The luxury market is going all guns blazing looking forward to another year ahead of growth across verticals fuelled by various favorable factors. Several reports suggest that luxury goods sales in the year 2019 & 2020 will be dominated by brands that attract the most millennials and Gen Z customers. A more recent study by Bain & Company and Farfetch, an online luxury apparel, and accessories e-commerce platform suggests that almost 40% of luxury sales by 2025 will be generated by millennial consumers. Furthermore, with the mass adoption of social media and digital technologies across generations, behavior patterns and expectations are changing all across. The most prominent trend being noticed is the advent of luxury experiential micro holidays rather than annual vacations. Short trips that offer unique and memorable experiences are on the rise wherein consumers are intentionally choosing offbeat locales in search of those Instagram-worthy unique experiences. This ‘millennial state of mind’ is now a widespread mindset across the demographics wherein products and brands are chosen based on the values they represent rather than the intrinsic value of the product itself. It’s no longer enough to be the best leather handbag. Consumers additionally want the product to be made of ethically sourced raw materials with fair trade and sustainable production practices. Herein, lies the concern. With trends changing faster than the seasons, what is it that the millennials and Gen Z luxury consumers really want? What can brands do to stay ahead of the curve, identify upcoming trends and stay ahead of the curve?
Traditional Luxury Consumer Behavior
Luxury Industry has always been of one that is more about a lifestyle statement, an appreciation for all things fine and beyond excellence rather than exclusivity and limited supply. For over a century, luxury brands across the world have managed to attract consumers based on this premise. However, for Gen Z and millennials the premise is no longer attractive. Just because it’s a famous logo, it wouldn’t necessarily convert to better sales than last year. Discount sales may drive sales up, however, the risk of being associated as a discount luxury brand can be catastrophic for the brand. What the millennials and Gen Z want are luxury goods that align with their value systems. More than ever, these value systems drive purchase decisions. While traditional aspects still appeal to a large demographic and are valuable marketing assets, however, there is a strong shift towards popular lifestyle values, such as sustainability.
Millennials vs Genz: Different Behaviour Patterns
Millennials are consumers born between 1980–1995 while Gen Z are considered to be the generation born between 1996 and 2015. This means that by 2025, millennials would be 30 – 45 years old while Gen Z would be 10 – 29 years old. Both demographics hence will be key consumers in the luxury industry.
- Purchase Patterns
While both Millennials and Gen Z are digital savvy, however, there are distinct differences in the purchase patterns. As per a detailed study by Research gate, while Millennials are aware of their purchasing power, have been known to ‘Want it all” and “want it now” and digital tech has catalyzed this behavior, for gen z, it is more about the quality and service( adequacy, kindness, and quality of the staff).
- Experiences reign supreme with Millennials
As per a recent report by salesforce, millennials have higher expectations for customer experience and are willing to pay a premium for it. In fact, as per the report, 74% of millennials have higher customer experience standards than others.
- The Impact of .com and tech era boom
Growing through the years of man landing on the moon for the first time, the launch of Apple, IBM, Microsoft products, internet expansion and the mass use of internet, more than 80% Millennials expect companies to continue innovation in their products and services, whereas innovation is the new normal for Gen Y consumers.
- Gen Z focuses on maximum ROI for their money, millennials seek experiences
Spoilt with choices, what is clear that Gen Z is a more cautious spender looking for the maximum bang for their buck. However, millennials are known to seek more novel experiences even if that means a more premium.
- Millennials want authenticity, Gen Z wants individuality
Transparency and like-minded value systems have been a key demand by millennials from brands and companies alike. Gen Z on the other hand, are focussed on individuality and brands that can cater to such individual tastes and preferences are in high demand.
- Gen Z prefers in-store shopping; millennials shop online
As per the salesforce report, with a boom in e-commerce and fast delivery, millennials prefer online shopping, however, Gen Z consumers research online first and then prefer to shop at a store. What this means is that both categories are actively researching their next purchase online and may choose offline or online stores to complete the transaction.
Ultimately, Millennial and Gen Z luxury consumers anticipate communicating with brands across digital platforms. Even though digital technologies are changing the luxury retail landscape, millennial and Gen z consumers are still important for in-store retail shopping as well. Digital platforms and new-age technologies such as artificial intelligence, 3D printing, blockchain technologies, cryptocurrencies, and augmented reality, etc. present opportunities for luxury brands to adapt their business models to meet the changing demands and stay abreast with the latest trends.
Technology offers both demographics unprecedented connectivity across the globe and with the rest of the population. This makes generational shifts more rapid and frequent hence more important for luxury brands to keep their eyes on them. For luxury brands across the world, as the two generations mature, these continuously shifting preferences will bring both challenges and equally attractive opportunities.