Ally Elphick is a Bristol-based Copywriter and Brand Strategy Consultant, who supports brands seeking to forge a more sustainable future for people and planet, together. When she's not reporting on emerging trends or exploring how her clients can better communicate their purpose, she's tending to her veg plot or making a dash to the coast for weekends spent surfing from the comfort of her campervan.

People expect products and services that feel made for them

Personal Worlds

Despite the lingering effects of the pandemic and a looming recession, the global luxury market is forecast to grow well into 2030. 

The Epoch Times

 With 60% of Gen Z shoppers purchasing a luxury item in the past year, it’s younger generations who are behind these positive market projections as they begin to flex their financial clout. 

Klarna

 High fashion houses are already reaping the rewards of post-pandemic splurging of savings in 2022; in the UK in the last six months, Britain’s Burberry reported its sales were up by 11%, while the French Kering Group, behind Gucci, Saint Laurent, and Balenciaga saw a rise of 14%. The most impressive figures were posted by LVMH – parent to luxury houses Louis Vuitton, Dior, and Tiffany – which saw a 28% increase – continuing its bounce back from the impact of the pandemic in 2020. 

The Guardian

There are no signs of consumer confidence falling in the immediate future, with sales revenues reported to reach $1.4 billion dollars by the end of 2022, up by over a fifth in 2021. 

Fashion United

 Luxury’s relative resilience to recession isn’t unexpected, and brands are better prepared than they were a decade ago; in 2008-2009, the value of the market dipped by 9% but regained losses quickly, as HNWI’s personal spending budgets emerged largely unaffected by the economic gloom. 

Vogue

 However, while the increased attention of Gen Zers is being welcomed by brands, expert Danial Langer writes that there are “significant implications” for brands courting this new generation of buyers, warning that over half of today’s luxury brands “won’t survive the transition to a Gen Z-dominated world” in 2030. 

Jing Daily

This is because the traditional hallmarks of luxury aren’t enough to differentiate brands in light of the consumption habits, perceptions, and values held by these new luxury buyers. The first truly digitally native generation, 98% of Gen Zers own a smartphone and they spend an average of four hours a day on non-gaming-related apps – they are heavily influenced by their online lives. 

Forbes

 What’s more, Gen Zers are fickle and flippant – less loyal to brands than their Gen Y counterparts, they actively want to make their own assessment of each brand based on their personal values rather than taking branding as gospel. 

Business Insider

 This presents a number of challenges and raises paradoxes for luxury brands, who typically lean on their legacy and craftsmanship to sell products. What do luxury brands need to do to establish a relationship with this young luxury cohort in an authentic way? And how can they encourage brand loyalty with a generation who are continuously evolving their sense of identity, and their values to express themselves?

The world of high fashion and luxury goods already looks different than it did pre-pandemic, which triggered ventures into digitalisation on an industry-wide scale. For decades, luxury brands capitalised on their ability to offer physical experiential value, through exclusive customer service and extraordinary hospitality. Maintaining this elevated experience, as well as the aura of exclusivity and rarity, online, was a challenge met with industry-wide reluctance. “Rarity is the cornerstone of a luxury brand’s identity and is the principle used to create and offer rare products and services with exceptional quality and customer experience,” says Genevieve Muwana, luxury brand management expert and lecturer at the London College of Fashion. “Yet, the internet has democratised the access to luxury brands, and it has become necessary for luxury brands to go beyond the traditional understanding of rarity.“ 

Interview with Genevieve Muwana conducted by author

Realising the potential to transform the luxury consumer’s experience, these brands are accelerating the adoption of digital experiences in order to appeal to super-wealthy youngsters. While currently, 60% of shoppers have no interest in virtual shopping in the metaverse, Rosh Singh, managing director of a multidisciplinary production company, notes how luxury brands have been among the first to enter this space. 

