of the study will turn out the same if placed under the same research conditions, type of subjects and the theoretical frameworks behind the study creation. If a research project is unable to follow these requirements, then it can be stated as being a flawed piece of research that is unable to follow the requirements of an academic paper properly. Taking these factors into consideration, this paper will endeavour to ensure that all processes utilised within a replicable under the indicated conditions should other researchers attempt a similar study.

Ethical Considerations

Possible ethical considerations that may arise through this study consist of the following:

The potential for unintentional plagiarism through verbatim lifting
The use of a biased viewpoint
Presentation of data without sufficient evidence
Falsifying the results of the research
The use of unsubstantiated information

Results of the study

Please select the level of ease when it comes to purchasing luxury fashion brands within the country?

Easy
Moderately Easy
Difficult
Extremely Difficult

Results of question – 1

From the results of the questionnaire, it can be seen that the research subjects had a considerable amount of difficulty when it came to purchasing luxury fashion brands within the country. This data has been corroborated by the findings in the literature review which support the data that due to a distinct lack of sufficient local infrastructure development, this would adversely affect the penetration of the Nigerian market by European luxury fashion brands. Other corroborating supporting details come in the form of data stating that nearly 90% of local luxury fashion brand buyers go abroad for their fashion needs and, as such, this helps to support the data collected from the research subjects that it may be due to the level of scarcity found in the local market.

Do you believe there are sufficient shops for luxury fashion brands within the country to cater to your needs?

Results of question – 2

Further corroborating the information from the previous section, this data shows that local shops within the country were not sufficient for the needs of local consumers. The reasoning behind this has been explained by the literature review as being connected to high taxes, issues with proper real estate development as well as problems related to the sheer amount of fakes located within the local market. It is due to these aspects and the data from the interviewed research subjects that help to confirm the accuracy of both the literature review and the data obtained. Overall, it should be noted though that this report is not reflective of the overall state of the luxury market within Nigeria since there are sectors such as the automobile sector that is far more developed.

Do you believe the pricing of luxury fashion brands within the country is fair as compared to other markets in other countries that you have experienced?

Yes
No
Not Applicable

Results of question – 3

Further analysis of the data from the study reveals that another of the issues is related to the price of local luxury fashion brands within the country. When examining the data from the literature review, it was noted that there is 60 per cent luxury tax levied against all luxury goods imported into the country. This would help to explain why residents would view prices from luxury shops within Nigeria as being far higher as compared to shops located in Europe or the Middle East. To address such an issue, it would be likely that consumers would go abroad to make their purchases due to the lower prices, a fact the literature review confirms that.

What factors dissuade you the most when it comes to purchasing a luxury fashion brand locally?

Lack of sufficient locations
Proliferation of fake luxury brands
Lack of local selection when it comes to available luxury brands
Concerns regarding purchasing products (i.e. possibility of being robbed)

Results of question – 4

Throughout the literature review, it was mentioned that issues related to a lack of sufficient real estate developments, issues with fake luxury brand and lack of local selections were the main issues that were noted by the academic researchers that were examined. The data from the research subjects examined for this paper helps to confirm the information. However, one notable aspect that can be seen is that it is the lack of sufficient real estate that is one of the most pressing concerns with the other being secondary issues. This helps to show that when it comes to resolving the described issues, more attention should be placed when it comes to addressing the lack of sufficient local real estate as compared to the other issues. By addressing the main identified issue, it can be expected that the rest of the issues can be dealt with as a result of the positive effects that can come about by resolving the first problem.

When it comes to a choice of luxury fashion, do you look for the price or do you examine what is available to be purchased?

Price
Availability

Results of question – 5

Based on the theory of consumer behaviour, it can be assumed that all consumers act rationally and, as such, use their income to derive the greatest amount of satisfaction from a purchase. What this means is that rational individuals under the theory of rational behaviour would purchase items that have a specific total utility or marginal utility that they can make use of. This comes in the form of necessities which people need to survive or for luxury items which some people consider as a necessary aspect of establishing their social status. Purchases, based on this interpretation, thus have a purpose despite the price attached to them wherein rationality is based on the perceived value placed on the product being bought. However, it should also be noted that since this study deals with consumers with higher purchasing power, they may not necessarily be concerned with price as they are with the lack of opportunities when it comes to addressing local demand. This may help to explain why availability and not necessarily price is the main issue that consumers within Nigeria want to be addressed.

