The Changing Face of Luxury

In recent years, the concept of luxury has gone through a profound transformation. Traditional markers of luxury—exclusivity, status, opulence, and conspicuous consumption—are being redefined to reflect evolving social values and shifting consumer priorities. This paradigm shift has given rise to what has been termed "New Luxury," a concept that evokes a more holistic, nuanced and hard to define approach to the luxury experience.

At its core, New Luxury represents a departure from the ostentatious displays of wealth that characterised the luxury landscape of the past. It is more understated, an idea of luxury that prioritises quality and craftsmanship, inclusivity, sustainability and community. In essence, New Luxury is less about status and prestige, and more about the story behind the product, the values it represents, and the experiences it enables—which all need to be authentic, and increasingly, personalised.

The rise of New Luxury is largely driven by the increasing spending power of Millennials and Gen Z, who currently represent up to forty-five per cent of the population. According to Bain & Co., Millennials, Gen Z and Gen Alpha (those born between 2010 and 2025) are expected to account for eighty per cent of global luxury spending by 2030.

These younger generations have played a significant role in driving the shift towards a more holistic and sustainable approach to luxury consumption. Millennials and Gen Z place a high value on authenticity, sustainability, and social responsibility, and they are more likely to support brands that align with their values. According to a survey by McKinsey & Co., nearly seventy per cent of luxury consumers under the age of forty-five support brands that have a strong social or environmental commitment.

Product transparency is becoming a table stakes requirement, not just driven by regulation, but also because of customer demand. Millennials and Gen Z are savvy and sceptical customers. Their demand for transparency is not just to ensure product quality and craftsmanship, but also to verify that sustainability claims are not just greenwashing.

There has been an explosion of collaborations forged to appeal to these younger generations, and their social values. Luxury brands are partnering with galleries, museums, local artisans, and high street brands in an effort to reach a more diverse group of customers. Brands however need to tread carefully, although many of these collaborations can be successful, the effects can be short-lived, or even damaging.

At the intersection of luxury and sustainability, we are also seeing huge growth in circular business models—everything from resale, recycled, rental, repair and refill. Bain & Co reports that 49.3 billion dollars (or 45 billion euros) worth of second-hand luxury products were sold in 2023, a market that is expected to outperform overall luxury growth in the coming years. This growth is largely fuelled by Millennials and Gen Z, forty per cent of whom already buy second-hand. With the continued price increases in the luxury market, and the emergence of more options to buy circular, this trend will only accelerate.

But where and how do these New Luxury customers shop? There is no doubt that digital plays an essential part of every step in their purchase journey—from social media for inspiration, search engines to research specific products, marketplaces or multi-brand sites to purchase from places they trust, or mono-brand sites to engage more deeply with the brands they’ve discovered. They also expect personalised content, are more trusting of algorithms’ suggestions, and are more comfortable with digital over physical interaction. Although they prefer shopping online, Millennials and Gen Z still value physical spaces to discover new products, try things on, experience a brand more deeply, and enjoy a day out with friends and family. The key is for the experience to be connected physically and digitally.

Indeed, experience is valued by these younger customers, who are more likely to spend on travel, dining, and wellness, than they are on goods. A study by Eventbrite showed that seventy-eight per cent of Millennial respondents would rather spend money on an experience, than a material thing. And a study by Hilton and IPSOS shows that sixty-four per cent of global travellers aim to cut other areas of their personal spending to prioritise leisure travel, with Gen Z and Millennials leading the trend. This demonstrates the values younger customers put on creating lasting memories, reporting that they are “more fulfilled by live experiences than purchasing an item of the same value.” What therefore does this mean for what and how you sell to this customer group. 

Every company everywhere has been affected by the emerging motivations and habits of Millennials and Gen Z, and they will continue to influence and redefine luxury. In fact, other generations are already embracing these same values, seeing them as a force for good. But New Luxury is not a monolith, and it is not static, the nuances between Millennials, Gen Z and Gen Alpha mean the definition of New Luxury will continue to evolve apace. Companies require the ability to anticipate and adapt on an ongoing basis—change is now the only constant. 

So, what happens when you have a legacy business or brand DNA that embodies ‘traditional luxury’? How can you evolve your business to imbibe the values of New Luxury without alienating your loyal customer base? Many companies are reluctant to take the risk of fully embracing this new customer group. Some are executing parallel high-low strategies that are often not serving either customer group well, and sending a confused brand message. Questions that tend to arise when grappling with this challenge are:

·      How do we serve the emerging savvy consumer who likes the freedom to explore brands on their own while at the same time not alienate our long-standing mature customers who prefer to be handheld through a purchase journey?

·      If we appeal to a different demographic group, do we risk pigeon-holing ourselves and not appealing to other groups?

·      What if our brand DNA is about the traditional features of luxury, which has kept us successful over the past 100 years—exclusive, opulent, brand status, iconic products. Should we embrace New Luxury, and if so, where do we begin, and how can we be authentic about it?

·      Given the global luxury slowdown and the buckling down of aspirational luxury shoppers, does it still make sense to address these shoppers, or should we focus our efforts on the ultra-luxury segment that seems to be immune to the slowdown?

·      We’ve done many activations that appeal to the younger generations, but somehow it doesn’t create a lasting relationship with these often fickle-minded customers. What can we do differently?

There is no one size fits all solution, it will largely depend on your current brand DNA, vision and purpose, your existing relationship with your customers, your current strategic priorities, your operational rhythm, your organisational capabilities and your team culture. What’s clear is that, regardless of your starting point, superficial tactics and marketing campaigns are not enough. A creative edge and imaginative thinking are what enables a company to remain relevant to their customers, whoever they are. To discover more about how creativity can, and should be, at the heart of any business see ‘The Power of 360 Creativity’.

Businesses need to adopt a holistic approach that starts with deep listening, is centred around radical creativity and relentless curiosity, and is driven by experience, imagination, and future thinking. It is not enough to change your business strategy, companies must change their mindset and culture in order to navigate the challenges and embrace the opportunities ahead.