As Millennials and Generation Z continue to take over as primary luxury consumers, a recent report conducted by Boston Consulting Group and Highsnobiety predicts the luxury consumer will become unrecognizable in the next few years. Already described as a demographic with a values-first approach to consumerism, the coronavirus pandemic has largely served to pronounce consumer behavior even further.
While research began in 2019, the companies resurveyed respondents after the COVID-19 crisis for an accurate pulse and updated insights. According to Sarah Willersdorf, global head of luxury at BCG and coauthor of the report, the crisis will likely continue to accelerate several consumer mind-sets and behavioral trends.
“The post-crisis ‘new reality’ will have many structural changes that brands and retailers will need to reconcile. Consumers will be increasingly health and environmentally conscious, even more engaged on digital and social channels, and many will revert to trusted and iconic brands,” Willersdorf said. “We also wanted to test if our results held true in a COVID-19 world, and what we found was that the pandemic has only heightened the importance of our findings.”
According to companies’ research, while traditional markers of luxury like superior quality, attentive design and an elevated native are still critical, they are no longer sufficient. Notably, a key finding from the repulse survey found that only 11 percent of the Highsnobiety readers said they did not want to hear from fashion brands at this time. Further, respondents said they had an “expectation that brands take a more proactive involvement on the world stage than ever before.”
The authors of the report write, “brands that are successful in this new environment do not simply respond to trends or outside narratives, but instead become true drivers of culture.” Put simply, brands need to become culturally credible to remain successful.
“Cultural credibility is a brand’s perceived relevance to a consumer’s values and social circle,” Willersdorf said. “The building blocks of cultural credibility are the brand’s timelessness, 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.”
Brands that are culturally credible, therefore, are those that are able to foster loyalty by enabling and encouraging participation and communication. While cultural credibility has always been a factor for consumers, the report notes that it has accelerated recently.
“[These brands] talk to their audience before and after production,” Willersdorf said. “They spotlight relevant causes and amplify them in the mainstream through advertising, creative projects, business philosophy, and through the products themselves. They agitate and direct politicization — through sport, diversity, urbanism or environmental issues, depending on the brand. They collaborate with others to meet and subvert expectations, and to harness local and subcultural knowledge, seeking advocacy from cultural pioneers and the circles they direct. Most importantly, brands that are culturally credible are both aspirational and accessible.”
The research also analyzed sales data from 32 brands from traditional luxury to sportswear and streetwear brands over a three-year time frame, matching growth rates with the cultural credibility scores derived from the survey. Brands that delivered on both luxury fundamentals and the key factors that constitute the report’s cultural credibility matrix saw annual revenue growth that was two to three times as much as those who only delivered on classic luxury factors and are not considered culturally credible.
“There has always been an interplay between the wider culture and the corner of it we classify as ‘luxury,’ yet the speed at which new cultural associations formulate and dissolve is accelerating each year,” Willersdorf said. “A new generation that was raised during this reformulation (and who are digital and social natives) is on course to dominate the market. They are informed, active and networked. They respond critically and collectively to what brands, retailers and media are signaling, and they expect to be included in the conversation.”
In the repulse survey, taken after COVID-19, half of the survey respondents stated a brand’s timelessness had increased importance, followed by a brand narrative that builds an emotional connection at 33 percent, social responsibility at 25 percent, and a brand being worn by key opinion leaders and the consumer’s social circle at 24 percent.
“Peer-to-peer interactions are instrumental in helping a brand’s idea spread and earn their place in the zeitgeist,” authors said of the report. “The most successful brands build responsive products designed for a specific mind-set rather than a demographic.”
The report also studied a group called “cultural pioneers,” who hold an influential authority but are not traditional influencers. These pioneers are described not as vapid, as the authors of the report note influencers are seen, but rather “innovators who embrace new ideas and commodities even before early adopters.” Cultural pioneers influence the influencers and are, according to the report, the strongest indicator of where the market is heading.
Notably, the report finds that rather than shopping at traditional department stores, cultural pioneers prefer multibrand retailers like Dover Street Market and The Webster.
“Cultural pioneers are trailblazers in the domain of style and culture whose influence animates and substantiates brand credibility within the broader consumer set — especially with Gen Z and Millennials,” Willersdorf said. “Their top three sources of inspiration are IRL/WOM, brand-owned social media; multiband specialty retail, and lifestyle publications. With respect to multibrand specialty [stores], these retailers offer a high level of curation and inspiration, with a unique in-store environment, and they are known by cultural pioneers for discovering new and lesser-known brands.”
In its survey, the companies’ found 47 percent of cultural pioneers self-identify as “creative” compared to 27 percent of all Gen Z and 23 percent of Millennials. And while 50 percent of cultural pioneers said they are more likely to shop mobile or resale platforms, only 20 percent of all respondents said they have used these platforms to make a purchase in the last year.
The research also found that Gen Z, in particular, spends half of the purchase journey seeking inspiration. More than 70 percent of Gen Z globally, and 82 percent of Gen Z in the U.S., said they make purchase decisions while seeking inspiration.
“Generation Z spends 51 percent of their purchase journey being inspired or inspiring others, versus 37 percent for Generation X,” Willersdorf said. “Social media is Gen Z’s largest inspiration channel, both from people [friends and cultural pioneers] and brands they follow and is an essential discovery platform. They also find inspiration on brand-owned websites and apps, as well as brand stores.”
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