Against a backdrop brought on by the pandemic, including supply chain snags, rising inflation and on-going geopolitical turmoil, luxury brands face another challenge. The consumers who are emerging post-pandemic are coming to the luxury market with new priorities and expectations from luxury brands.
“Customers’ tastes and interests have changed. Their attitudes toward shopping have changed. People want to spend money on more meaningful products that resonate with their lifestyles, not just spending frivolously,” shared this luxury executive in Unity Marketing’s latest State of Luxury survey, conducted among nearly 600 luxury industry insiders.
The time people spent at home changed how they shopped for luxuries – online nearly doubled its share of market, growing from 12% share to 22% in 2021. It also changed what they bought, with high-end furniture and home furnishings being the fastest-growing segment in the nine categories that make up the $1.3 trillion luxury market, as reported by Bain. Home luxuries were up 6% to 8% over 2019.
And with affluents focused on showing how much they care for the important people in their lives, including an unprecedented number of couples getting engaged and married, the luxury jewelry segment enjoyed a 7% uptick in spending over 2019. That made it the fastest-growing segment in the personal luxuries category which only advanced 1% over 2019.
Ironically, while luxury consumers’ lives slowed down because of the pandemic, luxury brands have had to move more quickly to adapt to the changes.
“Covid made people slow down and appreciate their lives and their families. They are more careful with their time and their money. There has been an awakening of a simpler life, so for some, over-consumption has lost its appeal,” shared this luxury executive
And the luxury industry has got to keep moving forward at even a faster pace since by 2025 the next-generation consumers will account for some 70% of the personal luxury market, as well as a significant share across the entire industry.
The next-gen consumers – Millennials, born between 1981 and 1996, and Gen Z, born 1997 to 2012 – are coming into the luxury market with new values and priorities. Unlike generations before, they are much more intentional about the purchase choices they make and the ways they they shop. Luxury brands must be ready to meet them as they lean into luxury with new intentions.
Similar But Different
Like siblings born in the same family, Millennials and Gen Z share similarities, but the greater the age difference, the greater the differences in the worlds they grew up in. Sixteen years separate the midpoints between these generations – 1988 for Millennials and 2004 for Gen Z.
Millennials are 26 through 41 years old this year, so they are, shockingly, beginning to reach middle age. Gen Zers are only 10 to 25 years old, some still children and the rest teens or young adults at best.
The age differences between millennials and Gen Z color their perceptions, values and consumer intent as they continue to mature in income and buying power. While Gen Z is important for all consumer-facing marketers to understand, they won’t hit their stride in the luxury market until they reach full adulthood and their incomes grow.
By 2025 the millennials are projected to make up 50 percent of the luxury market – they’ll be 29 to 44 years by then. If Gen Z follows the same trajectory, it won’t be until about 2040 before they are the dominant generational cohort in luxury.
Think Intentional, Not Aspirational
Aspiration is programmed into our human DNA, but it expresses itself in different ways throughout our lives. For Gen Z, aspiration is about who they want to become as they grow up and what kind of world they want to live in.
As people reach middle age like the Millennials, their aspirational desires morph from becoming toward being. In other words, being the best they can be throughout the rest of their lives and for the future lives of their children and society.
Aspiration is a value the luxury market holds dear. Luxury brands leverage people’s embedded aspiration for the finer things in life. Sales and marketing are informed by tapping into customers’ aspirations, entitlement and “dream” fulfillment and aspiration is an important motivation for consumers no matter their level of wealth and privilege.
But in the recent past, the term “aspirational consumer” has been most closely associated with Millennials. In this context, aspiration refers to the customer who has not yet reached a level of income that allows a full-on luxury lifestyle, but one high enough to permit an occasional luxury indulgence.
However, that “aspirational consumer” label lacks specificity so a more precise term defined by their income and spending power is preferred , i.e. HENRY – high-earner-not-rich-yet.
People’s incomes reach their peak between the ages of 35 and 55 years of age, about where Millennials are now and Gen Z will be in 20-odd years.
With many trailing-edge Millennials and even younger Gen Z cohort on the horizon, we are tempted to carry over the “aspirational consumer” tag to describe them. But that would be a mistake.
Intentional is a far more appropriate way to describe them. Intentional means “done with purpose; deliberate.”
Bernard Arnault, CEO of LVMH, talked about luxury consumers’ greater intentionality in his 2021 year-end earnings call. “These customers are becoming increasingly selective and show a priority for a number of brands that offer more.”
Young luxury consumers today weigh every purchase and give careful consideration whether a particular brand is one that they want to do business with. Many more factors, besides features, benefits and price, influence their purchase decisions.
Aspiration is part of it, but so are many others, like a brand’s purpose, mission and position on things that matter most to these consumers.
More Choices Requires More Intention
And it is easy to see why luxury consumers today are becoming more intentional. The number of choices in what to buy and how to buy them is exponentially greater now than ten, twenty or fifty years ago.
For example, several years ago a Harvard professor estimated that some 30,000 new consumer products are introduced each year. That number is exponentially greater now. Just count the number of new products on Etsy.
Importantly, these young consumers have taken to the emerging intentional consumer paradigm like a duck to water. They thoroughly enjoy the intentional purchase process: learning about products, brands, companies, what they stand for and what their friends think – all in order to find their best, most optimal choice.
Luxury Brands Must Be As Intentional As Their Customers
For luxury brands, the most important takeaway is that for any product available, there are hundreds if not thousands of comparable products that consumers also can choose from – and most of those are less expensive.
So luxury brands need to be as intentional in marketing to these new customers as they are in their purchase decision making. Luxury brands must understand what the next-gen consumers value most and deliver it to them. And given their young age and lifestage, their values are sure to continue to mature and evolve.
Contributed to Branding Strategy Insider by: Pamela Danziger, Owner, Unity Marketing
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