Generations Y and Z are rewriting the rules of the luxury market, according to a report released on Wednesday by the consulting firm Bain & Co.
The global luxury market, encompassing goods and luxury experiences, is forecast to grow by 5 percent this year to an estimated 1.2 trillion euros, or $1.4 trillion, according to the study, compiled using market data and interviews with people in the industry.
But while older shoppers traditionally have driven the growth of sales in the luxury sector, this time it was shoppers born after 1980 who made the difference.
Generation Y provided 30 percent of all spending and, together with Generation Z (born between 1995 and 2010), generated 85 percent of the luxury growth in the last 12 months, said Claudia D'Arpizio, a partner at Bain who specializes in the luxury and fashion industries.
"This power shift between generations, away from the baby boomers towards younger shoppers, means the latter are now the growth engine of the market in every region globally," she said in an interview. "In order to recover following the downturn, brands had to strategically reposition themselves towards this new demographic and their state of mind and distinct product and shopping tastes. But what has proven particularly interesting is how those habits and preferences are now shaping those of other generations, too."
Key to success with younger consumers have been efforts by brand to develop engaging content for digital platforms like Instagram and Snapchat, so they and their creative directors can connect with fans multiple times a day. Heavy investment also has gone into luxury streetwear, like sneakers, sliders (bedroom slipper-like shoes) and down jackets, with some brands showing double-digit sales growth across those product categories.