by Shin Tsumoto
As an idea, luxury is hard to define. It’s nebulous , subjective, and highly emotional. In the past, luxury was simply a notion of exclusivity driven largely by rarity and price which imparted a sense of status and privilege. Although people have expressed and experienced luxury in many different ways throughout history, there has perhaps never been a time of such diverse and nuanced definitions of luxury as today. While every generation develops its own set of values, attitudes, experiences which reflect and are reflected in luxury, Millennials are challenging the definition of luxury more than ever before.
In the coming years Millennials will grow to wield a considerable amount of economic power. According to US Census estimates, the Millennial (18 to 34 year old) demographic makes up roughly one quarter of the US population. These 83.1 million consumers are forecast to have an annual spending power of $1.4 trillion by 2021 as they reach their peak earnings potential. As a result, Millennials are an essential target audience for luxury brands.
About Our Study
We set out to answer one seemingly simple question, “What does luxury mean to you?” We interviewed, surveyed, and focus grouped Millennials across the US and learned that luxury is a highly complex and multifaceted concept to this generation. It includes everything from exotic cars, and lavish vacations, to craft beer, smart watches, and even their daily Starbucks coffee. Luxury has departed from the simple acquisition of rare products, and emerged as an emotionally-driven mindset.
What We Learned
By examining Millennial attitudes, shopping behaviors, and desires surrounding luxury, we discovered 7 unique luxury categories.
Status Luxury: This Luxury is all about projecting an image of success, achievement, power, and wealth. These external, and arguably superficial, needs are what most would associate with the ‘traditional’ definition of luxury.
Indulgent Luxury: This type of luxury centers around self-reward and hedonistic gratification highlighted by extravagance and impulsiveness. Celebrating special occasions, pampering, and escape are some of the needs that driver consumption of this type of luxury.
Timeless Luxury: Timeless Luxury offers Millennials feelings of quality, durability, authenticity, and longevity and speaks to the underlying desire for something that transcends one’s own lifetime.
Identity Luxury: Largely driven by internal motivations, Identity Luxury helps Millennials build, explore, and express their identities through the luxury brands they buy. This type of luxury also has a strong social component which is about fitting in rather than standing out.
Artisanal Luxury: Artisanal Luxury is about the artistry and specialized knowledge/skill embedded into luxury. This type of luxury is seen as having a rich backstory and heritage that further highlights its craftsmanship.
Experiential Luxury: Experiential Luxury energizes through adventure, freedom, and exploration. A hallmark of this type of luxury is that it gives Millennials the feeling of enriching their lives. This type of luxury transports them to new places and emotional spaces, it curates, guides, and educates.
Everyday Luxury: Millennials view Everyday Luxury as opportunities to treat themselves to the small indulgences on a regular basis. Luxury purchases of this type usually take the form of unique convenience, smart shopping, and upgrading a purchase.
What It Means for Brands
As the definition of luxury expands, it comes with a considerable shift in consumer expectations. Millennials want brands that engage, guide, educate, inspire, and provide unique life enhancing experiences.
This calls on marketers to understand the values that Millennials associate with luxury and how they interact with their particular product category. This shift has also given rise to ‘new’ product categories playing in this mindspace presenting major opportunities for both luxury and non-luxury brands.
With the tidal wave of Millennial buying power nearly here, building lasting relationships with them now is critical . Unlike prior generations, Millennials will want to play a larger role in product and brand co-creation. They want to be taken on a journey, have special access and unique experiences, and opportunities for them to learn and grow with your story.
For brands not traditionally considered luxury, this change represents a large opportunity to capture and delight a new audience. By knowing where they fit into the lives of Millennials and the type of luxury that they offer, these brands can legitimately extend into luxury with marketing tactics and messaging that elevate their brands and the experiences they offer.
The conclusion is clear. The $1.1 trillion a year luxury industry is experiencing an evolution and Millennials are the driving force. Their increased desires to have memorable and shareable experiences driven by the growing role of technology (and digital social norms that come with it) are reshaping not only the modern luxury industry but the very idea of what luxury means.