The luxury market and the high-profile brands captured within it face a new generation of shoppers. These buyers are exiting a years-long pandemic and face red hot inflation with an unclear end. They are expected to continue to curb spending on "aspirational" purchases, favoring frugality.
As Forbes reported in May, the personal luxury market has faced a roller coaster of challenges and successes in recent years. The market saw a worldwide high of $307 billion in 2019 sales. It was then hit by an unprecedented pandemic, watching COVID-19 lockdowns and other unforeseen factors cause the sector to plunge an incredible 22% during the pandemic's height in 2020. The year after that, astonishingly, it was back to supporting luxury brands, with most people settling into their work-from-home lives, shopping online while saving on takeaway lunches, and commuting costs associated with office life.
The industry saw a rebound last year, reaching $309 billion, Bain reported. But, as industry leaders look at the longer outlook, that could all have been a fluke.
For Gen Z, faced with a future of student loans, possible sustained inflation, and unattainable purchasing power, for many, amid fast-rising home prices and interest rates that could maintain their highs: The prospect of buying a $700 t-shirt as a sign of success is becoming evermore unlikely.
The luxury sector is worried about these financially stretched Gen Z consumers, and how they will sell those "aspirational" products to them, Reuters reported.
Kenneth Chow, director of consulting firm Oliver Wyman, said, “In the U.S., inflation is a big problem, the focus of many luxury companies…in China, it’s youth unemployment that’s alarming right now.”
Internationally, government data over the summer signaled a concerning outlook, with the unemployment rate among Chinese city dwellers aged 16-24 at an astonishing record 19.9%. And if global sales for luxury brands are affected, that could most certainly mean domestic worries for all international labels.
Claudia D’Arpizio, a partner with Bain, said, “There’s this young group of consumers entering the market that requires a lot of creativity at more affordable prices.”
In 2021, a call held by speakers for the Business of Fashion noted that Gen Z is expected to account for 40 percentof the international luxury goods market by 2035.
By a Bain and Company estimate, millennials and Gen Z will hold 130 percent of the purchasing power in the sector, controlling that chuck of its market growth from 2021 until 2025.