Luxury brands are eyeing Generation Z and Millennials with keen interest as the combined earning potential of these generational cohorts will be the largest in the world. This is due to the eldest of Generation Z reach the age 24 and are fully in the workforce while the eldest Millennials are turning 40 and at the height of their income potential.
But marketing to these cohorts is no cakewalk. According to retail analysts and consumer behavior experts, Generation Z and Millennials expect brands to be sustainable, ethical and to practice corporate social responsibility.
Research from Boston Consulting Group shows that Generation Z and Millennials are pegged to garner more than 60 percent of the luxury market by 2025. In a recent WWD report, Sarah Willersdorf, global head of luxury for Boston Consulting Group, said cultural credibility is key since sharing values with consumers has never been more critical. Willersdorf said the brands that are succeeding “are building their place in the metaverse — the shared, persistent virtual space — to connect with consumers at an even younger age through social media and build a community of, and with, followers.”
“Our research found that, while traditional markers of luxury remain critical — superior quality, attentive design and an elevated narrative — these are no longer sufficient to drive passion for Generation Z and younger Millennials,” she told WWD.
There’s also another factor that determines the success of reaching these consumer demographics: the degree of digitalization. As a result, luxury brands are collectively investing hundreds of millions of dollars in digital technologies, which include tech stakes for more integrated e-commerce and in-store shopping experience and AI-powered personalization capabilities.
“Indeed, If we are talking about Gen Z and Millennials, these are the most important channels to invest in,” Di Roberto said. “These generations are more willing to buy online as they are very informed and they know exactly what they want. Also, they are more and more sensitive to what a company does on a CSR and sustainability level. There has been a shift in the consumer’s concept of luxury and consumers’ buying choice is in fact now more than ever lead by ethical, social and environmental criteria.”
Di Roberto also noted that Generation Z and Millennial shoppers “are inherently curious and increasingly look for authenticity. Personally, I believe that brands should act on a double level to be able to reach them and to catch their interest: keep doing what they are good at — offering a high-quality product — but also showing in a concrete way what’s behind it, meaning their commitment toward ethical, social and environmental issues.”