Luxury consumers are evolving and brands need to respond to their changing purchasing habits.
According to a 2024 report from Bain & Company, Gen Z consumers, born between 1997 and 2012, will account for nearly a third of luxury purchases by 2030, while millennials, born between 1981 and 1996, will account for more than half of luxury purchases.
Gen Z in particular is expected to be the largest and most affluent generation, which could boost luxury sales across retail, travel and technology, according to Piper Sandler.
“Gen Z is only just entering adulthood, so they appear to be the fastest-emerging new generation in the luxury industry,” Jason Dorsey, Gen Z researcher and author of “Zconomy: How Gen Z is Changing the Future of Business,” told Yahoo Finance in an email. “While their purchasing power is still low compared to other generations, it will increase over time. The sooner brands can connect with them, the better their opportunity to grow with this generation.”
Fashion-conscious young women holding orange Louis Vuitton shopping bags greet each other on Bond Street in London, England on October 20, 2021. (Mike Kemp/Photo via Getty Images) (Mike Kemp/via Getty Images)
The push and pull of luxury
The changing demographics of luxury buyers can pose new challenges for luxury brands.
To better understand the habits of luxury consumers, Claire Tassin, retail and e-commerce analyst at Morning Consult, surveyed 2,203 U.S. adults and found that today’s luxury consumer is a “fickle buyer” who prefers “beautifully crafted products, premium travel experiences, and dining with unusual ingredients.”
The survey found that for all U.S. adults, quality was the most important factor in the luxury shopping experience. “Consumers don’t always believe that a luxury purchase is worth the price, but when it is, quality is the deciding factor,” Tassin said.
She told Yahoo Finance that she’s concerned about brands that only sell status and myth, and that Gen Z consumers are less loyal to brands than older consumers.
Dorsey explained that Gen Z consumers remain loyal to brands they consider part of their identity, especially as they follow trends, but may not be as loyal to others: McKinsey researchers found that more than 50% of Gen Zers surveyed in the US and UK would change their favorite brand if they found another brand that was cheaper or of higher quality.
“Look at loyalty from Lululemon to TikTok and the brands that were popular for a while but then had their moment, and then quickly came and went, to show how fickle they are,” Dorsey wrote.
Young customers buy second-hand luxury goods at a shopping mall in Shanghai, China, October 10, 2023. (CFOTO/Future Publishing via Getty Images) (CFOTO via Getty Images)
While younger consumers value authenticity in luxury purchases and experiences, aspirational purchases still play a key role in driving value.
The story continues
“People outside of the 1% are also looking for luxury,” Tassin says, “so it’s important, especially when selling luxury, to strike a balance between those classic luxury buyers and the more aspirational luxury buyers.” [Gen Z] I think incorporating that into the equation is a really hard thing for these brands to do at the moment.”
“The struggle between being on trend and being classic and rooted is always a struggle, and I think it’s difficult for any brand,” Tassin added, “especially for luxury brands.”
With total luxury spending expected to grow from an estimated 1.5 trillion euros ($1.67 trillion) today to 2.5 trillion euros ($2.79 trillion) by 2030, according to Bain & Company, brands have good reason to get this balance right.
“What our research suggests is that brands shouldn’t take Gen Z for granted or assume they’re less informed because they’re young adults, but rather value their diversity, inclusivity, sources of information, trusted trend resources and desire for connection,” Dorsey said.
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