“Management is discovering that more mature shoppers are basing their purchasing decisions on what is considered trendy among Gen Z shoppers,” Cowen & Co. luxury analyst Oliver Chen said after hosting a call with Saks CEO Marc Metrick and Movado chairman and CEO Efraim Grinberg.
“We expect more luxury brands and retailers to continually take the Gen Z shopper seriously and innovate for more digital penetration and creativity while balancing the core historical elements of the luxury channel,” he added.
Chen noted that luxury brands and retailers have seen a major influx of younger shoppers, with Gen Z seeking out innovation, fashion and constant newness. That’ss driving some legacy fashion houses to “rethink streetwear and versatility,” he pointed out, with some premium legacy labels now dropping product more frequently and collaborating with “up-and-coming” brands.
The luxury CEOs said though the sector’s core customers with continue $200,000-plus annual household income to spend at a healthy clip, the $100,000-to-$200,000 aspirational cohort seems to be wavering, Chen said.
The analyst believes aspirational consumers are spending somewhat less on luxury now that travel is back and they have more places for their dollars to go.
Chen raised one concern about inventory and assortments.
In recent months, “going-out categories” have fueled sales growth as consumers have events and offices to dress for, he said. Stores operating with leaner inventories and more flexible supply chains can better react to changing consumer demands. That means they should also be in a better position to limit markdowns. But some luxury retailers don’t have the right product for consumers who aren’t as interested in loungewear and other casual categories as they used to be. “Stores with a higher mix of accessories, shoes, dresses and men’s suits will likely benefit from this closet refresh cycle,” Chen said.
Chen’s read on the state of luxury comes after Cardlytics earlier this year analyzed data from some of America’s biggest banks to find that U.S. luxury sales jumped $2.2 billion since 2019.
“That’s the same amount as if every single female in New York City bought Golden Goose Super-Star Sneakers,” Cardlytics vice president of growth partnerships Jacqueline Block said when the firm examined luxury sales facilitated by institutions including Chase, Wells Fargo and Bank of America.
In 2021 alone, luxury sales increased over 26 percent compared with pre-Covid levels, the purchasing intelligence firm added.
Coresight Research luxury and retail division managing director Marie Driscoll attributed the sector’s pandemic-era strength to luxury’s “experiential” nature when Covid paused “our ability to enjoy experiences.
“For those who kept their jobs and income, luxury products became part of the consideration set with the saved discretionary income,” she added.
Brands popular in China
What’s more, data suggests China’s luxury consumer is looking to spend on brands supporting people and planet.
According to HSBC’s survey on Chinese luxury consumers published earlier this year, 89 percent said they spent more money to buy an item advertised as sustainable. Forty-six percent said they prefer to buy a new product from a premium brand, while only 6 percent said they will settle for secondhand. And 17 percent said they preferred Chinese luxury brands the most. When they do seek out Western luxury, brands such as Louis Vuitton, Gucci, Hermès and Chanel that sell in a range of categories win out over labels that specialize in just shoes and or only create jewelry, for example.
Brand affinity also seems to be changing.
Prada lost its outerwear crown to Burberry and Gucci emerged as the preferred luxury footwear brand over Louis Vuitton. For suits, Armani, Givenchy, Dior and Prada kept their rankings as the top four brands, same as in the last two earlier surveys. Rolex maintained its top position in watches for four years running. For sporting goods, local brands are gaining market share, but Nike and Adidas remain the most preferred brands. In luggage, Samsonite lost its crown as the most preferred brand, losing to its more affordable competitor Crown.
For affordable luxury handbags, Coach was the reigning favorite, while Furla and Michael Kors rounded out the top three spots. In the premium luxury space, Hermès continued to hold the top spot, as it did in the last three previous China surveys, followed by Chanel and Gucci.