A new analysis has shown that luxury shoppers are becoming wealthier and younger, with purchases by some of the youngest consumers expected to climb three times faster than older generations over the next decade.
“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, a management and consulting company, per CNBC.
They have estimated that "global sales of personal luxury goods sales surged 22% in 2022, to 353 billion euros, or roughly $381 billion.”
Nationally, the United States faced a 25% sales increase and overall sales of roughly $121 billion, reclaiming the top spot for luxury sales in 2022, exceeding China.
“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 states.
Social media is a significant factor in the success of luxury brands. Platforms have the ability to inform users about what is trendy and cool to own.
“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.” said Jan Rogers Kniffen, the CEO of retail consulting firm J Rogers Kniffen WWE, per CNBC.
So, we can expect luxury shoppers to become younger and younger because of social media. But, with the growth of customers shopping at large luxurious brands, what can we expect of small businesses?
The development of big businesses can damage small-business viability. Big businesses have the resources, funding, and materials to hire promotion researchers and product designers, causing them to dominate the market. This leaves small businesses to trail behind big businesses due to their lack of advantages.
Europe observed a 27% growth in luxury sales, an increase that is partially due to American tourists purchasing luxury brand products overseas in Europe on summer trips. Not only are Americans neglecting small businesses in the states, but also increasing the sales of other nations.
Amrita Banta, managing director of Agility Research & Strategy, which specializes in affluent consumers, claims that since the 2008 recession, high net-worth customers now feel less guilty about spending during a downturn and "feel entitled to spend their income."
Social media has been tangled into the attraction of having luxury products– specifically targeting younger age groups who are prominently active on social media platforms such as TikTok and Instagram. With name brands in style, small businesses are slowly losing importance as sales begin to stoop lower than ever.
Luxury brands are taking advantage of these increasing sales and growing popularity by pricing their best seller products at higher prices, too. For instance, the Chanel small Classic Flap bag is currently valued more than 60% higher than before the COVID pandemic.
TikTok places luxury brands in the epicenter of trends, making their brand significant to new audiences and connecting them with a highly engaged global community. Brands have the popularity and resources to collaborate with influencers and complete paid campaigns. Brands such as Fenty Beauty, Gucci, Louis Vuitton, and many more have begun using social media platforms such as TikTok as a primary marketing strategy.
Small businesses need to work harder and smarter in order to compete with luxury name brands. Producing a niche is one of the best small business techniques. Being as detail-oriented as possible makes it simpler for small businesses to discover potential clients.
It is also essential that small businesses adapt rapidly and efficiently– whether that be adapting to feedback or new online trends. Being flexible is a profound lead over larger businesses that are more inflexible and require many steps to create modifications to products or services.
Small businesses have advantages large businesses do not, such as access to the local community allowing them to concentrate on a more focused set of consumers. Shaping a product or service while taking the beliefs, interests, and backgrounds of consumers into account is a powerful technique. Use these exclusive resources to your brand's advantage in ways that larger corporations cannot.
As we assess the market dominance of younger age groups, it can be noted that hiring a local college student as a brand ambassador or social media manager is an effective method to capitalize on. Not only does your business have a new set of eyes for marketing, but can stay up to date with current trends.
By taking a look at the faults and mistakes areas of luxury brands where errors were made, small businesses can use these flaws to their advantage. Many large businesses have faced negative and unfavorable feedback on issues such as sustainability, eco-friendliness, and inclusive product purchases. Small businesses should keep in mind where large businesses struggle, increasing product diversity and promoting environmental friendliness to compete.
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