Despite a weak economy and the strangulation of South Africa’s middle class, the performance of luxury brand stores across South African is hugely outperforming every other merchandise category.
As people tighten their belts dealing with high interest rates, massive inflation and rising petrol prices, the rich are getting richer, brazenly enjoying their wealth as they splurge lavishly on designer brands.
“It’s a phenomenon we predicted in 2019, and is a result of the increase in inequality. It’s the unhappy effect of Covid and the ‘winner takes all’ competition in which the rich are doing very well,” said futurist Bronwyn Williams, an economist and partner at forecasting agency Flux Trends.
This is borne out in the latest retail figures reported by Stats SA last month which show that retail trade sales decreased by 1.1% in the three months ended August 2023 compared with the three months ended August 2022.
However, the only positive contributor to the category was textiles, clothing, footwear, jewellery and leather goods showing an impressive growth of 9.2% and contributing 1.5 percentage points.
The trend also emerged prominently in the newly launched Clur Luxury Brands Index — an addition to the Clur Shopping Centre Index, which tracks performance for listed and unlisted property funds at more than four million square metres of prime retail space across South Africa and Namibia.
Retail strategist Belinda Clur, MD of Clur International, said the luxury brand index showed trading density at R356,851 per square metre — outperforming the ‘All Centres Index’ average of R39,879 per square metre by a massive 795%, and well above all the other 150 merchandise categories. The index is aimed at tracking industry indicators and retail performance to make good leasing decisions and optimise returns.
Prof Fanny Surachera of the Wits School of Business Sciences has done extensive research on conspicuous consumption and described the data on luxury brands’ performance “intriguing”.
“In our research, we identified perceived functionality, uniqueness, social value, conspicuous value, prestige value, self-identity value and materialistic value, among various other factors that may contribute to their robust performance despite economic challenges. Additionally, we found that black, middle-income South African consumers in particular place a high value on conspicuous consumption,” he told TimesLIVE Premium.
“The idea that luxury brands might be under-traded with substantial demand corresponds with observations from our work. We believe the marketers of such brands could benefit from refined target marketing,” he said.
It’s a great time to be selling luxury goods. If you think about it, if you are a rich person, you can only take one holiday at a time. But there is no limit to the number of shoes and bags you can buy.
— Futurist Bronwyn Williams
Reasons for the surging demand, he said, include perceived status and prestige, symbolic success, the prioritising of quality and luxury experiences, successful branding and marketing efforts, the perception of luxury goods as investments, global influences, changing consumer attitudes and robust brand performance.
“It’s a great time to be selling luxury goods. If you think about it, if you are a rich person, you can only take one holiday at a time. But there is no limit to the number of shoes and bags you can buy,” Williams said, adding that South Africa and Dubai are seen as “the big international shopping destinations for designer brand consumers in this part of the world”.
But according to Clur, luxury goods are not appealing solely to wealthy people, as even consumers on extremely tight budgets save up for “a Chanel lipstick or a Gucci bag because it is the one thing they really want”.
“We saw this during Covid when people were able to travel again. Suddenly there was a queue outside the Louis Vuitton store in Diamond Walk reaching all the way to the escalators. We went to those people for commentary and found that they knew exactly what they wanted. They had sacrificed other things and nothing was going to stop them getting it. They said things like, ‘It’s important to me because I have a hard life, my salary is the only thing I look forward to.’”
Entrepreneur and businessman Mongezi Masombuka, founder of local fashion brand UDARKIE, said he was surprised by the number of people on average or low-end salaries splurging thousands on a single garment.
“The appetite for local brands is big, and the appetite for luxury goods and dressing expensively has skyrocketed. Particularly among middle- to upper-middle class young professionals who opt for luxury branded clothes, alcohol and cosmetics as a way to show their status and appreciation for quality,” he said, describing trends he was witnessing in his own social circles.
Brand strategist Zali Nxabi and his wife and business partner, Thandi Nxabi, own Streetkidz Media, have four children and are passionate luxury brand consumers.
“It’s a confidence thing. It’s not really about the price, but the image projection and the feel-good factor. We are both hardworking entrepreneurs, and looking good is inspirational to the young people who follow in our footsteps. The quality that comes with these brands is lasting,” Nxabi said, adding that among the big names he also loves local brands UDARKIE, Drip, Tshepo Jeans, Maxhosa and Bathu.
Liberty Two Degrees (L2D), co-owner of Africa’s iconic Sandton City, confirms that luxury retail has remained resilient in the depressed economy.
L2D CEO Amelia Beattie told TimesLIVE Premium luxury brands remain among the top five best-performing categories within their portfolio, particularly in Sandton City’s Diamond Walk, which “offers a unique and bespoke experience on the African continent, with an aggregation of both ultra luxury and luxury brands”.
This had accelerated during lockdown “where a particular customer, who would ordinarily fly to London and New York, was now seeking a luxury experience in South Africa”.
She said the pre-Covid perception that luxury offerings in SA were not at the same level or as available as overseas was “now a disproved ideology”.
Diamond Walk is anchored by Louis Vuitton and includes 2A, Burberry, Bvlgari, Cartier, Dolce & Gabbana, Ermenegildo Zegna, Giorgio Armani, Gucci, Jimmy Choo, Montblanc, Salvatore Ferragamo, Tod’s and Versace.
Clur said recent retail figures should be viewed in the broader context of a comparison with post-Covid surge figures “when luxury brands were shooting the lights out”, as “we’re still beating the pre-Covid growth rates” with the sector having grown by 155% from June 2019 to June 2023.
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