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How luxury brands have adapted to win Gen Z

Research conducted by Rakuten and Vogue Business found spend from younger luxury buyers is growing 3x faster than other generations. How have designer brands evolved to win the attention of the new luxury buyers?

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The luxury industry is undergoing a dramatic shift driven by a new generation of younger luxury buyers: Gen Z. Research conducted by Rakuten and Vogue Business found spend from younger luxury buyers is growing 3x faster than other generations. By 2030 they’ll make up one-third of the market.

When it comes to purchasing, Gen Z is making fewer yet more expensive investments in luxury items. The RealReal released their 2023 Luxury Resale Report last week, and revealed the average order values for the site’s luxury resale are up 18% for Gen Z. This keeps pace with the Rakuten and Vogue Business findings early this year.

Gen Z’s ability to spend on luxury is not tied to income, rather it’s tied to the amount of disposable spend they have. There is an enormous opportunity to create long-lasting relationships with this generation while redefining the luxury shopping experience. But Gen Z’s preferences and demands are divergent from the traditional paradigms of luxury. So, how have designer brands evolved to win the attention of the new luxury buyers?

Social media has amplified luxury brand exposure

Luxury brands can be slow to embrace new technologies, but brands like Chanel, Gucci, and Dior have turned to social media platforms to reach new shoppers and improve engagement with their audience.

Our research found Gen Z buyers make their first luxury purchase at age 15, three to five years earlier than millennials did. Undoubtedly, social media has played a strong role in this early maturity in luxury buying. These platforms have made discovering luxury items easier than ever. A Klarna report found half (50%) of Gen Zer’s look to social media influencers for luxury trends. Exposure generates interest, and eventually, conversion. The same report found, of Gen Z consumers following luxury brands on social media, 84% have purchased a product after seeing it on social media, emphasizing the acquisition opportunity.

So, what is this younger generation buying? According to WWD, 61 percent of Gen Z shoppers are buying luxury beauty. Today, Gen Z is outspending Millennials in facial skin care and hair care, while the two are neck-and-neck in makeup. Upon graduating and entering the workforce, Gen Z now has the means to afford high-price-point products and sees them as long-term investments.

Luxury is more accessible than ever

Accessible luxury is winning over Gen Z. In the simplest of terms, accessible luxury is affordable luxury. The industry has introduced several initiatives that allow buyers, especially younger generations as they amass wealth, to access high-end items at a lower price point. Rental services for luxury clothing and accessories and limited editions or collaborations are just some of the ways brands are meeting Gen Z’s desire for accessible luxury.

When luxury watch brand OMEGA partnered with its less expensive sister brand Swatch, there was speculation that the collaboration “devalues the OMEGA brand.” However, Gear Patrol noted, the sold-out designs prove “it also shows OMEGA as playful as well as drawing in a younger crowd — and those that can’t currently afford a Speedmaster.”

The resale luxury market also offers an affordable entry point for younger buyers. About 30% of Gen Z are buying resale items to afford higher-end brands, according to a recent survey by ThredUp. Additionally, 64% of the surveyed members of Gen Z look for an item secondhand before buying it new.

Luxury brands have taken notice and are now capitalizing on the resale market, while ensuring their brand and products maintain their value and appeal. The eBay “Certified by Brand” program enables the marketplace to partner directly with luxury brands to help scale their presence in the resale market, while offering shoppers an expanded selection of authentic luxury. With a growing number of knock offs and unauthorized sellers, the eBay program offers them a way to own authentication of their products on an established site.

Gen Z demands sustainability

The growing demand for pre-owned items is in part fueled by the importance younger consumers are placing on sustainability. 84% of Gen Z consumers will spend more on sustainably produced and ethically sourced products, according to Tata Consultancy Services. Not only does Gen Z prefer brands that align with their ethics and value, but this generation actively seeks them out, making sustainability highly influential in their purchasing decisions.

Gen Z’s demand for sustainability is driving the industry to adapt by adopting sustainable sourcing and embracing environmentally conscious approaches. Of note is British designer Stella McCartney, who is widely considered a pioneer in sustainable and conscious luxury. Since their founding, Stella McCartney has abstained from using leather, skins, feathers, or fur, as well as introduced the use of alternative materials such as recycle fabrics. The signature “Falabella” bag, constructed of vegetarian leather, is perhaps the best example of this. Stella McCartney also collaborates with several environmental conservation organizations and is an active member of the Ethical Trading Initiative, which ensures the careful selection of ethical suppliers.

Gen Z will continue to influence luxury’s evolution

The impact of Gen Z on the luxury market cannot be overstated. Their commitment to sustainability, digital savviness, and preference for accessible luxury are reshaping the industry.

For luxury brands, the key to success lies in understanding the motivations of these new consumers and adapting to meet their needs. The brands that best cater to the values and preferences of these younger generations will earn their loyalty.

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