Millennials exert their influence on luxury market
According to researchers Bain & Co., 2017 is shaping up to be a good year for luxury. After an underwhelming year in 2016, which saw the sector contract slightly, the first quarter of 2017 has shown 4% growth – and that’s projected to continue with a pace of 2% to 4% for the rest of the year. Amongst the drivers of this growth is recovery in Chinese luxury spending at home and abroad, increasing travel, and greater confidence in Europe. However, one of the driving forces of luxury growth this year will also shape the market in the next decade and beyond: the Millennial State of Mind.
Bain says that MIllennials and ‘Boomlets’ (Generation Z) will account for 45% of the global luxury goods market by 2025. This poses both a challenge and an opportunity for companies in the sector: on the one hand, Millennials have clearly defined preferences; on the other, they are very different to the generations that have gone before.
Claudia D’Arpizio, a partner at Bain & Co. and one of the study’s lead authors, said: “Since the 1950s, there was a clear and predominant definition of what an 'aspirational life' looks like. Getting a degree from a leading institution, getting a highly regarded and rewarded career, getting married and having kids by a certain age, and eventually becoming wealthier than your family of origin. This was also reflected on consumption models, to the extent to which products were a way to testify the passage across life stages and achievements.
"For Millennials, this paradigm is substantially different, at least in most developed countries. They are the first generation to approach adult life in less favorable economic conditions than their parents. They have inherited a secular vision of the world: for example 'family' and 'religion' are no longer indispensable elements of one’s life, but they are possible choices among many. They are also part of the digital revolution, which leads to a different perception of 'time,' 'space' and 'possibilities.' Everything is possible, here and now."
This means that Millennials have a very different view of consumption than their parents: they are more engaged with self-expression; they value experiences – things that change them, that make up a life – than things. One effect this may have on luxury retailing, according to the study, is that the shopping experience will have to become personal and immersive. This is particularly true in a world dominated by Ecommerce: consumers have to be stimulated to leave their homes, where they can already buy anything they want.
D’Arpizio also notes the extent to which Millennials share a global existence with one another that their predecessors did not: "Being highly digital and having disposable income to invest in education, travels and connectivity, Millennial luxury consumers are exposed to very similar stimuli and can participate in the same global conversations and experiences. Even in those countries that were historically less open to other cultures, Millennials have the opportunity to share experiences with people from all over the world. No culture is impermeable to the Millennial wave."
Luxury brands will have to adjust to these differences, as the study notes that Millennial behaviours are crossing into other generations. And, perhaps most fundamentally, they don’t have forever to do it: Millennials are entrepreneurial – if brands don’t reflect their preferences, they will simply create those that do.
Dominion holds a large number of companies in its Global Trends Luxury Fund that are proving popular with Millennial consumers.
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