The rising influence of Millennials and Generation Z is driving seismic shifts in the ever-evolving world of luxury. According to the True-Luxury Global Consumer Insight 2023 report by BCG and The Altagamma Foundation, these younger generations are poised to reshape the industry, accounting for a staggering 75% of luxury purchases by 2026.
The report reveals that Millennials and Gen Z have rapidly ascended in the luxury market. In 2022, they commanded a staggering $1.18 share, a fourfold increase from 2016. This number is projected to triple by 2026. Their penchant for luxury spending, which surpasses previous age groups by 15%, is catalyzing the sector's growth.
The emergence of resale and rental markets for luxury goods is another fascinating aspect of this transformation. Increasingly, younger consumers are opting for second-hand luxury purchases and rentals, redefining traditional ownership. A remarkable 35% of Millennials and Gen Z have embraced second-hand luxury items, while 26% have engaged in luxury rentals. This trend underscores their desire for luxury experiences without the permanence of ownership.
Although the demand for luxury remains steadfast, customer expectations in the digital realm pose challenges. A notable finding of the report is that luxury brands have yet to replicate the in-store ambiance online, leading to dissatisfaction among consumers. Particularly in Europe and among Gen Z, a "digital disconnect" is apparent, with 20% of young individuals expressing discomfort with online shopping. Bridging this gap necessitates innovative strategies that cater to the digital-native audience.
BCG's Jol Hazan underscores the potential of cutting-edge technologies such as generative AI and Web3 in revolutionizing the luxury sector's approach. These tools can create immersive, personalized experiences that resonate with diverse digital audiences. In China, where such technology is more advanced, online shopping satisfaction is notably higher, showcasing the potential of this approach. By harnessing these technologies, luxury brands can not only satisfy their youthful consumers but also create a significant competitive advantage.
While China and the U.S. are poised to lead the global luxury market, Saudi Arabia is emerging as a promising contender. Despite the challenges posed by the pandemic, the luxury goods market has rebounded and is projected to reach $1 trillion by 2026, growing at a steady rate of 6% annually from 2022 to 2026. Saudi Arabia, in particular, stands out, with luxury sales forecasted to quadruple from $3.54 Bn to $7.08 Bn between 2022 and 2030.