VentureBeat

 “The sector’s interest in Gen Z is one of the key factors driving this behaviour. The metaverse is a new virtual playground with serious longevity for this group, as well as tomorrow’s consumers,” he says. “Experimenting with metaverse and crypto activations gives brands relevance and enables them to tap into new audiences.” 

Raconteur

 Luxury brands were quick to embrace NFTs – their exclusivity and status chimes well with traditional hallmarks – with both Gucci and Burberry among the first to launch high-fashion NFTs in 2021. Gucci’s NFT Aria, a four-minute film inspired by its new collection, sold for $25,000 while Burberry’s partnership with Mythical Games racked up $395,000 from NFTs created for Blankos Block Party – revealing the appetite for new signifiers of wealth among luxury buyers. 

Predictions that the metaverse and NFTs will drive 10% of the entire luxury goods market by 2030, have encouraged many other designers to step into the digital arena with Dolce & Gabbana, Balmain and Balenciaga releasing collections of high-fashion NFTs and launching gamified virtual reality experiences. 

Luxe Digital

 But big players are simultaneously exploring AR and VR technologies to engage young shoppers sating their desire for personal luxury goods online; Snap Inc further rolled out it’s AR capabilities in 2021, partnering with Prada and Piaget enable users to virtually try on designer clothing and accessories. Beyond creative ventures into the metaverse, 37% of fashion executives cited social commerce as one of the top three impact drivers on their brand in 2022. 

McKinsey & Company

 To appeal to Gen Zers specifically, many brands are shifting their focus from the Gen Y domain of Instagram to Snapchat and TikTok – where Burberry has built a 1 million-strong following and Versace has accumulated 661,000 followers through sharing runway videos. The short-form video-sharing app offers lucrative hyper-exposure – Kate Spade’s $349 heart-shaped bag sold out after going viral on the platform in 2021. 

Modern Retail

Aspirational buying amid global uncertainty

“The creation of desire, the process of longing, and passionate imagining, is crucial to building successful luxury brands,” writes Hannes Gurzki, an expert in luxury brand management. “The main challenge in managing luxury brands is the constant trade-off between growing the brand while remaining exclusive and guaranteeing high quality.” 

 Today, Gen Zers make up 72% of the luxury market along with Gen Yers, but are making their first luxury purchase earlier at around age 15, three to five years earlier than their predecessors. 

 Hana Ben-Shabat, the CEO and founder of consultancy Gen Z Planet, believes brands have social media exposure to thank for this early maturity in luxury spending. “The likelihood that a 16-year-old today will know names like Gucci and Balenciaga is much higher than it was 20 years ago when exposure to brands was done via magazines and stores that not every young person had access to,” she says. “With the exposure comes interest, exploration, and eventually the purchase.” 

Interview with Hana Ben-Shabat conducted by author

And while forecasts are optimistic about the luxury-goods market in the long term, globally, there’s evidence to suggest the anticipated boost from aspirational consumers’ wallets, who “tend to be younger and have less wealth than the luxury goods industry’s traditional clientele” could be curtailed in the short term. US inflation prices have hit Gen Z buyers, where middle- to low-income earners (those earning $50,000 to $125,000 or lower than $50,000) now account for just 16% of spending on luxury goods, down from an average of 37% in 2021. 

Business of Fashion

 While in China, where luxury shoppers are a decade younger than the global average, the clampdown on tech giants and the disruption of COVID-19 lockdowns have exacerbated high unemployment rates for 16- to 24-year-olds. 

The National

 As a result, many luxury brands are lowering their expectations for Chinese spending, anticipating forecasted growth of 3%, down from 18%. 

SCMP

 “In the current economic climate around the world with recession being a real possibility, we hear from Gen Zers that they plan to be even more cautious with their spending,” says Ben-Shabat. “That means that purchasing an $800 T-shirt or a $2,000 pair of shoes isn’t likely.” 

