The luxury industry is witnessing a ‘nouvelle vague’ – or ‘new wave’ – according to the latest Bain & Company and Altagamma Luxury Study, a collaboration between Bain & Company and Fondazione Altagamma, the trade association of Italian luxury goods manufacturers’ industry association. 

The study notes that the global luxury goods market took a leap forward in 2022 and is poised for further expansion this year and for the rest of the decade to 2030, even in the face of economic turbulence. It also says that a powerful factor for sector growth this decade will be generational trends. Generation Y (millennials) and Generation Z accounted for all of the market’s growth in 2022. 

The spending of Gen Z and the even younger Generation Alpha is set to grow three-times faster than other generations’ through 2030, making up a third of the market. This reflects a more precocious attitude towards luxury, with Gen Z consumers starting to buy luxury items some three-to-five years earlier than millennials did (at 15 vs. at 18–20). Gen Alpha is expected to behave in a similar way.

As a generation with increased digital engagement and higher sensitivity to ethics and sustainability around social causes and climate change, Gen Z is changing the face of luxury. The report also indicates that India stands out among the rising stars and is expected to see a three-and-a-half-times increase in its luxury market by 2030. This growth is likely because of young consumers’ interest, evolved behaviour and attitude towards luxury goods.

Quest for Omnichannel 3.0

While e-commerce in the luxury sector has not traditionally been a preferred distribution channel, Gen Z’s penchant for digital technology and social media may change that. According to the Bain and Altagamma report, online retail grew to 21% of the luxury market in 2022, up from 12% in 2019. It is expected to reach between 32% and 34% by 2030, only marginally higher than the mono-brand channel. 

In our contemporary times, the future of luxury may lie in the successful and seamless integration of online and offline interactions, with ‘Omnichannel 3.0’ as the strategy optimising the consumer experience. In addition to brick and mortar stores, luxury brands are increasing their presence through in-house and third-party digital platforms.

Atlas of Affluence, India’s first white paper on luxury launched in 2022, indicates that 39% of Gen Z chose digital for their shopping experiences, accounting for the highest number of shoppers online. However, in India, physical stores are the prevailing mode for luxury consumers in the country, with 83% preferring shopping offline.

According to a 2019 Bloomberg report, Gen Z makes up 32% of the global population, with India’s Gen Z at 472 million, a number suggesting that online luxury retail activity is expected to increase in the country. With Covid-19 acting as a catalyst, several Indian luxury fashion designers have successfully embraced the digital ecosystem. For instance, designer Gaurav Gupta reportedly saw a 20% jump in overall sales within a month of launching its website in September 2020, compared to in-store only sales.

Other Indian designers such as Rahul Mishra and Manish Malhotra, among others, are adopting digital innovation as well: Malhotra, for example, was the first Indian designer to create a virtual store.

Mental health not a stigma

Some polls report that Gen Z’s average screen time is more than nine hours per day. Access to content for them – useful or harmful – is higher than for any other generation. With pros and cons associated with excessive screen-time use, according to a 2022 survey by YPulse, mental health is one of the most important issues for this generation. So much so that there is an interesting trend with the resurgence of ‘dumb phones’ aimed at limiting screen time. Emerging movements such as the Luddite Club, a group of teenagers in New York who swapped smartphones with dumb phones in 2022, are contributing to the awareness of mental health associated with social media and screen time.

While data on Gen Z’s shift to dumb phones in India is not available, a MediaPeanut poll reported that 34% of 3,200 people surveyed moved to flip phones for a distraction-free environment. While online distribution channels are predicted to increase, a growing awareness of device addiction is also on the rise. It is an interesting trend for brands to watch as they will have to carefully balance their strategies to align with both Gen Z’s woke consumption habits and their desire for conscious use of technology.

In addition, Gen Z’s increasing focus on values and social causes is also critical in understanding their brand preferences. According to Merkle’s Next Generation of Consumer Behaviour Report, around 83% of Gen Z expect brands to address social issues. Nike’s ‘Dream Crazy’ campaign featuring former NFL quarterback Colin Kaepernick (who kneeled during the national anthem to send a message against police brutality), and Nike’s use of the slogan ‘Believe in something. Even if it means sacrificing everything. Just do it.’, strongly resonated with the Gen Z and millennial audience, according to Ace Metrix, a company supplying data analysis on video advertisements.

While brands are increasingly looking at cause-based marketing, not all emotional marketing strategies prove successful. For instance, Tiffany & Co. received backlash for its ‘Not Your Mother’s Tiffany’ campaign. With an intention to engage a younger audience, the campaign backfired and their followers felt that it disrespected mothers.

Green is the new black

A wave of sustainability has also taken root among Gen Z, which is one of the reasons brands have reviewed their strategies for reducing carbon footprints and increasing supply chain transparency among other green trends. In fact, 70% of Gen Z’s are willing to buy products from brands who stand up for social and environmental causes, according to India’s Gen Z Report 2022 by the Havas Group. Being environmentally conscious, brands like Armani have banned the use of angora wool as part of its fur-free policy, which has been a successful means of attracting these young consumers.

To appeal to this segment, brands are facing the challenge of appearing green, which has led to increased instances of greenwashing. To address the issue, countries around the world are introducing guidelines and rules aimed at curbing these types of marketing gimmicks. While it is important for a brand to go green, this new generation prefers honest and authentic information on a brand’s effort to be sustainable over false claims.

The road ahead

Gen Z is drastically transforming the face of luxury, pushing brands to create new, dynamic and unconventional ways to revolutionise the industry and keep up with changing times. From focus on sustainable products, to transparency in supply chains and a cashless economy, Gen Z also seems to be altering the face of luxury in India. Brand strategy will need to resonate with this consumer base, even if that means going down a non-traditional path.

As luxury trends change and grow, the world is watching how the landscape will further cater to Gen Z’s influence and buying power.  

Remfry & Sagar Managing Associate Radha Khera is an intellectual property, media and fashion lawyer with more than a decade of experience. She is a trained fashion lawyer, having completed her second-level masters in fashion law from Luiss Guido Carli in Rome. Radha is on the editorial board of the Fashion Law Journal and a legal researcher at the Thinking Watermill Society, an Italian non-profit organisation. She can be reached at [email protected].