From among the following, what concerns you the most regarding patronising a particular luxury brand?

Ease of purchasing
Price
Fashion choices

Results of question – 6

This section of the study helps to confirm the earlier assumptions made and helps to confirm all the previous data that it is the ease of purchasing luxury fashion brand products that are at the heart of the issue.

Do you plan on shopping locally for your luxury fashion brand needs, or are you going to travel abroad to buy what you need?

Shop locally
Travel abroad

Results of question – 7

This section helps to confirm the previous information outlined in the literature review and what will be discussed in the discussion section of this study.

Interview Results

What sort of difficulties do you experience when it comes to purchasing luxury products locally?

The results of this question from the interview revealed that consumers often utilised magazines such as Vogue to know about the latest styles in bags, shoes, dresses, etc. from European fashion houses. With each new edition of Vogue that comes out per month, luxury product consumers within Nigeria attempt to emulate the style that they see to appear that they are fashionable and to keep up with their contemporaries at work or in their respective social circles. Information from magazines was one aspect that was not originally thought of when it comes to how consumers choose to buy particular items or brands and show the impact that luxury magazines can have on consumer choice. Going back to the purchasing habits of the research subjects, they explained that the items they saw in the magazines were simply not available locally. What was present were bags, clothes and shoes that were stylish last year and did not reflect the style choices that the consumers were attempting to emulate.

It was due to this that many often go abroad to buy the latest luxury styles or rely on international mediators so that they can get the type of products they want. From this interview question, it is revealed that while some European luxury brands do enter into the country, they are late or out of style before they reach store shelves. The customers that were interviewed also pointed out that there was a considerable lack of direct retailers of luxury brands within Nigeria with many being nothing more than third party affiliates or even stores that have no affiliation whatsoever with European luxury brands. The result is that the brands and products that do get in do not appeal to the specific type of product like that local consumers want which helps to explain why many choose to go abroad to get their luxury shopping done there.

What is your opinion regarding the current infrastructure situation in Nigeria when it comes to the sale of luxury fashion brands in the country? (Infrastructure reviews to the buildings, malls, and locations where luxury brands can be bought within the country).

The research subjects that were interviewed stated that when they compared the shopping districts in Nigeria with those in other countries that they have visited where they bought them luxury fashion items, they mentioned that there was a considerable level of disparity between the two locations. The various consumers mentioned that there were no dedicated shopping areas specifically focusing on the sale of luxury fashion brands in the country as compared to places such as Europe, Japan and the U.S. It was often the case that the stores selling luxury brands in Nigeria were interspaced with stores that sold ordinary consumer products. The feeling of exclusivity that could normally be felt in places like Rodeo Drive or the Gangnam district in South Korea was absent.

The research subjects stated that this detracted from their shopping experience since not only did this create a level of uncertainty regarding whether or not the products they were buying were original, but it also exposed them to a level of risk when it came to shopping for products due to the presence of various criminal elements in the shopping districts. They explained that when it comes to shopping for specific luxury products, it is the experience associated with the purchasing behaviour that is often one of the reasons why they buy such goods in the first place. The feeling of being pampered, of exclusivity and luxury that is associated with the purchase, creates a positive extrinsic effect which made them want to shop some more. This was unfortunately not present in the case of local shopping areas within Nigeria and, as a result, encouraged these consumers to shop elsewhere. Some of the research subjects mentioned that what was necessary was for property developers to invest in creating more areas that were similar to the luxury fashion areas in Paris and Berlin.

After informing the research subjects of the problem of the lack of penetration of European luxury brands into the local market, they were asked regarding their opinion on why this was occurring.

