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this evening. For now, we turn to this. South Africa is leading the way as the continent's luxury hub with significant growth in both new and pre-owned high-end segments. Despite economic pressures such as a dip in sub-Saharan Africa's GDP per capita and soaring inflation,
Laxity's 2024 state of the luxury market in Africa report reveals a demand for luxury goods remains strong across the continent. Now to explore the key drivers behind this growth and the broader implications for the African luxury market. We joined on the line by Michael Zohariev, a co-founder at Laxity. Michael, a very good evening and welcome to Power Business. Great to be here this evening with you and your listeners.
Now, can you share then an overview that of the findings from the seventh annual state of the luxury market in Africa report? What are you seeing? Well, I think when we look at the state of the luxury market Africa report, one of the first things we have to understand is what's going on with the luxury market internationally and globally. And what we have seen for the first time in many years is some of the luxury brands in the luxury market starting to suffer
over its post-COVID highs where we, uh, high records, uh, recorded. So what we're starting to see is that in general, the brands are starting to, some of them struggle, some of them flatten out and some of them outperform. But in general, the market in South Africa remains resilient and strong with the 8% growth in trading density across the shopping centers in South Africa and the luxury segments.
while we're seeing other markets like China, as well as the Western economies flatten out. So relatively speaking, the South African luxury market is high in demand and undersupplied. And I'm curious to know what's really driving then this resilience? Well, there might be multiple factors. I think one of the key factors that has happened is that there has been over investment in some areas such as China. So if we look at the groups that are
underperforming based on estimates like LVMH and Keering, they have had a very strong China-based expansion strategy. They've invested a lot into the eastern economies, and those economies are not doing as well as expected. Now, when we look at Africa, for example, there's been very little investment in the immediate term here. And that means that our local demand has been growing, and based on this under-investment,
We're seeing much higher trading densities for those brands and demand. But the good news is that in the next year or two, we are slated to see some new brand entrance into the market with new investments from waterfront and sentence city into the luxury areas. Very interesting, that. But Michael, you know what sets then South Africa part in terms of luxury demand and consumer behaviour?
Well, South Africa is really positioned as a leader in the African market when it comes to luxury items in Africa. Some of your listeners might be surprised to hear that when we look at the African continent, the only places where we have brand stores like a Louis Vuitton or a Gucci are in South Africa and in Morocco. The entire rest of the continent is essentially empty.
and not supplied with these luxury goods. So many African consumers, whether they're from Nigeria or Angola, who are starting to build their wealth, are coming to South Africa as a luxury shopping destination. Yeah, that very interesting, you know, the picture that you paint there. And then can you elaborate then on the growth trajectory then of pre-owned luxury goods in South Africa? What makes this segment so appealing to consumers?
Well, I think one of the things that we're talking about here is about accessibility. You know, why is luxury going in South Africa? Well, frankly, because it's not accessible in the rest of Africa. And pre-owned luxury adds to that accessibility. It's not only making certain luxury items in great condition available at a lower price, but it's also offering further accessibility. So, for example, luxury offers
online orders, which the luxury brands don't generally do. So if you're in Eastern Cape or if you're in Mupunalanga, you may order from us online, and that increases your accessibility. Additionally, we offer different payment plans as well as other things such as brands not available typically in short Africa like Amazon Chanel, where you can't purchase those anywhere in Africa new. So you have to buy them pre-owned.
So I think the idea of this increased accessibility when there is such a large demand for the goods in South Africa and Africa.
in general, is allowing the market to go at an exponential rate to even the new market. Given that real demand there, I'm curious to know what consumer preferences are there, because the report notes arise in demand for accessible luxury, such as mid-range watches. How significant is this trend, Michael? What does it tell us about consumer preferences? Well, I think what's quite interesting when we look at the report,
is, you know, there is a huge demand for lower-end or mid-range luxury items, which we call the 0 to 5,000-round range in the pre-owned sector. So those make up 44% of the searches, almost half of the searches. And as we go up to scale to more expensive and more expensive, you generally see a decrease in searches. But then when we get to the highest range of 50,000-round and over,
And again, we're talking about pre-owned luxury items here. We see a slight spike. So what that shows us is there's a huge amount of market interest for the lower-end items, but also a huge amount of market interest for the most expensive items. So it's kind of the joining sector of who's looking for the best and who's looking for the lowest. And everyone wants to be a part of this market wherever they can find the bite.
