Luxury industry comes to terms with Gen Z’s appetite for collaborations, resale
today Apr 18, 2019
The global luxury market was worth €920 billion in 2018, a sum combining the €590 billion spent on experiential luxury, up 5% over 2017, and the €330 billion spent on luxury consumer goods (up 3%). In 2025, the market is expected to be worth €1.256 trillion, growing at an average annual rate of 4.6%. In 2018, 30% of the world’s luxury spend, equivalent to €278 billion, was made by 18.5 million consumers, 4% of all luxury goods consumers worldwide.
These consumers, labelled ‘True-luxury consumers’, are the core of the ‘True-Luxury Global Consumer Insight’ survey presented on Wednesday by the Boston Consulting Group, at a conference organised by Altagamma, the association of Italian luxury brands. Once more, a leading role is played by Chinese consumers, whose share of the global luxury market is expected to increase from 35% to 40% in 2025, accounting for 75% of growth in 2018-2025, and by millennials. The latter segment, made up of consumers aged 18-34, will account for 50% of the luxury market in 2025, compared to 32% as of now.
But there is a new wave of consumers on the horizon: Generation Z, people born in the last two decades, currently only accounting for 4% of the luxury market. “They are entering the market with a consumption behaviour very different from that of their elders. It is in the best interests of the luxury industry, which found it so hard to attract millennials, to brace itself to deal with these future consumers, by learning more about their behaviour and values,” said Nicola Pianon of BCG.
These very young consumers interact with brands and their products almost exclusively on the web and social media: 95% of them do so, compared to 92% of millennials and 81% of True-Luxury consumers at large. Above all, Gen Z appears to be the segment most receptive to two highly popular trends: brand collaborations and the growing interest for second-hand products.
Collaborations are here to stay
Collaborations are thriving, a phenomenon which isn’t about to wane. According to the survey, one in two consumers is going for them. The figure is 67% for Gen Z, 60% for millennials and 62% for Chinese consumers, especially when it comes to buying handbags and sneakers. Even better, 89% of the 12,000 survey interviewees (95% of them Gen Z) said they are aware of and in fact know all about the collaborations introduced by luxury labels as they team up with artists, designers and streetwear brands.
Collaborations are attractive because they are perceived as being more “cool.” Compared to a simple branded product, they have added value, they are unique. Louis Vuitton’s association with Supreme is by far the most appreciated, in China as in the USA and Europe, followed by Adidas with Yeezy and Chanel with Pharrell Williams.
Another fast-growing phenomenon, notably with young luxury consumers, is the resale market, which is now worth €22 billion and is expected to grow at a rate of 12% per annum, reaching €31 billion in 2021, chiefly fuelled by e-tail sites. “This segment accounts for 7% of the luxury goods market, estimated at €330 billion. Its growth rate is four times faster than that of the traditional luxury goods market. One in five or six products is bought second-hand,” said Pianon.
He also underlined how several factors are contributing to this segment’s boom: “First of all, the internet reduces the risks of buying second-hand, providing more transparency and sundry authentication services, instilling greater confidence in this kind of purchase. The latter is also part of a sustainable attitude, as the products live on and aren’t discarded. Also, buying second-hand means you can unearth products that are hard to find, because they are no longer on the market, or you missed them. Finally, prices are cheaper than in-store.”
Nearly 60% of True-Luxury consumers said they are interested in the pre-owned market; 45% of them are engaged in it as vendors, chiefly to empty out their wardrobe (44%), fund new purchases (21%), or embrace sustainable consumption (17%). According to the survey, 34% of high-end products are resold by these very wealthy consumers, and 26% are bought second-hand.
“The phenomenon is all the more interesting given that these high-purchasing-power consumers can afford anything. Our survey showed that 44% among them, when they buy a product, consider its resale value. The percentage rises to 50% for millennials and 57% for Gen Z consumers,” said Pianon, who added that “younger customers approach luxury in a different way. They are very active in online resale.”
Chanel, Louis Vuitton and Gucci top the ranking for second-hand sales, followed by Burberry, Dior, Balenciaga and Alexander McQueen.
Copyright © 2019 FashionNetwork.com All rights reserved.