One of the first reasons that were brought up by the research subjects was the cost of the local luxury brands as compared to when they went abroad. Several of the respondents mentioned that the cost of buying some luxury brands locally was much higher as compared to simply buying a ticket and buying several in South Korea or Europe. They stated that local prices were often 50% higher, and this discouraged many of their friends from buying locally. They stated that this might have contributed towards the lack of penetration of luxury brands in the country. Aside from this, several of the respondents also stated that the influx of fake luxury goods from China might have also contributed to the problem. They mentioned that in various street corners, you could see people in wooden cards with wire mesh brackets selling European luxury bags and other products for a fraction of the price. Of course, such products were fake; however, the respondents mentioned that the local government was not being sufficiently proactive enough in preventing the sale of such items which would, of course, contribute towards the hesitancy of European luxury brands from entering into the local market since they would in effect have to compete with cheaper iterations of their products.

Would you prefer to buy your luxury fashion brands locally or abroad?

When questioned regarding their preference for buying their luxury fashion brands locally or abroad, the research respondents surprisingly stated that they would prefer to buy locally if given a chance. The only problem they stated when it came to buying locally is that the products were overpriced and that the selection was simply too out of date to be relevant. The result is that they have no choice except to go abroad to get the type of brands that they want. What this section shows is that going abroad to buy luxury fashion brands is thought of more as a necessity due to the lack of available methods to address their demand for luxury fashion items.

Discussion

Introduction

This section discusses the data that has been accumulated from the previous section and examines it for trends in the responses from which the researcher can create accurate conclusions or succinct assumptions. The interpretation of the data from the previous section will form the basis behind the formulation of arguments and will help to either justify the arguments presented early on in this paper or will prove that they need revision. Overall, it is expected that through this section, an accurate representation of the current state of the luxury industry in Nigeria can be developed which will enable readers to understand the various nuances, issues and points of interest that are needed to create an accurate picture of the current luxury market within the country.

Ease of Purchasing

After going over the data that has been presented from the study participants, one of the main issues involving the local luxury market was the level of difficulty that locals had in purchasing popular luxury products. As explained in the literature review section, consumers in Nigeria have a considerable level of demand for luxury brands originating from Europe (ex. Hermes, Christian Dior, Louis Vuitton, etc.), this is primarily due to holdovers from their period under European colonisation whose influence continues to be present within the country. The newly rich within Nigeria connect the concept of luxury with something originating from Europe with brand names from French fashion houses such as Louis Vuitton being the so-called “epitome” of luxury. Based on the questionnaire that was conducted, it was noted that despite the substantial levels of demand within the country for these products, the supply side of the equation lacks given the absence of several shops, boutiques, etc. that cater specifically to these brands. As explained by the research participants, issues with the ease of purchasing these items locally result in them either having to travel abroad to obtain them or having to rely on local purchasing services that purchase the products for them.

While there are local online suppliers that do have certain luxury brands in stock, there is a distinct lack of trust between local consumers and these online stores. This stems from the proliferation of online scams that specifically target the rich when it comes to purchasing luxury goods. It should also be noted that direct selling from the manufacturer to consumers within Nigeria is also rife with various issues. The research participants mentioned that there are “purchasing blocks” in place for various retailers that prevent people from certain countries from purchasing luxury goods. It is often the case that Nigeria is listed among these countries and this further limits the capacity of affluent local customers within the country from obtaining the luxury goods that they want.

Further analysis of the issues correlated with the ease of purchasing luxury products within the country shows that despite the high rate of demand, there are only relatively few outlets (i.e. stores) for luxury brands within the country. For instance, if a consumer were to go to regions such as the UK, France or Spain and proceed to their high-end fashion districts, it would be normal to see an assortment of boutiques specifically for Louis Vuitton, Hermes and other European brands. The same cannot be said for Nigeria wherein the shopping districts are oriented more towards local offerings with the high-end fashion stores that are present often being third party retailers that have no direct connection to the European brand that they are selling (i.e. the products are bought from shops in Europe then resold in Nigeria at a significant markup).

When examining this particular situation, it becomes immediately apparent that one of the main issues inherent in the Nigerian luxury brand market is the lacklustre access consumers have towards their desired luxury products. Simply put, European luxury brands are not maximizing the potential sales opportunities that they may be able to gain by expanding into Nigeria. This would normally not make much sense since most companies are oriented towards maximizing all possible opportunities to make a profit, and this slow uptake in what is a prime sales region is questionable. The next section in the discussion portion of the study will seek to explain why luxury brands are hesitant to expand into Nigeria. It is anticipated that through the views given by the research subjects in the next section, a greater understanding can be developed regarding the current problems found in Nigeria’s luxury brand industry and what possible steps could be implemented to resolve it.

