The luxury goods market is currently undergoing significant changes due to a demographic shift, with younger generations playing a more prominent role. According to a recent report by Bain & Company and Altagamma, the market share of Gen Z consumers is expected to grow from 8% in 2019 to 20% in 2025, while Gen Y consumers will rise from 36% to 50% during the same period. This means that by 2025, 70% of luxury consumers will be under the age of 40, making them a crucial demographic for luxury brands.
To cater to these younger consumers, luxury brands need to adapt their strategies and find new ways to engage with them. The report emphasizes the importance of digital tools and the need for luxury brands to establish a consistent brand image across multiple points of contact with consumers. Traditional roles, such as shop assistants, are being replaced by consultants who guide customers through each touchpoint, ensuring a seamless and personalized experience.
Additionally, the structure of the luxury market has evolved. It used to follow a pyramid-like structure with different price brackets and consumer targets. However, it has now become more oval-shaped, with fluid boundaries that allow customers to enter and exit from various sides. Traditional market segments and product categories no longer accurately represent luxury brands’ strategies. Consumers are now more interested in brands that inspire them and purchase products for emotional reasons rather than purely functional aspects.
The report highlights the success of hero products as evidence of this trend. Iconic items like a prestigious handbag or a pair of statement sneakers can generate billions in sales and become brands within the brand. Moreover, sustainability has become a crucial factor for consumers when choosing a luxury brand, as evidenced by the booming resale market.
While brand logos are still important, they serve a different purpose now. They are no longer simply symbols of status and wealth but allow consumers to express their values and association with a particular brand. A brand’s logo enables consumers to define their choices and signal their connection to a brand that aligns with their values.
Luxury brands are also evolving into broader cultural players that go beyond selling products. They are transforming into platforms that offer a wide range of content and engage with consumers through co-design. Cultural relevance and values are becoming essential in influencing luxury purchases, and luxury brands are taking on a quasi-political role in promoting these values.
However, there are also challenges that come with this new role. The growing wealth polarization in society creates a divide between those who can afford luxury purchases and those who cannot. Luxury brands will need to address the issue of social inequality and find a balance between the traditional symbolism of luxury purchases and the new emphasis on social ethics and culture.
In conclusion, luxury brands must recognize the shifting customer base and adapt their strategies accordingly. Engaging with younger consumers through digital tools, maintaining a consistent brand image, and prioritizing sustainability are crucial in attracting and retaining this demographic. Additionally, luxury brands are expanding their roles by promoting cultural relevance and values, going beyond product sales. However, addressing social inequality remains a challenge that luxury brands need to tackle to ensure long-term success in this changing landscape.
List of Sources:
1. Bain & Company: The Future of Luxury: Resilience Through the Storm Report
2. Altagamma: Association of Italy’s Top Luxury Brands
