Report: Gen Z accounts for 20% of all luxury purchases globally

The luxury industry is undergoing a major transformation, driven by the spending habits and preferences of Generation Z. This generation, born between the mid-1990s and early 2010s, has grown up in a digital-first world with access to shopping choices at their fingertips. According to Bain & Co., Gen Z accounts for 20% of all luxury sales globally in 2024, significantly impacting the high-end market and compelling luxury brands to adapt to new consumer expectations.

By 2025, Millennials and Gen Z are projected to contribute 70% of all luxury spending. This monumental shift highlights the urgent need for brands to stay in tune with these younger consumers' evolving tastes and values. As they prioritize sustainability, inclusivity, and personalization, luxury brands must adapt to remain relevant and appealing. Ignoring these generational preferences could mean losing out on a significant market share.

Gen Z icon, Zendaya is best known for her roles in "Euphoria" and the "Spider-Man" trilogy; she has also become a prominent figure in luxury fashion. In April 2023, Zendaya was unveiled as Louis Vuitton's newest House Ambassador, starring in a stunning campaign for the brand's iconic Capucines bag. This shows Gen Z's appeal to luxury brand decision-makers; we have compiled 5 key areas brands should focus on to attract Gen Z and Millennial shoppers interested in luxury goods.

1. Gen Z’s Unique Characteristics

Several characteristics set Gen Z apart from previous generations:

1. Digital Natives: Having never known a world without the internet, Gen Z is highly interconnected through social media platforms. They leverage online tools to discover, evaluate, and purchase luxury goods.
2. Social Responsibility: More than any other generation, Gen Z values sustainability, inclusivity, and ethical practices. They demand transparency from brands regarding sourcing, production, and labor conditions.
3. Personalization and Expression: This generation views luxury as a status symbol and a means of self-expression. Customization and personalization are key factors influencing their purchasing decisions.

With a combined global spending power estimated at $450 billion, Gen Z's influence on the luxury market can no longer be ignored. Here’s a closer look at how they redefine market trends and what this means for luxury brands.

2. Ethical Consumption and Sustainability

Gen Z’s purchasing behavior is strongly influenced by their sustainability and social responsibility commitment. Unlike older generations, who may prioritize brand prestige and exclusivity, Gen Z looks beyond the label. They are more likely to purchase from brands that demonstrate ethical practices, such as:

• Sustainable Sourcing: Brands like Stella McCartney have captured Gen Z’s attention by prioritizing sustainable materials and transparent supply chains.
• Fair Labor Practices: Companies that ensure fair wages and safe working conditions for their employees stand out to Gen Z consumers. For them, luxury includes knowing that their purchases do not come at the expense of someone else’s well-being.
• Eco-friendly Initiatives: Initiatives such as zero-waste packaging and carbon neutrality resonate deeply with Gen Z. Brands like Gucci and Louis Vuitton have launched sustainable collections and adopted green practices to align with these values.

3. Digital Functionality and Social Media Engagement

For Gen Z, the digital experience is paramount. They rely heavily on social media platforms like Instagram, TikTok, and Snapchat to discover and engage with brands. Here are some strategies luxury brands are adopting to connect with this tech-savvy audience:

• Influencer Marketing: Influencers and content creators significantly influence Gen Z’s purchasing decisions. Brands collaborate with influencers who embody their values to reach a wider, more engaged audience.
• Interactive Content: Engaging content such as virtual try-ons, 360-degree product views, and augmented reality (AR) experiences allows Gen Z consumers to interact with products meaningfully before making a purchase.
• Direct-to-Consumer Models: Luxury brands are increasingly bypassing traditional retail channels in favor of direct-to-consumer (DTC) models. This allows them to control the customer experience and gather valuable data to refine their marketing strategies.

4. Personalization and Customization

Personalization is not just a trend but a demand from Gen Z consumers. They seek products that reflect their individuality and offer unique value propositions. Luxury brands are responding by offering customizable and bespoke options, such as:

• Custom Orders: High-end brands like Burberry and Nike offer services where customers can customize products to their specifications, choosing colors and materials and even adding personalized monograms.
• Limited Editions: Limited-edition releases create a sense of exclusivity and urgency, appealing to Gen Z’s desire for unique and rare items.
• Collaborations: Collaborations with artists, designers, and other brands bring fresh perspectives and new creative elements to luxury products, resonating with Gen Z’s taste for innovative aesthetics.

5. Technological Adaptations in the Luxury Sector

Advancements in technology are playing a pivotal role in reshaping the luxury retail experience for Gen Z. Innovations such as artificial intelligence (AI) and machine learning (ML) allow brands to deliver hyper-personalized shopping experiences. Key technological trends include:

• AI-Powered Recommendations: AI algorithms analyze user behavior and preferences to provide tailored product recommendations, enhancing the online shopping experience.
• Virtual Reality (VR): VR offers immersive experiences such as virtual store tours and fashion shows, allowing Gen Z consumers to engage with brands in exciting new ways.
• Blockchain and Transparency: Blockchain technology enables brands to offer verifiable information about product authenticity and provenance, aligning with Gen Z’s demand for transparency.

Case Studies

Several luxury brands have successfully captured Gen Z’s interest by embracing these trends and values:

• Nike: With its NIKEiD platform, Nike allows customers to design their sneakers, providing a highly personalized shopping experience that resonates with Gen Z.
• Gucci: Through initiatives like its Gucci Equilibrium program, the brand focuses on sustainability, digital innovation, and social responsibility, all key factors for attracting Gen Z consumers.
• Louis Vuitton: Leveraging AR, Louis Vuitton offers interactive experiences through its app, enabling users to try on products and explore collections virtually.

6. The Future of Luxury Retail

By 2025, Millennials and Gen Z are expected to account for 70% of all luxury spending. This shift underscores the necessity for brands to stay attuned to the evolving preferences of younger consumers. Moving forward, we can expect to see:

• Increased Focus on Inclusivity: Luxury brands must embrace diversity in their marketing and product offerings to appeal to Gen Z’s inclusive mindset.
• Enhanced Customer Experiences: As competition intensifies, providing exceptional and seamless customer experiences will become increasingly important. This includes leveraging data analytics to anticipate needs and personalize interactions.
• Sustainability as Standard: Sustainable practices will become a baseline expectation rather than a differentiator. Brands that fail to prioritize the environment risk losing relevance among Gen Z consumers.

Conclusion

Gen Z is undeniably transforming the luxury market, challenging brands to innovate and align with their values. From ethical consumption and digital engagement to personalization and technological advancements, these young consumers are setting new standards for what defines luxury. Brands that can adapt to these changes and meet Gen Z’s expectations will not only thrive but also pave the way for a more sustainable and inclusive future in the luxury sector.