Luxury brands have to cope with macroeconomic problems in creative ways and find new means of tapping into aspirational buying. Ben-Shabat says that when it comes to Gen Z, luxury brands are still at a point where they are forming relationships with these new buyers, so offering entry-level products at more affordable prices could be a viable way to introduce the brand to aspirational consumers. “This is something that luxury brands always did but they now have to think creatively about what specific products could resonate with Gen Zers – items like cell phone cases, watches, collectables could be a start,” she says. 

 But as Pedro Bennasar, head of payment for luxury resale site Vestiaire Collective, says: “The pandemic caused widespread financial instability. This financial adversity, however, did not cause consumers to stop shopping but rather to seek financial flexibility to accommodate their existing spending habits.” 

PYMNTS

 A Klarna study suggests that flexible payments can drive luxury purchases, with 87% of Gen Zers and 89% of Gen Yers finding it helpful to pay over time. 

By next year, more than a quarter of the pieces in our closets could be pre-owned. 

Harper’s Bazaar

 The luxury resale market was valued at $33 billion, accounting for 11.3% of global luxury goods value in 2021, and is forecast to reach $47 billion by 2025. 

 “Although the luxury industry has seen an increase in sales since the pandemic, lack of disposable income for some consumers is a growing issue in today’s economic climate,” says Muwana. “This is one of the reasons why pre-owned luxury has become so popular since it allows consumers to still indulge in luxury without breaking the bank and paying premium prices.” 

 Plus, Gen Zers are notoriously thrifty consumers – 60% say they are motivated by price when it comes to their purchases – they don’t want to pay full price if they don’t have to. 

Secondhand luxury products may offer an inflation hack, but Gen Zers are savvy to the opportunities presented by the exclusivity of products and resale platforms, where must-have limited-edition products can be listed for a quick profit. “This generation views luxury as an asset or investment, something they buy today and has the potential to increase in value over time, says Ben-Shabat. “This is a very different attitude to that of previous generations who bought luxury for its quality, exclusivity, or ‘bling’ value.” 

 While resale has the opportunity to reduce the environmental impact of fashion through a circular marketplace, fashion policy expert Maxine Bédat warns this buy-to-sell behaviour could be counterproductive, saying “we don’t want people to end up buying 

 new clothes because they know that there’s an active market for their cast-off things.” 

 However, it is also a way that consumers can shop sustainably and embrace circular fashion – data shows that 73% of Gen Zers and Yers factor in luxury brands’ sustainability practices in their purchase decisions, so resale offers plenty of opportunity for luxury brands to engage with these values. 

Some designers have embraced the benefits of resale; Stella McCartney, who launched the Circular Economy Program with resale platform RealReal back in 2017, said that: “as a designer, I think it’s the biggest compliment for your designs to have an afterlife; to me, that is luxury”. 

 But many luxury brands aren’t convinced – to date, only 15% of brands have publicly participated in resale. 

 “The lack of control luxury brands have on the supply chain level is a problem they currently have no direct solution to. In fact, luxury brands cannot influence the availability, verify the authenticity, or guarantee the quality of products being sold,” says Muwana. “The products sold on the resale platforms could be limited editions or old collections, and the service may not reflect that of the one provided in stores. This could impact the brand image or reputation.” Yet she believes there are opportunities for luxury brands “to partner with those resale platforms and incorporate them in their value chain, as their sole purpose is to orchestrate the resale process. Luxury brands could offer a resell service as part of their customer care and engage with the end-of-life aspect of their products thus actively participating in a more circular economy.” 

Interview with Genevieve Muwana conducted by the author

Enable resale through authenticity and traceability

For those luxury brands yet to be sold on resale, blockchain technology could be the answer to retaining the authenticity and traceability they demand in this space. Adding further incentives for adoption, 41% of luxury consumers are enthusiastic about the development of traceability features, with 58% of Chinese shoppers particularly excited. 

