Understanding luxury in South Africa

This article is part of our Advanced Membership package. To enjoy unlimited access to The Long View from Vogue Business, The Fashion Exec's Guide and bi-monthly Market Insights Reports, sign up for Advanced Membership here. South Africa reigns supreme on the continent when it comes to winning over international luxury brands. The country is home to some of the biggest names in fashion, including Ferragamo, Louis Vuitton, Dior and Gucci, who have all opened stores in South Africa over the last decade. New players are entering the market as focus shifts to second and third-tier cities, with many keen to tap into the rising number of high-net-worth individuals (HNWI). But behind South Africa’s gradual growth as a fashion and luxury market is a country navigating socio-economic and political challenges. The African market holds a lot of potential for luxury brands, particularly South Africa, which has a youthful population and makes up a significant portion of the African luxury category. Sixty-two per cent of consumers in Sub-Saharan Africa are under the age of 25, according to Euromonitor International. Nigeria and South Africa account for 43 per cent of the region’s economy. “[Sub-Saharan Africa] overall has become a rising frontier to present many opportunities across a broad range of industries and product categories — including luxury goods and fashion,” says Fflur Roberts, head of luxury at Euromonitor International. “With many advanced economies ageing and seeing stagnant growth, South Africa’s youthful and dynamic economy offers further growth potential.” Individual wealth in South Africa is increasing. “Despite having a population five times smaller, by 2040, South Africa is projected to host 2 per cent more consumers with incomes surpassing $250,000 compared to Nigeria, which is another significant player in the regional market,” says Roberts. This, coupled with the rising number of HNWIs, makes South Africa an attractive entry point into Sub-Saharan Africa. It is set to have a significantly larger wealthy and affluent consumer segment compared to other African nations, she adds, noting that the number of consumers with a total net wealth over $5 million is forecast to increase 28 per cent by 2030. According to Euromonitor, the retail value of personal luxury in South Africa is set to see the biggest increase among other African countries, with 7 per cent growth from 2022 to 2027. There’s an opportunity for luxury brands to tap into this increase and generate a presence in the market — but it’s not a surefire win. Finding the right location Researchers at Henley & Partners and New World Wealth predict that Cape Town will overtake Johannesburg and become Africa’s wealthiest city by 2030 — marking it out as a luxury hotspot of the future. Most international luxury brands with a presence in South Africa have stores in both locations. Cape Town is home to local independent retailers like Merchants On Long, as well as major shopping malls such as the V&A Waterfront, which houses names like Zegna and Diesel. In Johannesburg, the Sandton City mall is a popular shopping destination, housing stores for brands including Louis Vuitton, Gucci and Dolce & Gabbana. Another popular shopping destination in Johannesburg is Mall of Africa, a regular sponsor of South Africa Fashion Week. Brands such as Adidas, Lacoste and Levi’s have stores in the mall along with local luxury brands like Maxhosa Africa. Henley & Partners believe Johannesburg will “remain the most attractive base for both South African and foreign HNWIs who are keen to invest or establish new businesses in Africa”, Berry Everitt, CEO of Chas Everitt International, said in a recent report on wealth in Africa. He notes, however, that Cape Town will continue to attract international brands, businesses and celebrities. For international players looking to enter the market, populous cities like Johannesburg or Cape Town are the safest bet. American luxury brand Amiri launched its first pop-up in Johannesburg last year and plans to expand its presence across the country. For founder and creative director Mike Amiri, the city’s culture, history and vibrant creative community presented a strong opportunity. “When the opportunity to open a temporary location presented itself, we immediately felt the connection and timing made sense. However, we are also looking to expand our presence in Cape Town by the end of the year having received a great response in Johannesburg,” he says. Amiri plans to open a permanent store in Johannesburg by the end of this year. Beyond Cape Town and Johannesburg While Johannesburg and Cape Town remain the key shopping hotspots in South Africa, there are some interesting retail and luxury real estate developments taking place in areas like Pretoria and Durban, thanks to growing wealth and investment, Roberts says. Durban — located on the east coast of South Africa — is the third most populated city, behind Cape Town and Johannesburg. With a good proportion of HNWIs, luxury brands are growing their presence in the city. Many are opening stores in Oceans Mall, a luxury shopping mall near the beachfront, including Gucci. To celebrate its one-year anniversary in Africa, Fenty Beauty held an event in Durban last year. “It’s not a new spot, but it remains a popular spot, particularly because the weather is warmer than Cape Town for a longer duration of time during the year,” says Jurie de Kock, partner at Deloitte in South Africa. However, he notes that the city has recently faced a number of challenges including political protests as well as flooding, which has caused some HNWIs to look elsewhere. “While Durban continues to attract HNWI, its ability to do so has declined compared to in the past.” Other experts say smaller towns with