The S&P global luxury goods market is expanding at a fast pace due to the rising popularity of designer brands and ever-so-prettier creations by local manufacturers. While it may seem impossible to compete with multinational brands, small South African companies are setting their sights on the global luxury goods market with great success. It is a buyer’s market but it has one of the highest volumes of goods sold in any other product category in the country.
South Africa is home to many manufacturers of luxury goods such as Armani, D&G, Louis Vuitton, Burberry, Celine, Diesel, D&S, Diesel, Fendi, Juicy Couture, Kate Spade, Marc Jacobs, Michael Kors, Prada, Reebok and Vera. A large proportion of these brands have set up base operations here to tap into the growing consumer demand for quality urban fashion. Many of these brands have expanded their retail presence in South Africa, creating outlet malls across the country. At present, the S&P global luxury goods market is worth US$6 billion per year.
Luxury goods come in different categories such as dresses, handbags, accessories, footwear, watches, bags, jewelry, make-up, fragrances, travel tickets, etc. The S&P global luxury goods market caters to all these brands and more. Apart from retail stores, there are thousands of online store fronts that showcase a wide variety of these luxury items. The Internet makes it easy for potential buyers to identify what they want and to order conveniently.
In South Africa, a buyer can choose to shop either for brand new items or for second-hand designer goods. Most of these branded products are imported from China and the Eastern Europe. Some online stores sell goods from different countries which are shipped to buyers via air freight, sea freight or road freight. These buyers need to be aware of the shipping costs, delivery time, customs duties and other charges so that they can plan their budgets accordingly.
According to research conducted by Global Brand, South African consumers spend US$2.4 billion on imported goods. The country’s economy depends on foreign earnings, primarily because most of its exports are priced very high compared to those of other developed nations. This has been a major factor behind the sluggish growth of the South African economy over the past few years. To overcome this problem, the government has made efforts to promote trade and create more manufacturing industries. Since many leading brands have already established their manufacturing units in the country, the competition among South African brands has been stiff, resulting in increased consumer spending power and market share for the global luxury goods brands.
A number of factors affect South African prices of top brands of global luxury goods such as labour costs, taxes, transportation costs, overhead expenses and marketing costs. However, the most important driver is the current political and economic situation in the country. Political stability and the level of economic development have improved tremendously over the years, resulting in better infrastructure and improved living standards for the majority of the population. Over the last decade, the prices of South African diamonds have decreased by more than fifty percent and gold rates have significantly increased in line with inflation.
The rise in demand for luxury goods in South Africa is expected to continue as long as political stability continues. The good business climate in the country has encouraged investment in both the industrial and the service sectors of the economy. With a weak dollar and stable interest rates, it is possible for exporters to expand their businesses at lower exchange rates. In addition, the government has implemented measures to enhance tax collection and encourage citizens to save money through prudent consumption of existing assets. Consumer spending has also been further strengthened by the introduction of a cash rebate scheme in South Africa.
With the introduction of the S&P Global Luxury Goods index, consumers can expect to see and feel the positive effects of the economic crisis in the country. With the index, buyers can identify potential deals and purchase the luxury goods that they need at the most favorable exchange rate. With the current economic conditions and the rising costs of South African diamonds, the future of the diamond industry in South Africa looks strong. As long as the political situation in the country is stable and the economy recovers from the recent economic problems, the value of the South African diamond will continue to increase on a steady basis. Both the domestic and the global luxury market are likely to benefit from this trend.