The luxury opportunity for local brands

The world is changing quickly. Geopolitical concerns abound, specially with Donald Trump’s return to the White House in the new year. This is all happening at a time when demand for luxury brands is stalling, as previously reported in this column and elsewhere.

Growth in China lags, and consumer spending in traditional luxury markets such as the US and Europe faces a dim outlook. Some of the world’s biggest and most recognisable brands are underperforming as consumers wince at the exorbitant prices of luxury fashion, and younger shoppers seek value in resale and more affordable brands. 

No-one knows how Trump’s second US presidency might affect the global economy. His touted tariffs present him as a wild card. It’s hard to predict how the tariffs will be implemented but what’s clear is that the average US consumer should brace for higher prices. 

In uncertain times, consumers tighten belts, and that much is evident in the current climate. However, the SA luxury consumer remains resilient, according to a report by retailer Luxity, which notes a growing appetite for luxury in spite of significant challenges for the luxury sector worldwide. 

Hard numbers are difficult to come by, but Luxity’s report notes “a robust 8% growth in luxury density” in SA’s shopping malls, per the Clur Shopping Centre Index. SA is home to the largest number of high-net-worth individuals on the continent, and the largest number of luxury retailers, housed at shopping destinations including Sandton City and the V&A Waterfront.

Local consumers’ interest in luxury brands also remains robust as demonstrated in online search interest, which gives us insight into brand awareness and desirability. 

Where are South Africans spending on luxury?

While SA decidedly remains Gucci, Hermes and Louis Vuitton country, more consumers are seeing value in resale, something that reflects global trends. Watches and jewellery significantly outperform fashion brands in terms of resale value retention. Rolex, Hublot and Van Cleef & Arpels are some of the brands benefiting most from this, with Rolex standing out by reselling at more than 100% of its retail price, according to the Luxity report.

This demonstrates the investment potential for this category, as compared to fashion brands, which generally resell for far less. S Hermes, Chanel and Louis Vuitton “exhibit robust performance, maintaining resale values between 60% and 68%”. Hermes in particular, maintains a resale value of 67.7% on retail price. 

Search interest

Not everyone is interested in resale luxury. When it comes to what people are searching for online, “Louis Vuitton and Gucci remain key standouts, attracting three out of 10 searches”, according to Luxity. In spite of this, resale value for both brands is on the decline even though consumer interest remains high in both brands.

There’s also a notable dip in interest for items that retail above R50,000, which is an indication that even though interest in luxury remains high, consumers are not very willing to spend crazy amounts on clothing.

This presents locally produced brands with the opportunity to entice a consumer on the lookout for something unique, exclusive and modestly priced, relative to what high-end luxury costs today. The question is whether entrepreneurs in the space are paying attention, and whether they can move quickly  enough to close the gap by offering consumers an alternative and build trust that is based on a quality offering, an important metric in luxury. 

As I’ve noted in a previous column, there are case studies for where this is happening in Europe, where brands such as Our Legacy are building a loyal following with consumers looking for high-quality clothing at affordable prices. 

Market turbulence is a marker of a world in flux, with geopolitical realignments and economic uncertainty at the centre. There’s also the sustainability question, which most of the big brands have failed at, but is a box many local brands, including Lukhanyo Mdingi, Viviers Studio, Sindiso Khumalo and UNI FORM, tick. It will be interesting to see where they emerge on the other side of the global shifts. 

We’ve seen moves on the part of many trying to enter traditional global markets over the years, like MaXhosa, who this year opened a store in New York, and others showcasing at high profile events in Europe during fashion week season. While those markets face challenges of their own, there are opportunities for local brands.

They have the opportunity to attract consumers at home and abroad, who will be left underserved by the luxury industry’s dithering big name behemoths, their exorbitant prices and lack of innovation, all of which are at odds with today’s realities (economy, demands for sustainability) and the modern consumer’s needs.