a strong number of HNWIs are worth paying attention to. Kock says it’s the smaller towns neighbouring Cape Town that have a high concentration of HNWIs — not necessarily the city itself. That includes areas such as Stellenbosch and the Garden Route District, which luxury brands have yet to tap into. Understanding South Africa’s aspirational consumer Similarly to markets such as the US or Europe, consumers were eager to spend on luxury goods post-pandemic. While the aspirational luxury consumer is now dying down in the US, that demographic is gaining momentum in South Africa and is spending on luxury goods now more than ever. The younger generations are looking to more affordable brands or categories for entry into the luxury market. “The big difference between Europe and South Africa in terms of luxury goods is that in South Africa, luxury goods are aspirational items,” says Mohamed Walele, manager at Deloitte in South Africa. Most retailers in South Africa stock a wide range of products to appeal to various income bands, Walele explains. Woolworths, a popular department store, stocks products from $12 for a camisole to $302 for a leather jacket. “The typical aspirational consumer is shopping at Woolworths, but the goal for the year is to buy that luxury handbag.” He adds that product categories such as eyewear or accessories are important entry points for Gen Z and millennial consumers who are starting to interact with luxury goods. The transition from “old money” to “new money” creates an opportunity for international luxury players to establish a presence among the next generation of luxury shoppers, says Karabo Metsing, assistant manager at Deloitte South Africa. “There’s a wealth transfer to Gen Z and Gen Alpha. These brands [such as Coach] are not just focusing on the core market — the old money market — they are pivoting to being more palatable and more marketable to the new generation,” she says. “This is where South Africa is at the moment, where a large majority of our population is filled with youth. This wealth transfer has attracted a lot of the luxury brands.” Those aged between 30 and 50 continue to dominate the South African luxury goods market; however, there’s been a large interest among younger demographics, who are becoming increasingly influential in luxury consumption trends, Metsing notes. Roberts echoes this. “Younger, urban, middle classes with rising disposable incomes further enhance the opportunities,” she says. “Demand for luxury apparel is increasing, driven by aspirational consumers seeking status symbols and affluent consumers who value exclusivity, heritage, quality, and craftsmanship.” However, she notes that counterfeiting poses an ongoing challenge in Africa, as it does in other markets. For many South African consumers, going to the shopping mall is seen as a day out, says Kock. It’s an activity that usually involves spending long periods of time in the mall with friends or family. However, Roberts points out that concerns around environmental and climate concerns are increasing. Consumers are taking a more sustainable approach to consumption, and this is influencing their purchasing decisions. A recent study conducted by Euromonitor International found that 67 per cent of South Africans expressed concerns about climate change, while 73 per cent believed that their choices and actions could make a difference in the world. A challenging market The state of South Africa’s economy continues to fluctuate, making it a difficult market for brands to break into with ease. Socio-economic factors, including rising inflation, booming energy and food prices, and “heightened economic uncertainties stemming from Russia’s invasion of Ukraine, have significantly impacted consumer spending on luxury goods”, says Roberts, adding that South Africa experienced an average inflation rate of 7 per cent last year. “The rising cost of living and soaring prices for essential goods placed considerable pressure on household disposable incomes, prompting a re-evaluation of spending habits,” says Roberts. A 2023 lifestyle survey conducted by Euromonitor International’s Voice of the Consumer found that 86 per cent of South African consumers expressed concerns about the escalating costs of their daily essentials. Load shedding — national blackouts of electricity supply that have been ongoing in South Africa for decades — continues to be a problem for brands across South Africa. “Load shedding is a big issue here because it’s so expensive to run a generator 24/7,” says founder of 99 Design store, Tayla Foong, with blackouts happening for four hours at a time on bad days. With the elections upcoming and political parties keen to secure votes, load shedding has not happened in the area for nearly two months, she adds. National blackouts are not unique to South Africa, with many of the African nations also battling this challenge. Finding the right real estate outside of the major shopping malls, like Cape Town’s V&A Waterfront or Sandton City in Johannesburg, is also difficult. Braamfontein, where the 99 Design store is located, is not seen as a safe area, says Foong. It’s also struggling to regain momentum post-pandemic. “Since Covid-19, the area has taken a bit of a knock. You’ll see that there are a lot of vacant spaces now, and all the cool customers have kind of moved out [of the area],” she says, noting that buzzy restaurants and independent coffee shops have also left the area, subsequently making it difficult for the remaining few to gain momentum. “We’re constantly trying to reinvent ourselves in some ways and trying to figure out how to attract those other people who aren’t necessarily fashion conscious but have more spending power.” E-commerce vs brick-and-mortar Shopping malls play a crucial role in keeping South Africa’s