“Millennials” and “Generation Z” – these terms are by no means new, but are changing the face of the premium luxury industry, nonetheless. These new generations of digitally-empowered consumers include a majority of high-earning individuals with a high propensity to spend. Their behaviors, motivations, and influencers are redefining the luxury industry – from brand positioning and product development to operations and marketing. According to the Deloitte Global Powers of Luxury Goods report, millennials and Generation Z will represent more than 40 percent of the overall luxury goods market by 2025.
A recent study conducted by Boston Consulting Group (BCG) and Altagamma has found that about 130 percent of market growth between 2018 and 2025 within the luxury market will need to be attributed to the millennial generation. Gen Z is expected to further magnify this growth. Millennials are also considered the generation that is most likely to “flex” – display brands to show a personal association with the brand – a recent study by First Insight indicates.
The sixth edition of the Arab Luxury World Conference, the Middle East’s leading luxury business conference, which will be held on Wednesday, June 12 and Thursday, June 13, at the JW Marriott Marquis Dubai, will highlight the impact of a new generation of consumers in its panel discussions including “Glocalization: redefining communication models,” “Big Data,” and “The Future of Premium Retail.”
Millennials (those now aged 23 to 36) account for more than $3 trillion in disposable income globally, with their consumer spending power projected to account for 33 percent of the global total over the next decade. Generation Z (those now aged 16 to 22) is swiftly following suit by setting new trends and engaging with fashion and premium luxury. In addition to premium luxury goods, millennials are also becoming a key audience interested in buying property in the UAE. It would be a costly error to presume that these new generations can’t afford the crème-de-la-crème that premium luxury has to offer.
Furthermore, these generations are also extremely tech-savvy and, therefore, are pushing the industry to move digital. In addition to developing an online presence and making the most of social media trends and “influencers”, luxury brands have also begun catering to these experience-based generations through predictive and personalized tech engagements such as Artificial Intelligence and Augmented Reality. The expectations that consumers have from luxury brands is also changing. In addition to high-quality and unique products, premium luxury customers now demand highly customized service, a strong narrative behind the brand, online engagement with the brand, and decidedly intense immersive advertising.
In an age of data and a variety of choices, young consumers are now demanding radical transparency, increased sustainability, and high levels of accountability from the brands that they associate with. The McKinsey and BoF State of Fashion 2019 survey indicates that transparency further up the supply chain, including fair labour, sustainable resourcing, and eco-friendly initiatives have become part of the brand loyalty choice. Close to 52 percent of millennials carefully research the background of a brand before buying a luxury product, the survey states. The McKinsey study shows that millennials constantly desire luxury products that are new, unique, authentic and care deeply about the brand’s ethical standards.
All in all, millennials are forcing the luxury industry to become tech-savvy, provide greater value for money, increase personalization in its human touchpoints, develop integrated digital access, communicate through social media platforms, balance heritage with innovation, and remain ethical while assuring sustainability in its premium products.