Luxury industry challenged by disruptive surge of young clientèle
The luxury industry is facing a significant generational shift among its consumers. A new wave is surging forward, young people who, more than ever before, are displaying an “activist” mindset on societal issues, and are likely to trigger a profound change in the industry's business strategies for years to come.
By 2025, Millennial and under-25 consumers will be the dominant demographic, with an estimated 65-70% share of the luxury market, according to a study presented on Wednesday by consulting firm Bain & Co. in partnership with Altagamma, the association of Italian luxury brands.
The pace of generational change picked up in 2020, and the shift is expected to contribute to 180% of the luxury market’s growth in the next five years. The market share of Gen Z consumers, born between 1996 and 2015, will grow from 8% in 2019 to 20% in 2025; that of Gen Y consumers, born between 1981 and 1995, will rise from 36% to 45-50% in the same period.
“The under-25 consumer segment is the most important, they are consumers who are truly significant for the luxury industry,” said Federica Levato, one of the study's authors.
“They are the consumers who most indulged themselves with gratifying luxury purchases during and after lockdown. They are the most active consumers on the web, and have been helping their grandparents to buy online. They have also been the first to go out shopping in stores after the end of lockdown,” said Levato. They shop across all categories, especially entry-level designer products in Europe and the USA, while in China their purchases stretch from entry-level to top-end products.
The new generations’ big difference, compared to traditional luxury consumers, lies in their purchasing habits and in the values that drive them. In addition to sustainable development and environmental issues in general, diversity and inclusivity have become crucial issues for these consumers, increasingly so in the course of 2020. In the pandemic era, the new generations are also greatly contributing to the growing influence of new cultures and sub-cultures, fostering the rise of new consumer profiles.
According to Bain & Co., the new generations are placing an unprecedented emphasis on the struggle against social and racial injustice. They are composed of “activist” consumers gazing with an eagle online eye at luxury labels, at their visions and goals. Consumers who will undeniably shape the market's future evolution. In this context, “the habits of older adult consumers are no longer at the core of luxury labels’ strategies,” said Levato.
The way luxury purchases have evolved in 2020, by product category and price positioning, clearly shows the decisive influence of younger consumers. The category that has struggled less this year, recording a 12% drop in sales, is footwear, whose sales were worth €19 billion globally, and have been driven by the growing demand for sneakers, the must-have accessory in young people’s outfits.
Another category that hasn’t been very adversely affected is jewellery, recording a drop in sales of ‘only’ 15%, to €18 billion. Sales of apparel and watches have instead plummeted by 30%. Jewellery is an increasingly polarised category: on the one hand, fine jewellery is attracting the wealthiest consumers, via sales made directly by stores to their most loyal customers, who also regard such purchases as investments. On the other, the jewellery category is catering to the aspirations of younger consumers with entry-level products.
Price-wise, once again the lion’s share of the market is represented in 2020 by affordable luxury items, highly coveted by a young clientèle. The Bain & Co. study indicated that entry-level products are increasingly important, accounting for over 50% of volume sold. “Gen Z consumers are accessing the market through its most affordable segment, though not in the traditional way, via the streamlined product range of luxury labels’ second lines, but through highly relevant products, special editions and new labels born on the web, which share these consumers’ commitments,” said Claudia D’Arpizio, a partner at Bain & Company.
Another example is the rising relevance of the second-hand market, which perfectly mirrors the current aspirations of the younger generations for a more circular, and less expensive, mode of consumption. Despite the pandemic, this segment has been growing by 9% in 2020, and is worth €28 billion.
Copyright © 2022 FashionNetwork.com All rights reserved.