The luxury market is undergoing a significant transformation, driven by the evolving preferences and buying habits of younger consumers. As brands scramble to keep up with these changes, understanding the dynamics at play is crucial for maintaining relevance and capturing new opportunities.
Gen Z and Millennials: The New Power Players
A 2024 report from Bain & Company highlights the dramatic shift in luxury consumer demographics. By 2030, Gen Z consumers—those born between 1997 and 2012—are expected to account for nearly a third of luxury purchases. Millennials, born between 1981 and 1996, will contribute to over half of these purchases. This shift is set to redefine the luxury landscape, as Gen Z emerges as a dominant force.
Piper Sandler predicts that Gen Z will not only be the largest but also the wealthiest generation, potentially driving growth across various sectors including retail, travel, and technology. Jason Dorsey, Gen Z researcher and author of “Zconomy: How Gen Z Will Change the Future of Business,” emphasizes the urgency for brands to connect with this generation. “While their spending power is currently less than other generations, it will increase over time. The sooner brands engage with them, the greater the opportunity to grow with this generation.”
The Push-Pull in Luxury
The changing luxury consumer landscape presents both opportunities and challenges. Morning Consult’s survey of 2,203 US adults reveals that today’s luxury consumers are characterized by a desire for “beautifully crafted products, first-class travel experiences, and meals with rare ingredients.” Quality remains the top priority, though consumers are increasingly questioning the value of luxury purchases.
Claire Tassin, a retail and e-commerce analyst at Morning Consult, points out that Gen Z consumers are less brand-loyal compared to their older counterparts. “Brands that rely solely on their status and mythology may struggle,” she warns. McKinsey’s research corroborates this, showing that over 50% of Gen Zers in the US and UK are willing to switch brands if they find alternatives that are cheaper or of higher quality.
The Role of Authenticity and Aspirational Buying
Despite their tendency for brand-switching, younger consumers place a high value on authenticity. This preference for genuine experiences and products is shaping how they engage with luxury brands. Yet, aspirational buying remains influential. Tassin notes that there’s a strong desire for luxury among those not in the ultra-elite 1%, complicating how brands balance classical luxury with more aspirational offerings.
“Balancing the traditional luxury shopper with the aspirational shopper, especially when Gen Z is involved, presents a significant challenge,” Tassin explains. Brands must navigate this “push-pull” dynamic, staying true to their roots while remaining on-trend.
Navigating the Future of Luxury
With overall luxury spending projected to increase from 1.5 trillion euros ($1.67 trillion) today to 2.5 trillion euros ($2.79 trillion) by 2030, according to Bain & Company, the stakes are high. To succeed, luxury brands must not only cater to the demands of younger consumers but also appreciate their diverse preferences and values.
Dorsey advises brands to avoid taking Gen Z for granted. “Instead of assuming they are less informed, brands should value their diversity, inclusivity, and trusted trend resources,” he says. “Connecting with Gen Z requires understanding their desire to be engaged and connected.”
As the luxury market evolves, brands that adapt to these new consumer dynamics and embrace the unique characteristics of younger buyers will be best positioned for future success.
