Photo credit: http://www.ifitshipitshere.com/guccis-2009-collection-to-benefit-unicef/
For my international marketing project my sophomore year of college, I decided to write a proposal recommending that Coach, the luxury goods company, expand into South Africa. When I shared my idea with my teacher, her reaction was something along the lines of “Can people there afford luxury goods?”
I didn’t know much about the specifics of the wealth of individual South Africans, but collectively, I knew that South Africa was, at that time, the richest country on the African continent.
This article from the Financial Times reports that South Africa had 71,000 millionaires in 2013, accounting for 60% of the continents total. By 2020, Bain Capital estimates that 420,000 South African households will have more than $100,000 USD in disposable income. While the fact that South Africa houses the majority of the continent’s millionaires doesn’t imply that droves of these people would buy luxury products (although it’s very likely), it shows that, in South Africa, a country known for issues such as high-unemployment, short-life expectancy, and high HIV/AIDS rates, the educated and well-connected upper class has more financial freedom than your average South African.
A few months after I finished my project, I actually moved to Johannesburg, South Africa. Jo’burg is a city with electric billboards (we still don’t have these in my hometown), and a local mall that was so expensive I could only afford to eat lunch there. There were Gucci, Prada, and Luis Vuitton stores—stores I had actually never even been to in the United States (In fact, we don’t have these stores in my city at all). When I saw those stores, I just laughed to myself and thought, Coach would have been just fine in this country.
In my report, I found that using luxury items to display status in South Africa was very important to the professional class. Even if the entire population isn’t walking around with $1000 handbags, there is at least a portion of the population that can afford to—and is more than willing—to do so.
People around the world are transitioning into the middle class and enjoying luxuries once reserved for the elites in their countries. Check out this video on the growing middle class in Kenya and the rising consumption of luxury goods in Africa.
My teacher, although well versed in international business, failed to realize that, there is in fact a difference between being poor and living in a poor country. “Poor” countries all over the world still have lawyers, doctors, bankers, business owners, and working class individuals who can indulge in luxury purchases; just like the United States, the richest country in the world, still has homeless people.