How Gen Z and Millennials Are Redefining High-End Consumerism

In the rapidly shifting landscape of luxury consumption, brands are facing the challenge of staying relevant to an evolving customer base. A 2024 report by Bain & Company highlights that Gen Z, born between 1997 and 2012, is set to become a dominant force in the luxury market, accounting for nearly one-third of luxury purchases by 2030. Meanwhile, Bain & Company projects that millennials, born between 1981 and 1996, will account for over half of luxury purchases during the same period.

This generational shift signals significant changes for luxury brands, as Gen Z emerges not only as the largest but potentially the wealthiest generation. According to Piper Sandler, Gen Z's growing financial power could lead to a surge in luxury sales across various sectors, including retail, travel, and technology.

"Gen Z is rapidly becoming a major player in the luxury market due to their transition into adulthood," explains Jason Dorsey, a Gen Z researcher and author of Zconomy: How Gen Z Will Change the Future of Business. While their current spending power lags behind that of older generations, it is expected to increase significantly. Dorsey emphasises the importance of brands connecting with Gen Z early to cultivate long-term loyalty.

The New Challenges for Luxury Brands

As luxury consumers evolve, so must the strategies of the brands that cater to them. Claire Tassin, a retail and e-commerce analyst at Morning Consult, conducted a survey of over 2,200 U.S. adults to explore luxury consumer habits. She found that today's luxury consumer is a "mercurial buyer," attracted to products and experiences that embody craftsmanship, exclusivity, and quality.

For many consumers, quality remains the cornerstone of luxury. Tassin says that while some may question luxury purchases' value, they usually justify the cost due to the product's superior quality. However, she cautions that brands relying solely on their historical status may struggle to connect with Gen Z, who are less brand-loyal than previous generations.

Dorsey echoes this sentiment, explaining that while Gen Z may remain loyal to brands that align with their identity, they are quick to switch if another brand offers better quality or a lower price. This is supported by McKinsey research, with more than half of surveyed Gen Z consumers in the U.S. and U.K. indicating they would abandon their favourite brand for a better alternative.

Balancing Tradition with Modern Expectations

The shifting demographics of luxury buyers present a delicate balancing act for brands. While younger consumers value authenticity in their luxury purchases, aspirational buying—where consumers strive to attain higher status through luxury goods—remains a key driver of sales.

Tassin highlights the challenge luxury brands face in catering to both traditional luxury consumers and newer, aspirational buyers, particularly within Gen Z. The struggle lies in maintaining a brand's classic appeal while also staying relevant and trendy.

This balancing act is crucial as the luxury market continues to expand. Bain & Company estimates that global luxury spending will grow from approximately €1.5 trillion today to €2.5 trillion by 2030, giving brands ample incentive to adapt effectively.

Dorsey emphasises the importance of brands recognising Gen Z consumers' unique attributes. "Brands should not underestimate Gen Z or assume they are less informed because of their age. Instead, they should appreciate their diversity, inclusivity, and the sources of information they trust."

Conclusion

As Gen Z and millennials become the primary drivers of luxury consumption, brands must evolve to meet their expectations. This involves offering high-quality, authentic products while also embracing trends and maintaining a connection with younger consumers. Those brands that successfully navigate this transition will not only secure their place in the luxury market of the future, but they may also see significant growth as these generations' spending power continues to rise.

Disclaimer: This information is for general knowledge and informational purposes only and does not constitute financial, investment, or other professional advice.