Lack of suitable real estate in the form of shopping centres

One of the chief complaints presented by the research subjects when it comes to their capacity to purchase luxury brands locally properly is the fact that there are only 3 locations in the entire country where this can be done. The first two, Palms Mall and Ikeja City Mall, are located in Lagos while the last is located in Hilton Hotel in Abuja. The research subjects explained that while these locations are considered as being “high end” within Nigeria, they are oriented more towards mass-market appeal and have little in the way of sufficient luxury retail when compared to luxury retail shops located within cities such as New York, Paris or Tokyo, this is despite the significant amount of demand that exists within the country for luxury fashion brands.

It was also explained that in comparison to malls that they saw abroad, the malls located within Lagos were far more utilitarian and were lacking when it comes to aesthetic appeal. While the Hilton Hotel was furnished in a more luxurious style, there were few luxury shops within that truly catered towards the appetites of local consumers that have experienced the types of shops available abroad. This is one of the reasons why in the background section of the study, it was mentioned that surveys conducted on the middle to upper-class consumers within Nigeria noted that 90% of them preferred to go abroad to buy luxury brands. Simply put, the offerings available within Nigeria are insufficient when it comes to their taste in European brands.

When examining this information, it can be assumed that one of the reasons why this level of dissatisfaction exists is simply because retailers and developers in Nigeria lack the amount of experience necessary to open the necessary storefront properties or to utilise land banking and proper long term development investments into creating prime luxury real estate (Conway 2014). As a result, this would hamper the capacity of the local luxury retail industry to expand sufficiently, resulting in its stagnation. Evidence of this can be seen at present wherein the analysis of Aiello Donvito, Godey, Pederzoli, Wiedmann, Hennigs, Siebels, Chan, Tsuchiya, Rabino, Ivanovna, Weitz, Hyunjoo & Singh (2009) explain that despite plans to develop more 5 star hotels in Lagos, it is anticipated that these locations will be unable to develop the accompanying luxury retail locations as compared to the hotels seen in Dubai, Qatar and the Philippines where luxury shopping centres are often directly next to or are a part of the hotel itself. Another factor regarding this aspect of Nigeria’s luxury product industry can be seen in the work of Muller (2010) which delved into the operations surrounding luxury fashion houses and how they do business across different regions.

It was explained by Muller (2010) that the establishment of different stores by Hermes, Dolce and Gabanna, Louis Vuitton, etc. were often done through the cooperation of local partners within the cities that they expanded into. For instance, when Louis Vuitton expanded into the Philippines, they contacted the SSI group (a company known for establishing foreign brands in the country) to establish a partnership wherein SSI would carry the Louis Vuitton brand and establish the necessary storefront properties for Louis Vuitton for them to sell their products within the country. This is an important comparison to take into consideration since there are significant parallels between the Philippines and Nigeria.

Both countries have experienced a surge in their respective growth rates over the past two decades in a variety of industries which has resulted in a considerable increase in the level of demand for luxury goods and products. However, unlike Nigeria, the Philippines has a well-established luxury goods industry with areas such as BGC (Bonifacio Global City), Makati City, Ortigas, and Greenhills becoming locations that specifically cater towards high end branded fashion. Not only that, but there are also numerous local companies that have decades of experience, such as the SSI group, when it comes to establishing storefront properties in ideal locations to maximise the number of possible sales of luxury fashion items. The main advantage that the Philippine luxury industry has over Nigeria’s is that there is a clear delineation between luxury and mass-market locations (i.e. malls specifically for the rich that only have high-end fashion products).

This helps international fashion houses to immediately know which locations to establish their shops in, what sort of foot traffic from their desired market can be expected and, as a result, enables them to plan their market penetration strategy accordingly. It is based on these advantages that despite the higher level of demand for luxury fashion brands within Nigeria, there is a stronger and far more established presence of these brands within the Philippine market. This particular situation is not limited to a comparison between the Philippines and Nigeria; rather, it can be seen in other markets that have immerged over the years such as those in Dubai, Abu Dhabi, Beijing and Qingdao wherein luxury fashion brands flourished in local markets due to the establishment of partnerships with local organisations and through specific investments by local developers towards the creation of locations (i.e. malls) that specifically catered to the rich.