 Brands have recognised the value of joining forces to find solutions for the benefit of the whole market; LMVH, Prada Group, and Richemont collaborated in April 2021 to develop the Aura Blockchain Consortium, which will allow consumers to trace an item’s whole lifetime, from sourcing to resale, offering the transparency and proof of authenticity for consumers, and protection for the brands legacy. 

Deloitte

 Plus, enabling resale presents other opportunities for brands associated with quality and craftsmanship to develop a connection with the three in five luxury shoppers who believe in buying better and buying less – the desire for high-quality materials (64%) and longevity (50%) are bigger drivers of luxury purchases than authenticity (48%) and exclusivity (39%). 

Build brand loyalty through virtual experiences and personalisation

Much of the anxiety around marketing to Gen Zers is that their consumption habits reveal a complete lack of loyalty – they are 22% more likely to say they’ve stopped following a brand online in the past month. 

 But focusing on digital innovation presents luxury brands with the opportunity to start building brand loyalty early on; 

 enabled the Roblox community to immerse themselves in a virtual recreation of the physical exhibition in Florence, Italy for two weeks only, appealing to consumers who feel luxury in virtual reality is just as aspirational as in real life. “A customer who is highly engaged and freely participates in online communities can display brand loyalty if they are emotionally attached to the brand,” says Muwana, who believes Online Brand Communities (OBCs) are key to bridging communication and nurturing long-term relationships, “further supporting a customer’s sense of belonging”. 

 What’s more, technological innovation in both physical and virtual realities can help meet this cohort’s desire to express themselves through individualistic identities – 72% of luxury consumers want personalised offerings from brands. 

 meets this desire in a virtual space, while Kylie Jenner’s 

 demonstrate how hyper-personalisation could materialise physically.

Offer seamless shopping experiences with social commerce

Four in five Gen Z consumers follow luxury brands on social media, and a massive 97% say social media is their main source of shopping inspiration, so social content and commerce strategies must be a top priority for luxury brands looking to win over young, affluent shoppers. 

Business of Apps

 There’s plenty of scope to aid brand discovery, but luxury brands need to ditch traditional advertising for organic, authentic content if they’re to engage this value-based generation. “Gen Zers expect brands to deliver experiences that are authentic, cool, memorable, and shareable,” says Ben-Shabat. “They want to be active participants rather than passive observers. Active participation is the basis for a stronger emotional connection with the brand, positive impression, and amplification.” 

 To promote seamless shopping experiences from discovery to checkout, TikTok has partnered with Shopify to allow products to be tagged in videos, while Instagram and Pinterest have developed their Shopify capabilities to enable in-app shopping features and payments. Given that 30% of Gen Zers say an easy checkout is key towards them making a purchase and 84% who discover a product on social media then go on to purchase it, it’s in luxury brands’ interest to leverage the power of these platforms to create an entertaining, experiential and frictionless path to purchase. 

 more likely to say they’ve stopped following a brand online in the past month

 of luxury consumers want personalised offerings from brands

 of Gen Z shoppers who discover a product on social media go on to purchase it

Even amid economic uncertainty, the outlook for the luxury market is positive, as affluent Gen Zers want to spend on designer brands

Luxury brands are tapping into digital innovations to foster the creation of desire among Gen Zers that’s so crucial to luxury brand management

The demand for resale is growing, meaning luxury brands are evolving to incorporate this channel – meeting Gen Z desires for sustainability and authenticity

Hana Ben-Shabat is the founder of Gen Z Planet, a research and advisory firm. She’s the author of the book 

Gen Z 360: Preparing for the Inevitable Change in Culture, Work, and Commerce

Genevieve Muwana is a business fashion management lecturer at the London College of Fashion. She’s passionate about consumer behaviour and luxury brand management and has over two decades of experience working with luxury, beauty, and fashion.

Gen Z (born 1997-2010)

United Kingdom

China

France

Luxury

Interview with Hana Ben-Shabat conducted by the author

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