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Luxury shoppers are becoming wealthier and younger, with purchases by some of the newest consumers projected to grow three times faster than older generations over the next decade, according to a new report.
Generation Y, also known as Millennials, and Generation Z have been responsible for all of the growth in the luxury market over the past year, according to a report by Bain & Co. Spending by Gen Z and the even younger Generation Alpha, or under-13s, is expected to account for a third of the luxury market by 2030, reflecting “a more precocious attitude towards luxury” among the younger ranks than older generations, the report said Report.
Gen Z consumers start buying luxury goods — from designer handbags and shoes to watches, jewelry, clothing and beauty products — at age 15, three to five years earlier than millennials, the report says.
“By 2030, younger generations (Generations Y, Z and Alpha) will be by far the largest buyers of luxury goods, accounting for 80% of global purchases,” it said.
Luxury sales have so far been largely immune to rising interest rates, a slowing economy and high inflation. Bain estimates that global sales of personal luxury goods will have grown 22% in 2022 to €353 billion, or about US$381 billion.
This year, luxury sales are expected to grow between 3% and 8%, depending on China’s recovery and the economy in the US and Europe.
The US retook the top spot for luxury sales in 2022, overtaking China with sales growth of 25% and total sales of 113 billion euros, or about $121 billion. China’s luxury sales fell 1% mainly due to Covid lockdowns. Europe also saw strong growth at 27%, helped largely by spending by American tourists on luxury goods in Europe over the summer.
Accessories, led by handbags, led growth in 2022 and are expected to continue to drive luxury goods sales for years to come.
Leather goods sales were up 23% to 25% last year and were over 40% above pre-Covid levels. While new styles and “hero” products accounted for some of that growth, the biggest growth driver came from price increases — like the Chanel Small Classic Flap Bag, which is now over 60% more expensive than it was before the pandemic. Bain estimates that 70% of leather goods sales growth in 2022 will come from price increases.
Analysts and luxury executives say the appeal of luxury brands to increasingly younger consumers is linked to a surge in wealth creation in recent years, coupled with social media.
“What has changed is the level of affluence of US customers and the proliferation of social media telling customers what’s cool,” Jan Rogers Kniffen, CEO of retail consultancy J Rogers Kniffen told WWE. “The generation before the Z raised the age for the first luxury purchase to 18 to 20. Wasn’t 15 to 17 the next logical step? Is this the low point? Probably not.”
Buying luxury shoes and handbags online has become much more accessible in recent years as luxury companies have embraced online sales and a variety of used luxury goods websites have sprung up.
Bain said Web 3.0, including the Metaverse and NFTs – a type of digital asset called non-fungible tokens – will further support future luxury sales to younger consumers.
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