Where are Gen Z spending their money? How does this affect luxury brands?
Nikole Wintermeier | Nov 24, 2021
Where are Gen Z spending their money? How does this affect luxury brands?
Everyone is talking about luxury disruption. Gen Z shopping habits are changing the face of fashion so much, many suggest legacy luxury brands struggle to keep up.
But is the luxury market a victim of Gen Z shopping habits? Or does this new behavior represent a once-in-a-lifetime opportunity to come out on top?
By 2035, GenZ will make up 40% of global luxury spending. Winning luxury brands are actually leveraging Gen Z habits and trends to reinvent and future-proof their brands.
Gen Zs are the shoppers roughly born in 1997 or later. These individuals graduated or started working in the middle of a pandemic. They are the consumers who want brands to connect their values with their retail experiences.
In short, their shopping behavior represents a unique moment in retail history. Capitalize on these habits quickly, and brands can define the retail landscape for the coming years.
This is a market where experiential commerce, value-driven storytelling, and innovative digital practices will become the norm. These Gen Z-defining trends are here to stay.
And the more luxury brands show progress in connecting with this market segment, the more they can leverage their legacy to shape consumer culture for the future.
Luxury resale represents a $24 billion market. And Gen Z – luxury’s biggest spenders – are thrifting in throngs, with 90% of Depop users under 26 years old.
The fact that Gen Zs are carving out their luxury spending on secondhand items has become quite the headscratcher for many luxury brands, who would rather burn excess clothing than recycle it (resale is quite literally throwing a spanner in the works, where ‘broken’ luxury goods are now fixed and resold rather than thrown into landfills or destroyed).
The rise of the resale market represents an opportunity for luxury brands to be a part of circular fashion while displaying concrete efforts towards sustainability. Forcing many luxury retailers to revise their unique selling points like vintage, premium, and rarity.
Gen Z's shopping habits don’t just cater to exclusivity or scarcity anymore; 62% of Gen Z say affordability is more important to their purchase decisions.
Vogue supports this, suggesting that 70% of Gen Z shoppers are now monitoring their spending habits after the pandemic. And 123% more of Gen Zs are using the buy now pay later model (BNPL).
Gen Z icon Billie Eilish at the Academy Awards 2020 wearing Billie x Gucci
But despite spending frugality, the return to stores after the pandemic was met with another phenomenon dubbed ‘Revenge Shopping’. After store closures and the buying lull during the lockdown, many shoppers overcompensated on those first days back to normal.
For example, the Hermes boutique flagship store in Guangzhou, China sold $2.7 million worth of merchandise on the first day of its reopening. But it’s unlikely revenge shopping will save luxury retail.
Instead, for more sustainable luxury growth, retailers need to invest in redefining their brand. Highlighting authenticity over exploitation. The winners are those that are relentless in the fight for the environment.
When Gen Z’s purchasing power returns to a new normal, luxury brands should keep a close not only on where their Gen Z consumers are spending but also on what they’re spending on and how.
Image 1: Balenciaga x Crocs platforms shoes
Out with the old in with the...ugly? Where luxury brands once promoted the rarity of their products, this is now taken over by a new desire for uniqueness.
Gen Zs will notoriously jump on ‘ugly’ trends if it helps them stand out by being eclectic or bold (as demonstrated by Gen Z aesthetics like new-age glamour, Y2k fashion, and ‘90s accessories).
Today, Gen Z consumers prefer unique products coupled with unique brand stories. Heritage or legacy is less interesting.
This is why 67% of Gen Zs purchase items from collabs – e.g., Crocs x Balenciaga (image 1), Louis Vuitton x Supreme (image 2), Dior x Nike (image 3).
Psychologically, this shift from exclusivity to uniqueness is demonstrated in the desire for quiet luxury versus conspicuous consumption (i.e., Gen Z shoppers prefer products that infer quality rather than products that ‘shout’ like ones with big brand logos all over them).
For more on the psychology behind luxury consumption, we’ve written a report which you can download at the end of this article.
Image 2: Louis Vuitton x Supreme
More than this, Gen Z shoppers connect with brands through the influence of their peers. Making social commerce on TikTok, Instagram, or Snapchat viable channels for spreading unique product offerings and brand stories.
Moncler’s #MonclerBubbleUp challenge, for instance, asked users to wrap themselves in Moncler-style winter coats which the brand then used a filter to turn into a real Moncler coat. By leveraging Charli D’Amelio (the most followed influencer on TikTok), their challenge had more than 2 billion views.
This shows how luxury products can be trending – a complete 360 from selling luxury goods as elite, exclusive, and unattainable.
Image 3: Dior x Nike on the runway
It’s no secret that this disruption of traditional luxury can be terrifying for big brands. According to Glossy, “luxury content tends to be slick, highly produced and tightly controlled”, and yet the most famous TikTok campaigns are “informal, organic, and fun”.
But the secret to success is in letting go. Winning luxury brands aren’t afraid to reinvent their legacy, reclaim exclusivity for uniqueness, and embrace disruption with as much digital zest as the zeitgeist requires (see the rise of Phygital retail).
Louis Vuitton, for example, is winning this segment over by posting informal, behind-the-scenes videos from their fashion shoots. A strategy that has amassed over 2 million followers on their TikTok page.
Moncler’s bubble up challenge on TikTok
Gen Z’s ‘cancel culture’ demonstrates not only the purchasing power of this segment but their agency when it comes to having a strong, customer voice.
They are committed to social values like inclusivity, diversity, and enjoy gender-fluid fashion not just as a trend, but as a sustainable direction for future apparel.
For luxury marketers, this flips the funnel on its head. While also showing a unique opportunity to listen to the customer and let them inform the direction of the brand.
This 360-degree shift could be exactly what luxury needs in order to stay alive in this new climate. It’s these Gen Z habits that are, after all, shaping the face of the retail landscape forever.
Luxury brands that succeed are ones that can prove authenticity in their:
The basis for success today is to appeal to Gen Z’s new shopping habits by extreme value selling and crafting memorable brand experiences through storytelling and experiential retail.
As we’ve seen with the rise of luxury Crocs (priding themselves on their durability and sustainability), it’s not about the product’s exclusive heritage anymore, but about the stories they entertain, and the uniqueness they exude.
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