After a flat year in 2016, retail analysts were unsure about the future of the luxury goods market. However, a recent report from the consulting firm Bain & Co. has revealed some exciting trends, and surprisingly, they show that the upward momentum is being driven primarily by shoppers born after 1980. Buoyed by the collected data and the swift growth of this category of goods throughout the year, Bain & Co. even has updated its projected growth for the luxury sector, to 5–7 percent, which represents nearly a doubling of its initial expectations for 2017. The value of this market for the year thus is expected to reach $1.4 trillion.
These predictions and trends come as a relief to a variety of retail actors. Following the global economic recession, many luxury brands attempted to reposition themselves to capture the attention of younger buyers, and those efforts seemingly have paid off. Generation Y accounts for 30 percent of all spending in the luxury goods sector; together with Generation Z consumers, they explain the 85 percent of the increase in growth in the luxury market.
In particular, new content generated for digital platforms such as Instagram and Snapchat have helped retailers connect with younger consumers, and changes that the brands have made include the introductions of new items such as sneakers and jackets, which appeal better to younger consumers, encouraging their brand loyalty at a young age. Online sales also have helped drive the increases, as have efforts made by high-end brands to tap into new international markets. In this sense, 32 percent of all buyers in luxury goods markets are from China.
Long bemoaned as the “killer” of traditional retailers, Millennials and Generation Z are now celebrated in the luxury good space as saviors of a once-beleaguered market. Retailers are likely to continue their outreach efforts to both Generation Y and Generation Z, to help ensure that this relationship lasts.
- What are luxury goods companies doing to appeal to Gen Y and Z?
- Will these promotional efforts have a positive impact on you?
Source: Elizabeth Paton, “Gens Y and Z are Buying Lots of Luxury Stuff After All,” The New York Times, October 25, 2017