Despite the economic downturn, luxury resale is on the up in South Africa
Johannesburg – South Africa’s economic challenges might include increased inflation and interest rates.
But South Africa’s biggest pre-owned luxury reseller, Luxity, has recorded a 75% increase in sales over the past financial year.
The company’s co-founder Michael Zahariev explained that this is driven by four key factors – affordability, investment potential, sustainability concerns and availability.
He added that with luxury brands like Hermès, Chanel and Louis Vuitton increasing the prices of certain products by as much as 25%, the resale platform has seen a boom in sales since it offers customers the opportunity to purchase high-end items at a fraction of the original cost.
“These price increases also allow people to sell their items at higher prices allowing for more supply to the market.”
He added that over and above the cost-saving aspect, the pre-owned luxury goods market serves as a source for investment pieces.
“The Knight Frank Luxury Investment Index shows that investment in luxury items like watches, jewellery and handbags is comfortably beating inflation and outperforming the majority of mainstream investment classes, including equities and even gold,” Zahariev said.
He also noted that pre-owned pieces tend to not only retain their value but also enjoy resale values that exceed their original prices.
An example of this is a Hermès Birkin bag bought in the early 2000s, could potentially sell for about 157% of its original value on the second-hand market today.
“Pre-owned items also offer a good currency hedge as they are appraised based on the dollar prices of new luxury goods,” said Zahariev.
He also explained that the US dollar has historically enjoyed strong performance, unlike the Rand which is one of the world's most volatile currencies.
“For pre-owned luxury buyers, their investment will be shielded from the impacts of domestic currency fluctuations,” he said.
Additionally, when selling their purchases, Zahariev said that these buyers would more than likely benefit from the exchange rate given that the Rand typically under-performs the dollar.
“With 92% of South Africans saying that sustainability is important to them and 64% eschewing fast fashion and non-sustainable clothing, resale provides an appealing option,” he points out,” Zahariev said.
“It not only meets these growing demands but also prolongs the life of quality items and mitigates the luxury fashion industry’s environmental impact. In recent years, the industry has come under fire for its lack of sustainability efforts, especially with some brands burning unsold inventory.”
Zahariev added that another upside to luxury resale is that it allows consumers to buy rare and exclusive items that are no longer in store, with 41% of buyers being drawn to the market for this very reason.
“Additionally, there are a number of designer brands which do not have a presence in South Africa, but the local resale market gives customers the opportunity to buy products from these companies.”
And in spite of the challenges facing the South African economy, Zahariev predicts no sign of Luxity slowing down.
“We’re expecting high double-digit growth in 2023, following our recent expansion of two new stores and the addition of watches and clothing categories to our offering, which is experiencing growth month- on-month.”
“This, buoyed by external factors such as increased total gross earnings amongst the majority of the employed population and the accelerated post-pandemic recovery of middle- to high-income earners, I foresee the pre-owned luxury sector becoming more and more mainstream resulting in increased sustainability and another avenue to funnel money back into the local economy,” Zahariev said.