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Luxury shoppers are getting wealthier and younger, with purchases by some of the newest consumers expected to grow three times faster than older generations over the next decade, according to a new report.
Generation Y, also known as millennials, and Generation Z accounted for all of the luxury market’s growth last year, according to a report from Bain & Co. Spending by Gen Z and the even younger Generation Alpha, or those under 13, is expected to make up a third of the luxury market through 2030, reflecting “a more precocious attitude toward luxury” among the younger ranks than older generations, the report said.
Gen Z consumers are starting to buy luxury goods — everything from designer handbags and shoes, to watches, jewelry, apparel and beauty products — at age 15, three to five years earlier than millennials did, the report said.
“By 2030, younger generations (Generations Y, Z, and Alpha) will become the biggest buyers of luxury by far, representing 80% of global purchases,” it said.
Luxury sales have so far been largely immune to rising interest rates, a slowing economy and high inflation. Bain estimates that global sales of personal luxury goods sales surged 22% in 2022, to 353 billion euros, or roughly $381 billion.
This year, luxury sales are expected to grow between 3% and 8%, depending on China’s recovery and the economies in the U.S. and Europe.
The U.S. regained the top spot for luxury sales in 2022, surpassing China, with 25% sales growth and total sales of 113 billion euros, or about $121 billion. China’s luxury sales dropped 1% due largely to Covid lockdowns. Europe also saw strong growth, at 27%, helped in large part by American tourists spending on luxury goods in Europe over the summer.
Accessories, led by handbags, led the growth in 2022 and are expected to continue driving luxury goods sales in the coming years.
Sales of leather goods soared 23% to 25% last year, and were up over 40% from pre-Covid levels. While new models and “hero products” accounted for some of that growth, the biggest driver of growth came from price increases — such as the Chanel small Classic Flap bag, which is now priced over 60% higher than before the pandemic. Bain estimates that 70% of sales growth in leather goods in 2022 came from price increases.
Analysts and luxury executives say the appeal of luxury brands to ever-younger consumers is tied to a surge in wealth creation over the past few years, along with social media.
“What has changed is the affluence level of the U.S. customer, and the prevalence of social media that tells the customer what is cool, ” said Jan Rogers Kniffen, CEO of retail consulting firm J Rogers Kniffen WWE. “The generation before the Z’s pushed the age of first luxury purchase to 18 to 20. Wasn’t 15 to 17 the next logical stop? Is that the bottom? Probably not.”
Buying luxury shoes and handbags online has become much more accessible in recent years as luxury companies have embraced online sales and a host of secondhand luxury good websites have emerged.
Bain said Web 3.0, including the metaverse and NFTs — a type of digital asset called nonfungible tokens — will help future luxury sales to younger consumers even further.