Taking these factors into consideration, it can be seen that the “formula for success” so to speak when it comes to the proper establishment of high-end fashion brands within developing markets with high purchasing powers is having experienced local partners present along with the willingness of developers to take risks in orienting some of their assets away from the mass-market appeal and towards niche markets that specifically cater towards the rich. Should these aspects be developed in the case of Nigeria, likely, the number of people that travel abroad specifically to buy luxury brand name fashion items would be reduced due to the establishment of more convenient local stores that can cater to their needs.

Proliferation of Fakes

When various store owners were asked what they believe was one of the main reasons why luxury brands were not making greater significant inroads into Nigeria, one of the most common answers given was the proliferation of fake products in various areas of Nigeria’s mass-market shopping centres. Due to the demand for luxury fashion brands in the country, it is not surprising that local entrepreneurs would attempt to bridge the gap with some form of affordable alternative for consumers to purchase. The result of such actions come in the form of various Nigerians going to China to buy knock-off high-end fashions in bulk and then subsequently selling them in Nigeria in the various markets within the country. The inherent problem with such actions is that it causes significant issues for high-end fashion retailers within the country since they are subject to competition from copycat products that are sold at a fraction of the price. International retailers of luxury goods are aware of this issue and implement various methods to counteract it such as stating that fakes are of poor quality and do not last long as well as leveraging the exclusivity associated with placing their stores in malls meant for those with high levels of purchasing power.

By setting themselves apart from the fakes through exclusivity in malls, this enables luxury product manufacturers to continue to operations without being in direct competition with the copycat products. However, after examining the information presented in the previous section involving the lack of development of proper malls and sectors, specifically catering to the rich, the vaunted exclusivity and the ability to separate themselves from fake products is absent in the case of Nigeria. The necessary infrastructure is simply not in place within the country and this, as a result, creates a considerable amount of issues for the business models that luxury fashion brands utilise. It can be assumed that another of the reasons why the rate of penetration of such companies is low in Nigeria is because they would have to be placed in areas where they may have to compete against fake products directly. This takes away their competitive advantage and would result in their stores being unprofitable. Since companies can be described as rational entities that focus on logical business practices, their absence in the Nigerian market due to a significant competitive disadvantage is not surprising.

Taking all these factors into consideration, it can thus be concluded that the most effective means of resolving this particular issue would be to implement some means of protecting local industries from fake products entering into the Nigerian market. However, based on the report Company spotlight: PPR (2008) which delved into the status of luxury items and fake products in the Nigerian economy, it was seen that while there were attempts at being made, they were far from being effective due to the proliferation of the grey market within the country. The grey market, in this case, refers to the various informal methods of selling items that are not necessarily illegal but are not sanctioned by the government, nor are they taxed outright. As a result, it is harder for government agencies to track the origin and sale of such items especially due to the congested nature of Nigeria’s ports, corruption in its import agencies as well as intentional mislabelling of products.

Pricing Strategies Implemented

Another of the issues that were brought up by the people that were part of the study focused on the issue of pricing and how the products seemed to be far more expensive locally as compared to their price abroad. It was explained earlier on in the literature review of this paper that luxury products in Nigeria were subject to a significant price increase brought about an import tax rate of 60 per cent. When examining this particular situation, it is important to note that pricing is a critical element of successful marketing since it can make or break any marketing campaign.

It is with this in mind that when analyzing the complaints of the local populace regarding the price of local luxury branded fashions compared to what they can get abroad, it is immediately obvious that government interference in this particular industry is manifesting itself into an adverse effect which causes local consumers to go abroad and spend their money their instead. Based on the questionnaire results, it was determined that due to the high prices of local high-end fashions that have been imported coupled with the relatively affordable nature of simply going abroad and buying the products there, rational consumer behaviour dictates that they would choose the option that is more affordable yet would net them a product of the same quality (Davies 2012).

