They are grappling with high debt loads, have limited purchasing power, their impact on current luxury sales is not that significant, etc. We might always argue about the numbers, but we cannot argue about one thing: Millennials have thoroughly redefined the term luxury. This free-thinking, individualistic generation have one thing in common - a disruptive mindset that values experiences over tangible items. They are all about putting a premium on experiences and finding opportunities to post a shareworthy story. With their connected life, Internet of Things (IoT), the functional and purposeful motivation of purchases, they increasingly transform the concept of luxury. Unique experience is the top driver for deciding whether or not, and how to make future purchases. Surprise effect, authenticity functionality and radical transparency also stay at the forefront of their list. Both generations will exercise oversized influence on society and luxury brands should start preparing now to engage the luxury customers of the future.
According to the newest study of Bain & Company, luxury cars, luxury hospitality and personal luxury goods, account for approximately 80% of the total luxury market. The overall industry has posted steady growth of 4%, to an estimated €1.08 trillion in retail sales value in 2016. Yet, among specific categories, there was a clear spread in the past year’s performance. Categories directly related to experiences were the fastest growing ones. Luxury cars remained the top-performing segment (+8%), with the luxury hospitality (+4%), and luxury cruises (+5%) following. Beauty, fine wines and spirits, and fine food segments all grew as well, reflecting a redirection of luxury spending away from goods and toward personal pampering and experiences. This trend will only strengthen with Millennials and Gen Z since they are not spending money like their rich parents or grandparents did. Travel, entertainment, and dining are emerging as top experiential purchases for this group according to JPMorgan study of Millenials spending patterns**. Luxury no longer refers exclusively to expensive handbags or jewelry. Now, it includes high-priced farm-to-table dining and craft beers, as well as “über-luxe” travel.
Unique, omni-channel experience and the effect of constant surprise will determine all the branding activities for this target audience. Online, ultimately bridging the gap between brands and consumers through curated storytelling and content. Offline, specialty luxury stores will aim to counter the Internet by turning themselves into destinations offering discoveries, dinning options and human connections. Angela Ahrendts, Apple’s Head of Retail, perfectly embraced the Millenials zeitgeist: “computers and smart devices are among the greatest intellectual gifts ever created for man, but if not balanced with human contact, may offer little to develop one’s heart.”
Millenials & Gen Z are living in the mixed reality and omni-channel world. Therefore online luxury retailers such as Rent The Runway and Farfetch are leveraging user data from its digital operations to design a physical store based on "luxurious convenience". Last year in November, Rent The Runway opened its first store-within-a-store inside Neiman Marcus’ Union Square in San Francisco. This new partnership between the fashion tech start-up and luxury retailer will help the former build offline luxury experience, and the latter reach millennial demographic it has struggled with by now. Farfetch also revealed their plans to open the Store of the Future, where latest advancements in technology (including virtual reality) would start to free up time and help make the consumer experience more human. Farfetch founder José Neves admitted at the Condé Nast International Luxury Conference, that "the next stage in the evolution of the fashion industry is the connected store, which uses technology to enhance the luxury retail experience to become even more customer centric".
According to Millenial audience, luxury is not something made by a machine in a repetitive fashion. It always needs to pique curiosity and surprise. STORY, a 2000 sq. feet retail concept store in Manhattan’s 10th Avenue, is re-inventing the definition of retail and creating a true experience of discovery. It is a space that has the point of view of a magazine, changes like a gallery and sells things like a store. Every four to eight weeks, STORY completely reinvents itself - from the design to the merchandise – with the goal of bringing to light a new theme, trend or issue such as love, disruption, feminism, F-word or creativity. Founded by a serial entrepreneur & disruptor Rachel Shechtman, STORY has received Fashion Group International's 2014 Rising Star Award for Best Retail Concept and it hosted more than 30 installations since its start. STORY introduced this sort of ephemeral retail that reveals the concept of product as content.
Radical transparency, functionality and authenticity are another features important for this age group. Modern luxury brands such as Warby Parker, Everlane, or Naadam not only produce products of the highest quality, but also explain their production facilities and supply chain process to justify the price. Warby Parker broke the monopoly of Luxottica, bypassing retailers and the middlemen that would mark up lenses 3-5x what they cost, so they could transfer all of that cost directly to their Millenials consumers and save them money. Naadam has created the largest privately funded non-profit providing veterinary programs, livestock insurance and breeding development. In return it is granted the first access to Mongolia herder’s fleece to produce the highest quality cashmere products.
Millenials and Gen Z are community oriented and are willing to be advocates of the brands they love. “Ready to shoot my first campaign for Burberry Brit fragrances,” announced 16 year old Brooklyn Beckham to his six million Instagram following. For fashion brands, it’s the responsive, visual channels like Instagram and cooperation with Insta-famous people that have been proving themselves most profitable. 96% of US fashion brands use Instagram, and it’s not hard to see why. According to research from Forrester, top brands on Instagram are seeing a per-follower engagement rate of 2.26 %, which is roughly 10 times higher than on Facebook and 100 times higher than on Twitter. High-engagement platforms give them the possibility to co-create the luxury brand universe.
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