Luxury is no longer a sector associated with older people, according to a recent market research study presented by Bain & Company at the Worldwide Market Monitor during Osservatorio Altagamma. The yearly event provides in-depth analysis on the sector, delivering an up-to-date snapshot of the health of the global luxury market.
The results are very encouraging, with the high-end luxury personal goods sector leaving the spectre of the crisis behind and showing clear signs of recovery, to the extent that it is set to end 2017 with 5% growth on the previous year, reaching overall turnover of €262bn.
Yet the most interesting and promising piece of news pointing to a bright future is that the recovery has been almost entirely driven by millennials.
Millennials represent a group of young consumers under the age of 40 who – up until a few years ago – were gripped with worry as a result of the economic crisis. The recession has been a part of their lives ever since they entered the world of work, throwing up obstacles for their professional development and economic wellbeing.
However, millennials have proven they can overcome the adversity of the global financial system, bucking the trend to become the main target audience for luxury brands. Indeed, according to research, millennials account for 80% of all purchases in the luxury sector.
This generational shift has (almost) definitively condemned the Baby Boomers era to the archives. Now is the time of the millennials: the market is changing the rules for them and revolutionised long-held production, distributions and communication habits.
It’s unthinkable for a contemporary luxury brand not to adapt to fit the needs of their new clients. The alternative is becoming yesterday’s news.
On the contrary, companies that have picked up on the desires and behaviour of the new target market and reorganised their operations accordingly can now start to reap the rewards of their strategies and aim for even greater future growth.
So what are the challenges for 2018?
According to data from the Altagamma Consensus, the best-performing sectors of the luxury personal goods market will be clothing and cosmetics, with 4% growth forecast, jewellery and watches, set to grow by 5%, and leather goods, which are expected to shoot up by 7%.
As in 2017, a multi-channel approach is set to be the best way of engaging customers during their consumer journey and seize each and every opportunity, without worrying about cannibalisation. Among the best-performing distribution channels is online – whose irresistible growth is set to continue with a further 24% increase – while airports and outlets are both expected to grow by 12%.
On a global level, Asia will see a luxury sales boom of 10%, thanks mainly to the China’s love of purchasing luxury personal goods, with the Chinese market alone generating 30% of revenue in Asia.
As in the fashion sector, where the design process for a collection begins nearly two years before consumers find the products in stores, it’s already time to start working on target trends for the upcoming seasons in the luxury market.
In other words, Generation Z is just around the corner – and the luxury sector needs to start keeping a very close eye on it.