Further analysis of the questionnaire results combined with the theory of consumer behaviour involving rational behaviour points to the notion that consumers are rational actors and would likely pursue actions that are in line with rational lines of thought when it comes to their consumption of goods and services (i.e. not paying more for what they need). However, this same theory can also be applied to companies wherein these entities would also operate rationally based on their respective business models (i.e. they will not operate at a loss or engage in actions that would not be feasible for normal operations. Under this sort of logic, it can be assumed that companies would consider proper pricing strategies when selling their products wherein they would place the sale at a price that is reasonable for their desire clientele. Such a practice often takes the form of companies taking into consideration the physical value of the product being sold as well as various factors related to the object that consumers take into consideration before buying it.

In the case of Nigeria, this comes in the form of comparing the value of the imported luxury fashion brand which has been marked up by 60 per cent due to the luxury import tax as compared to going abroad and buying the same product there since a plane ticket would be far cheaper as compared to buying multiple luxury fashions at an absurdly high markup cost. Since companies are considered as rational entities, it can be assumed that with the lack of effective real estate structures, local partnerships for doing business and with the high rate of taxation which would turn away customers rather than cause them to buy more of their products, it can be assumed that these three factors combined are at the heart of why luxury fashion brands are not establishing themselves as prolifically as they are in Nigeria as compared to other developing economies that have high levels of disposable income.

When applying the theory of rational behaviour to the actions of consumers, consumers would choose the path of least resistance which in this case would be to buy the cheap plane ticket and to go abroad to buy certain luxury fashion brands instead of being subject to high prices locally. This helps to explain why the automobile segment of Nigeria’s luxury product industry is the most developed in this particular sector since there are few options that are available to locals to avail of luxury vehicles.

They cannot utilise the same strategy involving luxury fashion brands due to the sheer cost involved in having to transport a car from one country to another over land or sea. Thus, after evaluating the factors that have just been mentioned, it can be assumed that by addressing the issue of the exorbitant tax rate for luxury products (at least for luxury fashion brands), this would help to rectify the current development issues related to the high-end fashion sector of Nigeria’s luxury industry.

Resolving the Issues

Partnerships are necessary within retailers and developers in other countries that have experience in operating shops, attracting foreign partners and developing proper retail locations for the rich. A second solution would be for local business organisations to hire international consultants to help them develop the necessary expertise in the form of training, people and systems to make them attractive partners for international luxury brands. One of the problems with local developers within the country is the current organisational mindset of conservatism that continues to create a more repressed outlook when it comes to real estate developments within the country. This mindset is still heavily embedded in the years before Nigeria’s economic improvement wherein the vast amounts of poverty within the country and the isolation of wealth to a select few made the construction of malls and shopping centres specifically for the wealthy seem like a bad idea given the relatively few consumers at the time.

When looking at the case of Nigeria’s luxury goods tax, it is simply there as a means of gaining more money for the government. However, the inherent problem with this measure is that the excessive nature of the tax causes local consumers to go elsewhere since they are unable to satisfy their demand for quality high-end fashion brands locally.

To resolve such an issue, it would be necessary for local real estate developers to start efforts to create areas that specifically cater to the newly rich and the middle class within Nigeria. This would help to convince luxury fashion brands that the necessary infrastructure for proper stores does exist and they can take advantage of it. The second solution would be for local business organisations to hire international consultants to help them develop the necessary expertise in the form of training, people and systems to make them attractive partners for international luxury brands.

Conclusion

Based on what has been presented in this paper, it can be seen that Nigeria’s local luxury products industry has revealed that it is currently worth $213 million with a 10 to 15 per cent increase in domestic sales expected over the next five years based on sales forecasts and the fact that the local market is still relatively “untapped” so to speak. Despite this apparent boom, there are still some notable issues in this industry that should be taken into consideration. Unfortunately, in the case of Nigeria, the development of its luxury goods industry within the country has not kept pace with the affluent/middle-class population growth. While its luxuries related to automobiles, watches, and wines have somewhat kept pace with the growth, the development of other segments such as the potential influx of high-end European fashion brands has not. In comparison, during the early onset development of China’s luxury industry, this was not the case since international fashion brands were able to keep pace with local demand for their products.