fashion economy alive. Across the three major cities (Johannesburg, Cape Town and Durban), shopping malls dominate retail. The experience of purchasing luxury items in-store massively outweighs an online transaction, says Metsing. “South African consumers are more geared towards going in-store and holding the bag… that whole experience of being in the store and being served champagne, wine. The market is more geared towards purchasing that way.” The online experience doesn’t match up to the luxurious in-store experience, which is also what customers in South Africa are buying into. Barriers to digital transformation remain high. This includes logistics costs, distribution issues and a lack of trust in online shopping. “Customers are still wary of ordering online, fearing they will not receive their items on time, or the quality will not be as advertised,” says Roberts. “Although e-commerce within the fashion luxury industry is now gaining momentum. Consumers still prefer in-store shopping to confirm a product’s quality and fit. Generally, the level of trust among well-established apparel companies is higher than for smaller players.” Returning online orders needs streamlining. It’s not a quick and easy process, Metsing adds. This is steering the market towards in-store shopping, as transactions take place immediately, and customers feel confident knowing they’re leaving the store with the right product. For now, e-commerce forms an important platform for retailers’ growth aspirations, though it’s often used by customers as a price comparison tool rather than the ultimate sale portal, she adds. A store can help brands build and strengthen their community. Mike Amiri says a recent pop-up in Johannesburg helped the brand physically connect with South African creatives while also creating a touch point for new consumers. “[The pop-up] allowed the local community to experience the brand in person, and the store became a vibrant meeting place for artists and musicians,” he says. “The response exceeded our expectations.” Local brands such as Art Club and Friends have been using the store to connect with their community, with the brand often holding parties and events in the store. It’s a similar strategy for 99 Design, which recently partnered with the Boiler Room, a London-based digital music broadcaster, to curate a space showcasing their brand as well as emerging designers. More mature South African brands have a presence in shopping malls like the V&A Waterfront, says Tamburai Chirume, founder of the Cape Town-based brand One of Each and co-founder of The African Fashion Academy. “Twenty years ago, that was even harder. The landlords are seeing that these are growing brands, and there’s a big opportunity [to generate revenue].” The brand opened its first retail store in 2014 at the Watershed, the V&A Waterfront’s design market. “That was our starting point. It’s a good place to be as it’s good for brand visibility… if we didn’t have that space, we wouldn’t be where we are now.” That’s thanks to affordable rent prices and the increased footfall, which has opened the brand up to new clients and tourists. Emerging players disrupting retail Emerging brands are finding new ways to connect with high-spending consumers. For those who do not have the capital to secure a residency in one of the country’s major shopping malls, they’re turning to independent players like 99 Design, Merchants On Long, and Duck Duck Goose to stock their brand and reach South Africa’s young fashion crowd. At the time of launching the store in 2020, a lot of designers didn’t have a physical retail store in Johannesburg, founder Tayla Foong recalls. The store has become an incubator for young brands. “A lot of the designers we were interacting with back then didn’t have a retail space; some of them didn’t have an online store yet,” she says. “The brands have really grown since then. Some designers have even outgrown the space and are just operating on their own now. But what we are trying to do is spotlight these emerging brands that are going to become household names in the future. We want them to start off with us and grow from there.” Independent retailers like 99 Design provide a gateway for young brands to reach consumers. Foong explains that brands are not expected to produce in large quantities. Instead, some designers will only create around 10 to 20 versions of a garment. “We don’t take large orders, and it’s not mass production at all,” she says. “It creates a more unique experience because you’re not going to see thousands of people wearing the same things as you. These pieces are made super slow, locally made and manufactured in South Africa.” There is a fashion-conscious crowd in South Africa who don’t want to purchase mass-market brands or international luxury players, she says. They’re keen to support local talent and shop in line with their values — that means shopping more consciously and purchasing from brands that produce on a small scale. “A lot of people who shop with us are drawn to indie brands; they already know the brands stocked and don’t really have to educate them on local designers,” says Foong. She notes her audience is evolving, and a lot of older men who are visiting a neighbouring store are taking an interest in the designers stocked at 99 Design. Independent brands and international luxury giants alike are keen to tap into South Africa’s growing luxury and fashion market. As the number of HNWIs continues to grow and aspirational consumers look to add more luxury goods to their personal portfolio, brands have the opportunity to grow in this young market. To receive the Vogue Business newsletter, sign up here. Comments, questions or feedback? Email us at feedback@voguebusiness.com.

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