A.T. Kearney, Luxury

Gen Z and the Paradox of Luxury

A new generation of consumers challenges the old definition of luxury.

At its core, the luxury goods industry has always been defined by a simple paradox: its products—designed as a celebration of youth and beauty—are generally only accessible to customers “of a certain age” and relatively high income.

Perhaps it is the final irony of affluence in the 21st century, but it seems that today, as Gen Z’s buying power is about to increase, the luxury industry may be losing its historical ability to excite the imagination of successive generations of aspirational shoppers.

Gen Z consumers—those born between 1998 and 2016, and successors to the millennial generation—appear to be turning a deaf ear toward the traditional way luxury goods have been marketed and, perhaps more critically, on the assumptions of the industry that produces them and the values and culture that underpins many high-end brands.

For over two decades we have seen the ideas of global branding and a universal standard of beauty and fashion grow to the point that it’s hard to tell the affluent shopper from Shanghai or Dubai apart from his and her counterparts in New York City or Moscow. Beauty and glamour lost their local flavor and nuance as more and more shoppers embraced the idea of a new world standard for luxury and fashion.

Gen Z represents a break from the acceptance of this global standard of luxury as well as the multi-generational habit of equating shopping with status and self-worth. These new shoppers demand to be seen as unique, reject the very idea of universality in any activity, and demand to have their voices heard when it comes to brand identity and product development.

So the commercial issue is rapidly becoming how well luxury brands understand Gen Z and how they can communicate with a generation of shoppers apparently opposed to nearly everything they stand for.

As part of its Consumers@250 initiative, which looks at American life in 2026, A.T. Kearney conducted extensive research on Gen Z. This is a generation whose first members experienced childhood in the shadows of a global recession. The Digital Revolution was a fait accompli before the first Gen Zer was born. They assume that gay people should be allowed to marry, that gender identity is a matter of choice, and that the world owes refugees from the strife in the Middle East a safe harbor.

And, oh yes, there are a lot of them.

At its height, there will be 2.5 billion members of Gen Z scattered across the globe, 82 million of them in the United States, making them the largest generational cohort in American history.

What Do They Want?

Besides their impressive numbers, there are other solid business reasons luxury brands should study Gen Z. As the first generation in U.S. history where former “minority groups” will make up the majority of the population, they have a collective bias toward embracing diversity and defining beauty and glamour through a broad range of cultural filters. The idea of luxury being the exclusive properties of one culture, or one company for that matter, is totally foreign to them.

Gen Z also is fiscally conservative. As children of the Great Recession and its aftermath—a third of whom, by the way, are being raised by a single parent—they saw their parents, or parent, struggle with debt, often living in fear of losing their home or jobs. This leads them to take a measured approach to money, savings and spending.

Thirty-nine percent of Gen Z teens we surveyed reported to be working in addition to going to school. The money they earned is being saved or carefully spent. “Luxury brands annoy me,” one of our focus group members told us. “They are about “showing off.” That said, she added, “… but, I trust their quality. I am willing to spend on items that are high quality and that will last for a long time.”

So, while luxury goods may have a future with Gen Z shoppers, brands would be well advised to drop some of the perceived mystique of “exclusivity” and focus a bit more on other characteristics such as workmanship, quality and durability. And remember, not only do Gen Zers place a premium on authenticity, they also have a way of vetting brands .

Theirs is the first generation born after Google was incorporated. They have never known life without search engines, mobile phones or apps. Ninety-four percent report being “continuously connected,” using the internet for education as well as entertainment. Most are active in at least two social networks, preferring video and visual platforms, which helps explain why 65 percent are on Snapchat and 60 percent are on Instagram while less than half (49 percent) are on Facebook, the social media network of their parents and grandparents.

Gen Zers have mastered the art of creating multiple “curated selves”—more or less digital representations of themselves designed to suit a specific platform and moment in time. Whoever they are, or pretend to be, they shop online. Forty-nine percent say they have shopped for clothing online in the past 12 months and 75 percent indicate they scan consumer reviews before making a purchase.

They are scanning for values, not just value. Over half (54 percent) of Gen Zers indicate they regularly take a brand’s social stance and policies into account as part of their purchasing decision. And given their communal nature, some Gen Zers blossomed into social media stars whose blogs and posts enjoy staggering reach and carry previously unimaginable influence.

Capturing the Market

So, if you are a luxury goods company, how do you approach Gen Z?

Well, speaking their language is one thing, but nothing is as powerful as speaking to their values—especially inclusion. LVMH and Dolce & Gabbana have both launched ad campaigns targeting Gen Z’s post-racial, post-gender sensibilities.

Engagement matters. Luxury brands have always been good storytellers but now they will have to learn the art of leveraging co-created narratives. As digital communicators, Gen Zers are ill-cast in the role of awestruck audience. They want to talk back and add to conversations they can relate to. Stories must be localized, empathizing community values, like Burberry’s “Art of the Trench” campaign.

If your strategy is to wait for Gen Z to be old enough to afford high-priced luxury goods, maybe it’s better to rethink your approach. Forward-thinking luxury brands like Dolce & Gabbana are starting to give young Gen Z influencers seats in the front rows at their fashion shows. They are making a statement that D&G welcomes young people, using key Gen Z influencers to amplify the message. In another Burberry campaign, Brooklyn Beckham, an influential member of Gen Z, was given a camera and allowed to shoot his own fashion campaign. Gen Z likes to listen and hear from “people like themselves” and influencers help build that trust .

Much in the same way retailers targeting baby boomers marched to the mantra of “Location, Location, Location,” brands and retailers hoping to attract Gen Z’s shopping dollars must focus on, “Experience, Experience, Experience.” Gen Zers see experiences as an opportunity to create memories. Shopping—on or offline —is also an experience, a social activity to be shared.

End Game

Gen Z isn’t turning its collective back on luxury, but it will redefine it. In Gen Z terms, luxury is inclusive as opposed to exclusive and is freely shared, not controlled. Luxury is also personalized and not a reflection of some universal standards, Gen Zers disavow conspicuous consumption and are far less impulsive than boomers, Gen Xers, or millennials.

And finally, as we noted before, this is a generation for which values will always trump value and where the notion of value itself is redefined to focus on intrinsic, personalized meaning rather than extrinsic status seeking logos and brand awareness. Gen Z represents a high potential market for luxury brands and retailers, but it’s a potential that will only be realized on Gen Z’s own very specific terms.

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