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Johannesburg - South Africa should take advantage of the expected growth in the luxury goods market, according to Michael van Wyk, lead partner at Deloitte, Stellenbosch.
A new report by Deloitte found that luxury products such as fine wines, champagne and spirits are expected to enjoy increased growth in coming months.
“These findings present an opportunity for not only South Africa, but also for Stellenbosch. The opportunity for Stellenbosch lies in the high number of foreigners who visit the town annually, who are drawn to luxury experiences in the hotel, travel and tourism category, as well as products in the leisure category, such as wines, spirits and champagnes,” said Van Wyk.
He said that Stellenbosch is known for being a home to many founders of luxury goods in South Africa, and this presents a unique selling point for the town and the category. In addition, although a niche market, the high-net-worth individuals (HNWI) in the town are a target audience that should be considered by the luxury goods market.
“Reports indicate that the number of HNWIs in Africa is increasing and that this market has a taste for luxury goods. Also, a rising aspirational middle class for whom luxury goods are seen as a sign of success has fuelled an increase in demand for luxury products locally. Purveyors of luxury goods therefore need to reassess how they market their goods to this growing demographic, given the weighted role of technology, in order to reap the benefits,” said Van Wyk.
A Euromonitor International report recently found that foreign visitors are essential to the growth of the luxury goods market in South Africa. This is due to luxury goods being slightly more cost-effective for tourists than in their home countries, thanks to the weakening exchange rate.
The 2nd annual Global Powers of Luxury Goods found that several key aspects of the luxury sector will be unrecognisable in the next few years.
While Africa is still considered a growth market for the luxury goods segment, the report finds that luxury brands should take advantage of evolving technological and consumer demands to help boost profits and remain competitive.
The traveling luxury consumer will change the concept of national boundaries. Millennial consumers will represent a significant percentage of sales volume in the luxury market and technology will continue to disrupt at a faster pace.
As such, global luxury brands must overcome significant challenges in order to maximise engagement with their digitally-savvy, time-sensitive and socially aware consumers or risk being left behind.
“The presence of international luxury brands in South Africa, which includes designer apparel, handbags and accessories, fine jewellery and watches, and cosmetics and fragrances, has increased tremendously in recent years," said Van Wyk.
"However, the African market provides a longer-term growth opportunity for this segment, due to its relatively small and niche customer base. Luxury brands will need to develop a uniquely African approach driven by technology, to ensure that the category remains relevant.”
The Deloitte report found that 58% of millennials currently go online to search for information on luxury items and 31% use social media to gather information around discounts and promotions.
The report also found that in order to effectively target millennials, luxury brands can benefit by fully understanding their buying habits and influencers.
“The luxury sector needs to continue to forge a strong relationship with an ever-increasing array of technologies, especially as South African consumers continue to utilise online channels and platforms for ecommerce purposes,” said Van Wyk.
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