Taking all these factors into consideration, it can be seen that there is an issue when it comes to capacity for luxury fashion brands to penetrate Nigeria even though there is a significant level of demand within the country.

When examining these factors, it can be assumed that one of the potential reasons as to why there is a lack of sufficient penetration of luxury fashion brands in Nigeria is due to the country’s middle class still being relatively new and not so well established. As such, luxury fashion companies would interpret this as a serious issue towards their potential expansion into the country and, as such, would delay in establishing shops within the region. One of the possible reasons why luxury fashion brands have been relatively few within Nigeria can be connected to the fact that there is a 60% import tax placed on luxury products that enter the country.

Further examination of the case of Nigeria in this paper has revealed a distinct lack of sufficient investments into infrastructures and retail blocks that are exclusively for the rich. What are present are malls and retail locations that are oriented more towards mass-market appeal than they are towards catering towards the rich.

There is the relative absence of sufficiently developed locations and malls that cater specifically to individuals that have high levels of purchasing power. While there are a few locations where some high-end fashion shops do congregate to a certain extent, they have not been planned to the same level as the examples that were provided. The relative absence of this method of planning by local construction companies within Nigeria can be considered as a contributing factor behind the reluctance of various international brands of expanding into the country despite the high levels of demand. The areas where they are used to operating in, based on their business model, are simply not present and, as such, this creates a considerable level of reluctance since opening a store in an area that is oriented towards the mass market would detract from the reputation of the company as a whole.

What this paper has proven is that Nigeria lacks sufficiently experienced local organisations as well as the necessary established infrastructure for luxury brand retail operations for it to be an attractive location for European based high-end fashion brands. While it is true that there are locations where establishing high-end fashion brands is feasible, such as the Hilton hotel in Lagos, the fact remains that the infrastructure of the hotel was never meant to cater to significant amounts of foot traffic as seen in the average mall. It is due to this their facilities are inadequate for the needs of European based brands. As such, to resolve such issues, it would be necessary to address the problems mentioned above that have been identified via the proposed solutions that have been brought up in this paper. By doing so, this would result in adequate practices being implemented that should, in theory, address the issue of luxury fashion brand penetration into the country.

Recommendations for future study

After finalising this study, it was determined that the format utilised can be of use for future analysis of similar cases of luxury fashion brand penetration in other countries. This study has delved into the theoretical, social and economic aspects of luxury fashion brand penetration when it comes to developing economies whose consumers find themselves with sudden high rates of purchasing power. As such, since this study has examined only one country, the aspects, ideas and theories utilised within could also be used to examine other countries with developing countries when it comes to discerning issues with luxury brand penetration. This could be immensely helpful in enabling them to understand how economic, social and consumer behaviour theory combines to explain how luxury brands decide to penetrate new markets. While this study did utilise a small sampling size when it came to the research subject population that was analysed, this can be addressed by future studies through the use of larger populations to get more accurate data. Another focus that can be done is to create a study that examines whether cultural holdovers impact the current demand for certain types of products within various countries.

For instance, in the case of Nigeria the perception of local consumers is based on the notion that European based luxury brands are superior and, as such, despite the presence of local alternatives, it is determined by Nigerian consumers that this is not an effective maximisation of total utility as per the theory of rational behaviour which culminates in them going abroad to satisfy their desire for the maximisation of their total utility through the purchase of quality European fashion brands. This is a cultural holdover from the time of European expansion into Africa, which continues to influence societal perceptions within the country and results in demand for European luxury fashions. This attitude is not limited to individuals from higher-income thresholds; rather, it extends to the working class of Nigerian society as well and manifests through locals buying imitations instead of the originals due to the inherent price gap between the two types of product. One potential avenue of approach that could be useful would be to utilised statistical software analysis such as SPSS to analyze trends in purchasing behaviour and back it up with data from questionnaires. It can be assumed that such an approach would result in a more accurate outcome for the study results.

Appendix

Consent Form

“An evaluation of the Luxury Market in Nigeria from a customer analysis perspective.”

