The why-not attitude is driving the shopping habits of the younger generation, particularly Generation Z, those born between 1997 and 2012, who wears luxury on their sleeve without being apologetic about it.
“The younger cohorts have been one of the big drivers of the (luxury) industry in the last five years,” says Achim Berg, a senior partner at McKinsey and global leader of its apparel, fashion, and luxury group.
According to an estimate by Bain & Company, Gen Y (or millennials, those born between 1981 and 1996) and Gen Z will together make up 70% of the global luxury market by 2025.
Brands have started to take notice. “In the short and medium term, demand from Generations Y and Z remains one of the principal growth drivers for the global luxury market,” says Kering, which owns the brands Gucci, Balenciaga, Alexander McQueen and Saint Laurent, among others, in its 2022 annual report.
Against this backdrop, India — with 40% of its population under the age of 25 years — holds huge growth potential for the luxury market.In 2022 , Indians spent around $8 billion on luxury products, says Claudia D’Arpizio, senior partner and global head of fashion & luxury, Bain & Company.The luxury market in India has always been associated with special occasions, big events and jewellery, she says. “But now, there is probably an opportunity for everyday and casual wear (in the luxury category).”
A study coauthored by D’Arpizio estimates that India’s luxury market will grow by 3.5 times by 2030. “Among the rising stars, India stands out for growth potential, which could see its luxury market expand to 3.5 times today’s size by 2030, propelled by an increasing interest and evolving attitudes and behaviours among (young) customers towards luxury goods,” says the 21st edition of the Bain & CompanyAltagamma Luxury Study.
LUXURY MEETS STREETWEAR
In the luxe-hungry Gen Z land, there is trouble, too. As Gen Z has barely joined the workforce, its disposable income is limited. Singla, for instance, still depends on his family to make most of his luxury purchases. There is also the question of relevance of old brands.
The industry is trying to solve these problems. Companies are introducing more products at entry-level price points, collaborating with fast-fashion brands for exclusive collections and getting into newer product categories like sneakers and streetwear.
Fashion designer Manish Malhotra, who recently launched ‘Diffuse’ to target Gen Z, says his new line “hits the point between couture and streetwear that they (the younger generations) love”.
Berg of McKinsey agrees. “Combining luxury statement pieces with fast fashion is a big trend compared with 10-15 years ago.”
Hidesign, which has a luxury collection called Atelier Hidesign, says while 53% of its customer base is in the 25-35 age bracket, a significant 21% is Gen Z. “Although it comes to 16% of value, as they buy more wallets, within each category such as wallets, belts or bags, they don’t buy a product that is very cheap,” says Hidesign founder Dilip Kapur.
According to Akash Sheth, CEO of luxury event agency Magnanimous, the biggest change in the luxury landscape over the last five years is collaboration. “Five years ago, the luxury mantra was ‘we are for a chosen few’. It was all about being inaccessible beyond a certain point. In the last five years, things have drastically changed. I think it all started with collaborations. Whether it’s Louis Vuitton collaborating with Nike, or Gucci with The North Face, or Sabyasachi with H&M, the collaborative landscape has created an ecosystem where everything is a lot more inclusive,” says Sheth.
Since many of these Gen Zers have not moved out of their home, they can also influence their parents’ shopping habits. “That’s a key enabler for growth,” says D’Arpizio.
SUSTAINABILITY STORM
Marketing to Gen Zers is tricky as they are quite environmentally conscious, forcing brands to take concrete steps on sustainability. Many have stopped using fur and exotic animal skins, started recycling, revamped supply chains and declared clear carbonneutral goals apart from harping on the fact that luxury by definition is high quality and durable, which means longer life cycles.
“One key part of the sustainability mantra {is}: reduce, reuse, recycle. More than 90% of the gold used by Cartier is recycled. The luxury model of high value, high quality and durability can become the proxy for the global economy. Fewer but better and longer,” Cartier CEO Cyrille Vigneron wrote in a LinkedIn post late last year.
The target of LVMH (Moët Hennessy Louis Vuitton) is to have 100% of its products sustainably designed by 2030.
At the 2019 G7 meeting in France, 32 major global fashion companies signed a Kering-led Fashion Pact to achieve netzero carbon footprint by 2050.
“What we have seen over the last few years is that every brand is trying to be as mindful as possible. From a customer’s perspective, Gen Z is more aware that their buying patterns have to be conscious and mindful,” says Sheth.
Indian consumers reportedly watch their shopping habits more than their counterparts in developed markets. The Gen Z and millennial consumers in India are more likely to buy sustainable products than those living in developed countries, according to a 2022 Credit Suisse Research Institute report. Berg, however, says there’s a difference between intent and actual behaviour. “In market research, the stated intention is often we want to save the world. But if you look at actual consumer behaviour, it’s a bit more mixed. Sustainability definitely drives certain buying and consumption behaviours but if a certain item is hot and relevant, customers seem to be triggered to buy the item nonetheless.”
INFLUENCE OF INFLUENCERS
While luxury brands strive for Gen Z’s attention, they are wary of alienating the older customer base. The solution: targeted marketing using influencers.
Malhotra says social media has revolutionised marketing and promotion. “Influencer marketing is a new concept to me. Earlier, movie stars and films dictated trends. Now it’s influencers. They might not be the only way to connect with younger generations, but they are one of the most influential, if I may say so.” Hidesign’s Kapur agrees, “Influencers are a very important part of the Hidesign community. That most of them are Gen Z is a reason why sales to them have grown so much.”
Catching the customer young has never been this urgent for luxury brands.
