Boston Consulting Group Discusses Luxury and the Young Consumer

·4 min read

Data clearly shows that Generation Z and Millennials differ from other generational cohorts on a variety of consumer behavior barometers — from expecting luxury brands and merchants to offer flexible payment options and to have sustainable practices in place to brands leading on e-commerce digitalization and with personalization.

What’s more, these young generations are expected to represent over 60 percent of the luxury market by 2025, according to research from Boston Consulting Group. They’re also “certainly more thoughtful and demanding in their luxury purchases than older generations,” Sarah Willersdorf, global head of luxury at BCG told WWD.

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And, she said, these cohorts can be broken down even further.

“We try to distinguish between younger and older Millennials, as younger Millennials tend to have needs and behaviors closer to Generation Z (often because of life stage),” said Willersdorf. “These younger generations are true digital natives, more diverse than prior generations, more socially conscious — and will boycott brands for offending their beliefs — want personalized engagement, place a high degree of importance on store associates and in-person events, and put a great emphasis and trust in their own communities.”

However, from an engagement perspective, what makes these consumers different is not as simple as calling them “digitally native” or just pointing to the internet or gaming.

“Rather, what has changed is the increase in creativity and cultural literacy, driven by the use of digital and social platforms,” said Willersdorf. “The result is a new level of sophistication in all aspects of life that manifests higher expectations from brands and products.”

So, what is required of luxury brands to do to better engage these shoppers, retain them, increase repeat purchases, and foster long-term customer value?

“Luxury brands still need to deliver on the traditional markers of luxury — such as superior quality, unique design and an elevated narrative — but they also need to enable and encourage a different level of participation and communication,” said Willersdorf. “Gen Z and younger Millennials are looking for a brand narrative that evokes emotions, the advocacy of key opinion leaders and a consumer’s social circle, as well as a curated assortment and creative partnerships with culturally relevant authorities. Creating a sustainable and ethical business is increasingly a table stake across all consumers.”

At the same time, brands will need to foster an authentic community. Willersdorf noted that while the product will always be important, buying into a luxury brand with a common value system and a tribe of like-minded people is “perhaps the new end goal, with the product itself increasingly serving as just a means to an end. For younger consumers, buying into a specific brand or label conveys both one’s individuality and the community to which one belongs.

Additionally, brands will need to commit to strong brand-owned channels for both inspiration and purchase. BCG’s research shows that brand-owned channels, such as a brand’s website, physical store and mobile apps remain among the top five sources of inspiration for consumers and are critical in driving purchases.

“Ensuring that these owned properties symbiotically tell a consistent story and give a reason to visit is key,” said Willersdorf. “For example, access to limited or unique content on a brand’s app or website, unique physical stores that can serve as inspiration and shopping destinations, as well as community clusters, are powerful. Offering flexible payment options is important — after-pay options and installment programs are increasingly demanded by younger generations who are looking for transparency and simplicity in payment options.”

Lastly, Willersdorf said, brands need to test and learn and be prepared to fail, saying that brands that are prepared to experiment with new platforms and partnerships are likely to create stronger engagement with the next generation.

One example of this is gaming. BCG’s recent global research shows that over half of luxury consumers say that their perception is positively affected by their favorite brand taking part in online gaming experiences. And of those consumers, over a third say it is because they can better discover new luxury collections and experiences from their favorite brands, while an additional 30 percent say it would help them better express themselves and their style through their digital persona.”

“Savvy luxury brands are increasingly experimenting with things like cultural commerce, augmented reality and social shopping to connect with younger consumers,” said Willersdorf. “These platforms often offer the ability to inspire as well as drive purchase.”

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