The younger generation will be key for the luxury industry in the next decade as it enters a “new normal” characterised by lower growth, new research shows.
To find success, brands will need to refocus on their customers to better anticipate and cater to their needs, according to US global consulting company Bain & Company, which ran the research for luxury fashion e-commerce group Farfetch.
The research estimates that millennials will represent 40 per cent of the global personal luxury goods market by 2025, and the characteristics of millennial behaviour are already seeping through to older generations, which accounted for 73 per cent of luxury purchases last year.
The resultant “millennial state of mind” is characterised by three main traits:
- Uneasiness. Digital interaction with peers is rising when it comes to choosing a product.
- Urgency. “I want it fast, and I want it now.” The time to make a purchase is shrinking, with younger customers taking a third less time than older customers to make decisions.
- Uniqueness. Consumers now expect brands to align with their personal values and passions.
Online interactions are now influencing 70 per cent of luxury purchases, which means at least one digital interaction has taken place with the brand or the product before those purchases.
For consumers between 18 and 24 years old, 14 per cent make their first luxury purchase online, and digital traffic to websites of luxury brands is double the number of store visits.
By 2025, says the research, online and monobrand stores will become the two largest channels for luxury sales, each accounting for 25 per cent.
Bain & Company believes that stores will continue to play a critical role in the luxury market, accounting for 75 per cent of purchases by 2025.
Asian consumers will continue to account for more than half of the luxury market, with generation Y (millennials) and generation Z accounting for 45 per cent.
Headquartered in Boston, Bain & Company has 55 offices in 36 countries.
Farfetch partners with luxury boutiques and brands and was founded in 2008 by Portuguese entrepreneur José Neves. Its online platform is in nine languages, the company has offices in 11 cities globally and it express ships items to more than 190 countries.