Luxury is an industry in flux as teen and twenty-something consumers have their own expectations for what high-end means today.
In a world where seemingly everything is available everywhere and all the time, young consumers expect—and demand—access. And access takes many forms.
For the millennial and Gen Z cohorts, access often means getting to do and see the best things, as Triangle Capital Partners partner Richard Kestenbaum describes the new luxury as the “facilitation of experiences.” The most infamous example of the millennial obsession with access to experiences and the fear of missing out might now be the Ja Rule-linked Fyre Festival that went down in (figurative) flames in 2017, and was excruciatingly scrutinized in a pair of documentaries on Netflix and Hulu. People ignored critical warning signs just for the chance to party with supermodels and rock out to Kanye West in a Bahamian cay once owned by drug lord extraordinaire Pablo Escobar.
Then there’s the access economy driving new business models. Many young consumers now opt to rent versus buy as a way of keeping up with quickly changing trends, and without sinking significant expenditures into goods that might fall out of favor in months. Cowen analyst Oliver Chen sees young consumers focusing on curating, rather than collecting, better goods. Services like Rent the Runway and The RealReal offer access on more affordable terms.
Rather than showing off material possessions, millennials and younger consumers turn to Instagram not so much to “flex” their stuff, but to spotlight indulgent meals, jet set adventures to far flung global destinations, aww-worthy pets and adorable kids, Kestenbaum said. However, the return of heavily logoed luxury products harkens back to the baby boomer era, where consumption was nothing if not conspicuous. Young consumers aren’t immune to the sense of status that certain brands convey, and Chen credits Gucci for doing a good job of freshening up its image and approach to appeal to new demographics. Consumers can find some of the Italian label’s logo-splashed socks for $120 on some luxury platforms—quite pricey for socks but more accessible for young people who may not yet have the income to spend on Gucci products that can run into the tens of thousands of dollars.
Gucci, Chen added, also speaks to the young shopper’s sense of individuality. “They’re making it really appealing to have your own sense of style, with mixing and matching,” he explained. The brand plays into this need for uniqueness by casting “eclectic” models who might not “conform to the prior standards,” Chen continued, noting that body positivity could be an opportunity for luxury players that haven’t yet embraced inclusivity in that regard. Millennials accounted for 50 percent Gucci’s 2017 revenue, as brand sales climbed 42 percent, according to Deloitte’s Global Powers of Luxury Goods 2018 report.
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Digitally native direct-to-consumer brands are further muddying the waters for luxury brands, expanding the pool of premium options for people who want something better without overpaying for the sake of a label. The Internet has changed the game of how brands engage with their audience.
“The way that consumers receive this newly defined presentation of desirable brands is through blogging, articles, videos, YouTube and social media.” Kestenbaum noted.
Premium sleepwear brand Lunya exemplifies the new approach to high-end direct-to-consumer brand engagement. Founder and CEO Ashley Merrill said at last fall’s Luxury Interactive conference that her company was digital from the start six years ago simply because she “couldn’t figure out where we would exist in traditional retail.”
Lunya’s washable silk jumpsuit is offered for $228 while its signature robe will set you back $250. “We had too much story to tell, and we had spent a lot of money on our fabrics and construction. A lot of thought went into why we made pieces the way we did,” Merrill said. “We ended up digital first because it was the only way to break the category and re-approach it in a way where we could add the dialogue we needed to.”
Chen echoed the importance of storytelling and brand communication. “It’s a two-way street,” he explained. “The future of retail is having a dialogue with the customer…but it also means being an architect of that dialogue and the brand facilitating it.”
What millennials and Gen Z are buying
Lyst, Edited and The RealReal offered a glimpse into how young consumers spend their money.
Fashion platform Lyst merged data from its millions of shoppers with social media engagement stats to draw strong conclusions about what millennials and Gen Z search for and purchase. Young consumers eschew heritage and craftsmanship in favor of “instantly recognizable, stand-out branded products that light up their Instagram feeds,” Lyst said. “At the moment we’re seeing real demand for all kinds of logo pieces, designer sneakers, and small luxury accessories like bag charms and belts.”
Data from luxury resale company The RealReal finds Gen Z interested in established labels, not just new, hype-driven ones. Hermes has risen in popularity from 15th to 9th place with Gen Z in recent years, which “speaks to both the rising popularity of the brand with this demo and the spending power of Gen Z,” The RealReal said. The company’s data also finds Burberry, another classic, overindexing with Gen Z compared with older consumers. With Gucci, Prada and Chanel among the top three luxury brands purchased by every demographic, “luxury really bridges the generational divide,” the resale platform added.
Edited retail analyst Krista Corrigan finds sustainability catching on in the industry, thanks to rising expectations among eco-conscious young shoppers.
“There’s no doubt that sustainability has been a hot topic across the retail industry and luxury retailers are helping to lead the charge. In fact, new-in luxury products using the word ’sustainable’ in their descriptions jumped 86 percent compared to the same time last year,” she said, noting that top brands in this area include Monnalisa, Gucci and Stella McCartney. Most of the products bearing the “sustainable” label include accessories—specifically jewelry and handbags—followed by T-shirts and shorts. The majority of these new-in-stock products sold through with limited or no discount, Corrigan added.
Though many luxury brands have been slow to adapt to digital, they can’t afford to wait much longer and miss out on important groups of consumers whose spending power is set to rise. “Millennials don’t necessarily want to come see you just because you’re a special brand,” Chen noted. “They’re open-minded, too, and they’re interested in private label and a lot of things.”