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There are few generational divides when it concerns spending decisions and luxury goods, a report released Wednesday by The Luxury Institute revealed.
Although volatility has returned to the stock market, the luxury sector of fashion apparel and accessories is being driven by a nascent rebound in the global economy and a growing appetite for top-quality products by Baby Boomers, Gen-Xers and Millennials.
The overall trend remains higher, producing a significant wealth effect, and retailers in the luxury space are benefiting from the improving economic outlook in the global market as well as from climbing equity rates and real estate prices in China, the U.S. and Europe, which show double-digit percentage gains in year-over-year median sales prices. Confidence is on the rise across Europe and in China, where fears of inflation and currency issues are subsiding as GDP growth continues to move north of 7 percent.
The report, which also defines luxury brands and purchase influences across generations, concluded that in a favorable macroenvironment, there is a big opportunity for “nimble” competitors to gain market share quickly from established brands. Case in point: In the luxury handbag arena, “Michael Kors has established itself as a dominant brand worldwide, much to the consternation of a much older brand, Coach.…Kors is expected to grow revenues 47 percent to $3.2 billion this year, while Coach is looking at a drop of 3 percent to $4.9 billion.…As new generations continue to redefine what constitutes luxury, brands will need to stay in touch with the evolution of tastes and preferences,” the report noted.
The Luxury Institute surveyed consumers age 21 and older from U.S. households with minimum annual income of $150,000 about specific triggers that influence purchases. Median annual income of respondents was $224,000, while median net worth was $1.3 million.
“Wealthy shoppers of all three generations agree that superior quality (86 percent) and craftsmanship (76 percent) are the top two most essential elements of a luxury brand, with superior customer service (62 percent) and design (62 percent) also defined as vital attributes. As for what influences the purchase decision, the opinions of others count a great deal for Millennials (68 percent).…The tendency to consult others drops with age as 64 percent of Gen-Xers and 58 percent of Baby Boomers say they query their friends before making a [luxury] purchase,” the report found.
It was further noted that Millennials are “significantly” more inclined than their older cohorts to place greater weight on a brand’s history, one-of-a-kind products and investment value when it comes to assessing luxury brands, but are open to embracing new ideas. Unlike Baby Boomers, who grew accustomed to online discounts and have expectations of free shipping and rewards programs, affluent younger generations prefer tailored, one-on-one relationships with luxury brands.
Other key points include:
• Online shopping is a well-established and popular sales channel across all age groups, with Baby Boomers, Gen-Xers and Millennials “all nearly equally as likely to have made their last luxury purchase online as in-store.”
• Brand Web sites (35 percent) are universally the most popular sources of information wealthy consumers use when preparing to make a purchase.
• Younger shoppers, along with their parents and grandparents, all agree that convenient return policies and lifetime guarantees are the two most potent features of luxury brands that add to their experience and influences them to buy more from a particular merchant.
The report concluded that in order to justify premium pricing and become a leader in the highly competitive luxury market, brands must deliver quality, craftsmanship, service and design at the highest levels.