Although the luxury sector has experienced a slight slump in recent years, current projections by market analysts suggest that the industry is gearing up for a rebound. In a recent report, Bain and Company estimated that the luxury consumer market will grow at an annual rate of 4 to 5 percent through 2020.
One significant factor expected to drive this growth is the increasing buying power of millennials. As of 2017, millennial consumers comprised 38 percent of activity in the luxury consumer market, yet accounted for only 30 percent of spending. This is likely to change in the near future, with luxury spending among millennials growing to match their presence in the sector.
Millennials will join forces with Generation Z to make up 45 percent of the international personal luxury goods sector. However, they will do so in their own unique way, subverting many of the trends and expectations currently associated with luxury retail. The following are some of the major habits and preferences shared by millennial consumers as they drive the renewal of the luxury sector:
Redefining the Luxury Label
As millennials become a stronger force among consumers, they are beginning to shed traditional attitudes toward luxury brands. For decades, luxury products have offered consumers something beyond the assurance of quality. Personal luxury products have come to serve as markers of wealth and status, and in many cases, even signify transitions from one stage of life to the next.
Consumers have long aspired to partake in the luxury market because it signifies a certain level of wealth. Millennials, it would seem, are driven less by these positive associations and more out of a desire for self-expression.
The generational shift in perspective toward luxury brands may be the result of multiple factors. For one, the bulk of the millennial generation is entering adulthood in an economic climate less favorable than that enjoyed by their parents. Social expectations are evolving, while digitization has created endless new possibilities. Millennials have come of age in a world of endlessly expanding possibility, and their budding interest in luxury brands reflects an interest in this possibility rather than predefined labels.
When millennial consumers consider investing in luxury brands, it is usually because they are seeking to make a personal statement. Rather than attempting to communicate their economic status, they are instead striving to make a purchase that reflects their unique values and interests. For millennials, luxury brands are a way to not only display their identity, but also help define it.
The need to promote individuality rather than exclusivity has prompted many luxury brands to expand into new categories. One recently successful example is the streetwear retail subcategory. Many luxury apparel companies have developed t-shirts, sneakers, denim, and other casual products to cater to the needs and aesthetic tastes of millennials.
Millennials Value Experiences
The luxury submarkets that have experienced the largest increase in growth are those that offer not only products, but experiences. This includes areas such as hospitality and food and beverage. In order to keep up with these sectors, personal luxury goods markets such as furniture and apparel must tap into consumers’ desire for uniquely valuable experiences. They must leverage a combination of product development and marketing strategies to offer products that communicate an idea that inspires consumers to make a purchase. Brands can accomplish this by using digital platforms to reach out to consumers, as well as by offering items at a variety of price points to encourage experimental entry-level purchases.
Meeting Customers Where They Are
A recent study of millennials’ shopping habits conducted by Deloitte confirmed that the generation is largely drawn to online retail. Millennials rely on company websites and social media to influence their luxury purchases, and they are more likely to buy luxury items online.
E-commerce is therefore an increasingly relevant channel that retailers cannot afford to ignore. While online sales comprised less than 10 percent of all luxury sales in 2017, this number could increase to 25 percent by 2025.
However, the shift to online retail doesn’t diminish the importance of brick and mortar locations. If anything, the growing role of e-commerce makes the in-store experience a more crucial element of the overall customer journey. Visiting a physical store is often the final step in the buying process for consumers who conduct most of their research online. Thus, retailers must provide engaging, immersive in-store experiences that reflect their brands and provide a value that can’t be gained online.
Emerging consumer trends in luxury furniture are gradually driving fundamental changes in the sector. While today’s leading luxury brands have traditionally focused on brand heritage and history as marketing points and foundations for product design, newer strategies are celebrating individuality, exploring new design possibilities, and helping consumers express their identity.