How Gen Z is re-shaping luxury fashion.
“By the end of the month, Dolce & Gabbana is looking to introduce a crypto community and an NFT collection of virtual jewel boxes.” says Shashi Menon, founder of UNXD; a curated AR marketplace for digital luxury and culture. Her platform just auctioned a digital clothing collection produced by Dolce & Gabbana that sold for six-million dollars.
Marketed as “gems that can’t quite be found on Earth”, consumers shell out hundreds and thousands of pounds to outfit their avatars with the latest clothes and accessories that may never be worn in the real world. This dystopian parody of Ready Player One marks the new forefront of the luxury fashion landscape. An industry that typically has stuck with traditional advertising for older audiences with heavy pockets.
Gen Z’s spending habits will shape how luxury goods and experiences will look in years to come.
The changing consumer
So, what has driven this new shift in direction? Over the pandemic, luxury brands understood the importance of accelerating their digital transition, enticing a new generation of younger, digitally savvy luxury shoppers.
These younger audiences turning high-end isn’t anything new, however. Despite being a demographic luxury brands have historically ignored, influential personas on social media channels flaunting luxury attire have presented the sector to younger audiences as relatable and accessible.
Millennials and Gen Z will make up 50% of the total luxury market by 2025. Eyeing the opportunity, luxury brands are increasingly seeking the favour of Gen Z consumers, tapping into new digital channels, and experimenting with concepts like The Metaverse and other digitalised marketplaces.
Catering for the future
Appropriately titled ‘the consumers of the future’, Gen Z’s spending habits will shape how luxury goods and experiences will look in years to come. These younger consumers support companies whose ideals line up with their own – be it lowering carbon footprints, committing to innovation, or standing up for equal rights. And this audience are willing to put their money where their mouth is when it comes to ethical values, with 73% willing to spend more on sustainable products.
Consequently, big names in luxury have begun adapting their core values, incorporating CSR into their image, and communicating this with consumers. Heritage brand Stella McCartney, for example, has become a recognised campaigner for ethical fashion, eschewing leather and pioneering new biomaterials.
In the last six months, however, Gen Z purchase behaviour has shifted toward buying luxury products through department stores, instead of directly from brands. As wholesalers are better positioned to provide discounted prices on luxury goods, this has opened the doors for brands younger audiences previously rejected because of the price tags.
Price cuts: a blessing in disguise?
The influx of department store visits has acted as an intermediary for young consumers to discover new brands that share their values. Offering a limited selection of garments in-store, shoppers will likely move to the brand’s shop and become loyal customers.
Off the back of this, Gen Z’s future consideration of luxury products has increased. Fragrance and cosmetics brands, followed closely by eyewear, saw the most growth in this metric in the last six months.
Luxury fragrances and cosmetics also witnessed the most significant increase in Brand Love from Gen Z over the same period (3%). Fragrance purchases are often how younger consumers become invested in a brand’s heritage, prestige fragrance houses, Guerlain, Chanel, Dior, and YSL have each drawn on sustainability initiatives to increase their appeal to these consumers.
Notably, younger audiences’ decisions are increasingly informed by ethical values and principles. A previous study by YouthSight, now part of Savanta, found the percentage of Gen Z who most valued brands being ‘Ethical’ has increased by 9% since August 2019, compared to being ‘On trend/fashionable’ which has declined from 11% in 2019 to only 2% in 2021.
Younger audiences converted into customers in their early twenties can cultivate into loyal higher-spending customers for the next twenty to thirty years. As such, this formerly untapped market can become increasingly profitable for premium brands and retailers.
The luxury brands that can effectively understand, embrace, and communicate values such as sustainability and innovation, rather than rely on symbolising status, will stand the best chance of building lasting relationships with this promising audience.