And that's really what the new market reports are showing us, whereas traditionally we saw the entire market gravitating to certain brands or certain price ranges, it's become a lot more spread.
showing a diversity of interest in this luxury market. I have my thoughts on this, but there seems to be a shift then in brand loyalty with Omer's overtaking traditional favourites like Louis Vuitton and Chanel as you've outlined. But what do you think then is behind this shift? Well, I think at the end of the day, if we can look back over the luxury reports, luxury really has its core in exclusivity.
And the more people start to earn an item, the less exclusive it becomes. And then the people that are really affiliated to that band start to look for alternatives. So this is the seventh annual luxury report we've released. And for the first five Louis Vuitton was the clear number one brand.
But as that exclusivity has started to deteriorate, brands like Sinaw and Amaz have really started to outperform in terms of the factors we look at, which is search, resale price, et cetera. And that purely comes down to the fact that in South Africa, they're incredibly low supply.
and high demand, which increases the exclusivity. I suppose that is important there when you're buying luxury goods. It is that exclusivity to say that I've paid quite a premium to have this and be one of the few people to own this a certain product. But Michael, while global luxury brands dominate the market then, local brands are also making their mark. How do local brands like Browns compare to global leaders in terms of appeal and resale value?
Yes, I mean, that's a very important point that you brought up because this was the first year where we've introduced a local brand, which was Brown's jewelry. And we are quite hesitant to see if Brown could perform on the same scale, if it would have the demand, if it would have the ratio of value as industry leaders like Cartier. I mean, we're talking brands that dominate the entire world. Going up against the local competitor, which has some international presence,
And what we're quite surprised to see is the affinity and the strength of this local brand. Brown's jewelry is selling at less than a 10% difference to Cartier jewelry. And we're talking about the world leader versus local South African brand. So certainly there's definitely investment potential in local brands.
And we're excited to look more and more for local luxury brands into the coming years. Yeah, very interesting trends that you're picking up there. But Michael, with the anticipated price adjustments in and strengthening local currencies, how might the African luxury market evolve in the next few years? Well, I think that's one of the great things for the African luxury market is that we do have a strengthening currency right now. And that's why we have actually seen lower investment returns
as the pre-owned market lags the new price increases. Obviously, every year the new prices will go up and then the pre-owned prices will adjust. But right now, because the pre-owned prices and listings are happening faster than the new price adjustments, it's a good time to invest. So if we look at the return on the channel, you can right now purchase a pre-owned pre-owned for a lower amount than you could for new
So definitely, it's a good time to look if you're interested in luxury apologies and will definitely see improvement with the local currency stream. Yeah. And then finally, you know, the report suggests in that Africa's luxury market is becoming increasingly attractive for investors. What opportunities do you see then for luxury brands and investors on the continent? Well, I think there are a lot of opportunities, as we can see, it's not increasingly becoming
good for investors, but we already see massive investments. We have some of our most reputable malls already investing in the luxury segment. If we look at the trading density, it's one of the highest performing and highest growing trading densities, so we're likely to see more and more investments. And naturally, as more brands enter, the next investor, like us, is going to start looking at what are the local potentials?
How do we uplift the local community? How do we grow from within, rather from without? And I think that's really the true source of where we're looking for the next thing is what is the next big African luxury brand? And we're hoping to find that not only in the research space, but also in the new space over the coming years. Very, very interesting. And we'll continue to look out in that space. But Michael, thank you so much for your insights this evening. Thank you very much for having me.
All right. That was Michael Zohari of a co-founder at Laxity talking to us about the state of the luxury market in Africa report some interesting trends that they're picking up there.
