The luxury industry has a Gen Z problem. Gen Z consumers, those born between 1997 and 2012, could account for nearly a third of all luxury purchases by 2030, according to Bain & Company. Yet, after the COVID-19 pandemic, many brands pivoted their focus towards wealthier clientele, neglecting the aspirational younger shoppers that are vital for long-term growth.
In this post, we’ll explore why luxury brands can’t afford to overlook Gen Z any longer and how they can adjust their strategies to reconnect with this influential demographic. From affordable luxury offerings to embracing creative collaborations and tapping into the secondhand market, brands need to rethink their approach to survive and thrive in the evolving landscape.
Why Luxury Brands Are Struggling to Connect with Gen Z
After the pandemic, the luxury sector took advantage of inflation by raising prices and concentrating on their highest-net-worth clients. The result? A narrowing of their consumer base and a 50-million-person shrinkage in potential luxury customers. According to Bain’s 2024 luxury study, the decision to neglect the younger, aspirational consumer market now looks like a costly mistake.
Claudia D’Arpizio, senior partner at Bain, said that luxury brands “probably over-corrected their strategy” during the turbulent years of COVID-19, focusing too heavily on the top of the pyramid. But to stay relevant, brands need to strike a balance and find ways to connect with both ends of the market.
The Case for “High-Low” Strategies
Gen Z might not be able to drop $5,000 on a handbag, but they’re willing to invest in affordable luxury. Experts suggest brands adopt a “high-low” approach, offering affordable products alongside their more expensive items. This strategy allows younger shoppers to engage with luxury brands without breaking the bank. Over time, these products build brand loyalty, which will serve brands in the long term as these younger consumers grow into their purchasing power.
Key Categories to Focus On:
- Fragrance and beauty: Categories like perfume, cosmetics, and eyewear have seen strong growth, even during economic slowdowns. LVMH and Kering, two of the largest luxury conglomerates, have seen impressive sales in these divisions.
- Eyewear: As fashion accessories, eyewear remains accessible and widely popular. Many Gen Z consumers see eyewear as an affordable entry into the world of luxury, as seen in collaborations with smaller brands like Prada and Gucci.
For example, Prada’s beauty range launched in the U.S. through the use of nano influencers on TikTok and Sabrina Carpenter showcasing Prada products in her music video. This is a prime example of a luxury brand getting it right: targeting Gen Z through affordable products that resonate with their values, while simultaneously planting the seeds for future loyalty.
Creating Emotional Connections with Gen Z
It’s not just about affordable luxury — it’s about creating an emotional connection. Gen Z doesn’t just want to own a product; they want an experience. This is where creativity comes into play.
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Experience-driven Marketing: Gen Z is drawn to brands that offer more than just a product — they crave experiences that tie into their values. Whether it’s exclusive VIP experiences, interactive pop-up events, or collaborations with their favourite influencers, luxury brands need to get creative in how they engage this audience.
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Collaborations and Creative Partnerships: One powerful tool to capture Gen Z’s attention is through creative partnerships. However, not all partnerships will work. Gen Z is hyper-aware of authenticity and will quickly dismiss collaborations that feel forced or out of place. The secret is to align partnerships with brands, influencers, and causes that genuinely connect with the values of this generation.
Thomaï Serdari, a luxury marketing professor at NYU, pointed out that brands should embrace partnerships that resonate with Gen Z’s love of sports, sustainability, and inclusivity. But brands must be careful not to lose their identity in the process.
The Secondhand Luxury Boom
If there’s one area where Gen Z has already demonstrated its commitment to luxury, it’s the secondhand market. In 2023, the secondhand luxury market reached an estimated value of $47 billion, according to Bain. Platforms like The RealReal have become the go-to places for young shoppers looking for luxury goods at a more affordable price. This booming market satisfies Gen Z’s desire for both affordable luxury and sustainability.
Many Gen Z consumers view buying secondhand as an opportunity to access luxury brands without the hefty price tag, and they enjoy the thrill of collecting limited-edition items.
Interestingly, experts argue that secondhand luxury doesn’t cannibalise primary sales. Blanca Zugaza Escribano, a fashion and luxury consultant, stated that the wealthy, Very Important Customers (VICs), would never turn to secondhand options, especially for high-demand items like Hermès Birkin handbags.
Instead, secondhand luxury opens up a new entry point for Gen Z consumers who aspire to own high-end products. In fact, brands that align themselves with the secondhand market may find a way to stay relevant to younger buyers while maintaining their appeal to high-net-worth individuals.
How Brands Can Reconnect with Gen Z
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Develop Affordable Product Lines: By offering lower-priced items like beauty products, fragrances, and accessories, luxury brands can attract aspirational buyers while ensuring they stay within reach of the future wealthy elite.
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Embrace Creative Collaborations: Partner with influencers, brands, or even artists who resonate with Gen Z’s interests. Authenticity is key. Gen Z can smell inauthenticity from a mile away, and they won’t hesitate to call it out.
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Tap Into Secondhand Markets: Collaborating with resale platforms or launching your own pre-loved lines can create an accessible entry point for younger shoppers while maintaining the brand’s exclusivity and allure.
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Focus on Experiences: Gen Z values experiences over material goods. Hosting exclusive events, engaging with immersive digital campaigns, and promoting brand loyalty through creative, memorable experiences can help you build long-lasting connections with this generation.
Conclusion
Gen Z represents a vast untapped market that luxury brands cannot afford to ignore. By shifting their strategies to focus on affordable luxury, creative partnerships, and the secondhand market, luxury brands can foster a new generation of loyal customers. Now is the time for brands to meet Gen Z where they are, creating emotional connections through products and experiences that resonate with their values of sustainability, authenticity, and inclusivity.
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