Luxury's Generation Gap
"Millennials and Gen-Z will account for 45 percent of the luxury market by 2025, but their values and spending habits are at odds with the business models of many traditional brands."
Brands at the luxury and premium levels are struggling to adapt to revolutionary changes in consumer behavior. It's hard for many brands to imagine how their products and ways of doing business, steeped in tradition and successful over generations, will be radically influenced by changing cultural mores and the prevalence of technology. Bain & Co.'s Luxury Study (in collaboration with the Fondazione Altagamma) was printed earlier this week in The Business of Fashion.
The highlights are striking:
Over the next three years, Bain predicts that millennials and Gen-Z will boost the value of the luxury goods market to €290 billion ($324 billion
In the past, luxury brands strove to create a superior product that encapsulated ideals of exclusivity and aspiration.
Now, brands must consider the values of younger generations, for whom community, authenticity and transparency play an important part in how they purchase luxury goods. “It’s the first generation with radically different behaviours and attitudes towards all consumption and lifestyle to the generation before.”
Millennial behaviour is changing how older generations spend their disposable income. “There is a different kind of attitude, transparency and experience that older generations are expecting from luxury because now they are exposed to different experiences and propositions that technology players like Amazon are offering.”
Indeed, online and mono-brand stores are set to become the two largest sales channels, according to the Bain report, putting pressure on brands with wholesale models to adapt fast.
“Product for a customer now is taken for granted. There is a whole other set of expectations like the online experience, the in-store experience, living the story of the brand.”
“Millennials are more focused on experiences which inherently incorporate what they value: sharing time together, transparency or realness, and perhaps learning something or doing good along the way.”
The brands that are best placed for success within the millennial economy are those with a strong and distinct point of view, says Rebecca Robins, co-author of the book “Meta-Luxury” and global director at branding agency Interbrand.