Dear Study Participant,

You are respectfully invited to participate in a research study involving an evaluation of the Luxury Market in Nigeria from a customer analysis perspective. You were selected as a participant for this project based on your knowledge regarding the local luxury market within Nigeria, the various issues and problems that are inherent in it as well as your own experience as a consumer. Before participating in this study, please read through this participation form to familiarise yourself with the various aspects of this study and what type of responses would be needed. Should you have any questions or concerns, please ask the researcher who will be available at any time throughout the questionnaire process to alleviate any concern that you may have. This study is being conducted by a masters degree candidate and, as such, will contain various terminologies that may seem quite complex. Please ask for clarification if you encounter a term that you are unfamiliar with; this ensures that the study will continue without any problems. Thank you for your time, and your assistance in this endeavour is greatly appreciated.

Background Information

The purpose of this study is to examine the current market environment in Nigeria from the perspective of local consumers. Through an analysis of such views, the researcher will be able to create an effective overview of the current situation in the country and combine it with relevant literature on the topic to come up with informed conclusions and develop specific resolutions to the identified issues. It is expected that through this data gathering procedure, the views of the research participants will be invaluable when it comes to analyzing the luxury market environment within Nigeria.

Procedures

As a participant, if you agree to be a part of this study; the following protocols are to be followed to comply with the study requirements

When questioned, please give honest answers to the individual questionnaire you. This helps to ensure the validity of the research that is being conducted.
Please sign the consent form indicating that you are willing to participate in this study involving the luxury market in Nigeria

Assurance of Anonymity

Please be assured that all information that the researcher will obtain from the questionnaire will be kept strictly confidential. You can be assured of the anonymity of your responses with none of the responses that will be utilised in graphs or being cited in the paper having any indication whatsoever that they were given by a particular individual during a questionnaire. Also, as per guidelines regarding information gathered from respondents of studies conducted, all the information that will be collected will be destroyed after ten years. This helps to ensure the anonymity of the respondents and upholds proper academic guidelines in research paper writing.

Voluntary Nature of the Study

Before proceeding, please do note that your participation in this project is voluntary and, as such, if you should desire to stop participating this will not affect the future outcome of this paper. You may withdraw from the study at any time

The risk of Undertaking the Study

Lastly, it should be mentioned that while there are no risks in participating in this project, the researcher will still ensure proper anonymity of the study participants. All data that will be collected will have any identifying remarks remove to ensure complete study anonymity.

Consent Form

“An evaluation of the Luxury Market in Nigeria from a customer analysis perspective.”

Contacts and Questions:

The researcher conducting this study is (First Name Last Name). The researcher’s adviser is XXX XXXX, PhD. You may ask any questions you have now. If you have questions later, you may contact us.

Contact info for researcher: Contact info for advisor:

Questionnaire

Please select the level of ease when it comes to purchasing luxury fashion brands within the country?

Easy
Moderately Easy
Difficult
Extremely Difficult

Explain:

______________________________________________________________________

Do you believe there are sufficient shops for luxury fashion brands within the country to cater to your needs?

Explain:

______________________________________________________________________

Do you believe the pricing of luxury fashion brands within the country is fair as compared to other markets in other countries that you have experienced?

Yes
No
Not Applicable

Explain:

______________________________________________________________________

What factors dissuade you the most when it comes to purchasing a luxury fashion brand locally?

Lack of sufficient locations
Proliferation of fake luxury brands
Lack of local selection when it comes to available luxury brands
Concerns regarding purchasing products (i.e. possibility of being robbed)

Explain:

______________________________________________________________________

When it comes to a choice of luxury fashion, do you look for the price or do you examine what is available to be purchased?

Price
Availability

From among the following, what concerns you the most regarding patronising a particular luxury brand?

Ease of purchasing
Price
Fashion choices

Do you plan on shopping locally for your luxury fashion brand needs, or are you going to travel abroad to buy what you need?

Shop locally
Travel abroad

Research Question for Interviews

What sort of difficulties do you experience when it comes to purchasing luxury products locally?
What is your opinion regarding the current infrastructure situation in Nigeria when it comes to the sale of luxury fashion brands in the country? (Infrastructure reviews to the buildings, malls, and locations where luxury brands can be bought within the country).
After informing the research subjects of the problem of the lack of penetration of European luxury brands into the local market, they were asked regarding their opinion on why this was occurring.
Would you prefer to buy your luxury fashion brands locally or abroad?

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