The New Face of Luxury: Embracing Values and Innovation for Gen Z Consumers
Luxury brands are redefining themselves as they adapt to Gen Z's changing values. From sustainability to inclusivity, discover how the luxury market is evolving.
The luxury market is going through significant changes to accommodate the increasing purchasing power of Generation Z. According to Bain & Company, Millennials and Gen Z were responsible for the entire growth of the luxury market in 2022 and are expected to account for 70% of luxury spending by 2025.
Luxury brands are facing the challenge of catering to the evolving value systems of Gen Z, which differ from those of previous generations. To attract and retain Gen Z consumers, luxury brands are quickly moving beyond traditional notions of luxury such as status, legacy, prestige, and heritage. Instead, they are embracing a new set of values, including inclusivity, sustainability, transparency, technology, and circular innovation.
This shift is leading to a transformation of the luxury market, as it forms unexpected connections with various aspects of culture and commerce. We can witness surprising collaborations between luxury brands and high-street brands, particularly those with the desired cultural cachet or values that luxury brands aim to develop. However, brands must navigate this terrain carefully.
An example of a collaboration that pushed the boundaries of luxury is Tiffany & Co's highly anticipated partnership with Nike on a limited edition pair of Air Force Ones. While it aimed to redefine what "luxury" means today, it faced backlash on social media from discerning sneaker enthusiasts who claimed that "credibility cannot be bought."
In contrast, eBay's entry into the luxury market proved more successful. The brand's recent Luxury Exchange pop-up in New York allowed shoppers to have their luxury goods appraised and valued, which they could then use to purchase items from top luxury sellers on the platform, including Bottega Veneta and Cartier. This demonstrates how new notions of fluidity and transparency can position an everyday brand like eBay at the forefront of luxury. It also highlights luxury brands' willingness to form unlikely partnerships to express these emerging values.
The eBay example also underscores how the luxury sector is adapting to the growing demand for pre-owned luxury goods, estimated to be worth €43 billion (approximately $46 billion) in 2022. This trend is driven by the emphasis younger consumers, particularly Gen Z (84%) and Millennials (73%), place on sustainability and circular economies, according to Tata Consultancy Services. They aspire to become collectors in their own right, purchasing second-hand luxury items as sustainable investments and assets to trade in the future, rather than pristine status symbols or heirlooms.
Luxury brands like Rolex and Zenith, owned by LVMH, have responded to this trend by launching certified pre-owned programs. These initiatives showcase how luxury brands can adapt to new definitions of luxury while upholding traditional values of superior quality and heritage. For instance, Rolex's program authenticates and restores pre-owned models, while Zenith offers certified pre-owned models from its archives.
Another example is Prada's venture into fine jewelry with a collection made from 100% recycled gold. The brand launched the collection with a campaign featuring poet and activist Amanda Gorman, signaling that the new faces of luxury represent diversity, inclusivity, community, and equality.
The luxury sector is also engaging younger consumers by embracing emerging technologies that align with emerging values like transparency and inclusivity. Companies such as LVMH, Prada, and Mercedes-Benz are utilizing blockchain technology to trace the lifecycle of their products, ensuring responsible sourcing and authenticity. This technology has significant implications for the luxury jewelry market, with De Beers exploring the use of blockchain to trace every diamond it employs.
Luxury brands are also leveraging technology to create virtual spaces that engage younger consumers. For instance, the experimental 'Gucci Vault' offers an interactive fashion experience featuring a virtual display of vintage items and games that educate players about the luxury house's history. Additionally, Web3 digital marketplaces are disrupting the luxury sector by providing designers with alternative platforms to sell physical and digital versions of their products, including NFTs.
These developments, such as high-street partnerships, the pre-owned market, circular economies, virtual marketplaces, and technological advancements, would have seemed unconventional for the luxury sector just five or ten years ago. However, today they are seen as culturally relevant, showcasing how young people are rapidly redefining the values of the luxury market.
Luxury brands must adapt to these changing dynamics to remain competitive and appeal to the evolving consumer preferences of younger generations. The ability to align with values such as sustainability, inclusivity, and transparency is becoming crucial for luxury brands to establish a strong connection with Gen Z and Millennial consumers.