Modern Luxury: New Consumers, New Values.
The modern luxury era isn’t only about brands, it’s just as much about the consumers that propel them too. But how are shoppers different from just ten years ago?
The luxury industry is facing an unprecedented transitional phase. Well-known luxury brands struggle to retain their traditional consumers — who are either aging or who are now opting for luxury experiences over luxury goods — and they’re struggling even more to attract younger consumers. That last part is a major bone of contention: Indeed the most frustrating thing for big luxury groups right now is to know that the demand for luxury goods and services among young consumers exists — and yet, they’re unable to grasp it.
But who are these modern luxury consumers, and most importantly, what values drive them? A good starting point is to understand the motives of young affluents (a core group for modern luxury companies) by consulting the work of luxury expert, Pamela Danziger. In a recent study, she categorized a segment of modern luxury consumers called High-Earners-Not-Rich-Yet (or HENRYs). Occupying the top 20th percentile of affluent households and having a spending power twice as large as the average middle class american, HENRYs’ annual incomes range between $100,000 and $250,000. Although ultra-net worth individuals have a much higher spending power than HENRYs, they can’t support an entire industry and only represent the top two to three percent of American households. Thus, they can’t rival with the HENRYs who represent nearly 24.3 million households.
Beyond numbers, HENRYs split from previous generations of affluent consumers, thanks to a unique set of values. Quoting Danziger, young affluent shoppers are “looking for brands that communicate who one is and what one values.” More precisely, there are recurring thematic narratives luxury brands should look to if they want to tap into the HENRYs crowd. One of these themes deals with performance. Young affluents are hyper-connected and keenly aware of the plethora of choices available to them. If they are to pay premium prices for luxury products, they expect to be paying for more than just aesthetics. The item must also be able to perform a specific duty, which partially explains the successes of modern luxury brands like Canada Goose (keeping the wearer protected in sub-zero conditions) or Outdoor Voices (athletic performance without the neon aggression).
Another big trend to observe is personalization. As pointed out by experiential agency PBJS in a 2015 report, previous generations looked for exclusivity through brand positioning; but the younger generation is now looking for uniqueness. It is the logical evolution of things: HENRYs grew up in an era where everything revolved around expressing who they are. In fact, they share their social life on Facebook, they live-stream their life on Snapchat, and are now able to do so on Facebook and Instagram too. For them it goes without saying that brands should allow them to fully express their identity, and that includes customization and made-to-order products.
Another critical trend highlighted by PBJS shows that young affluents value three things: quality, craftsmanship, and authenticity. These consumers don’t purchase luxury goods to define who they are. For them, it is more about “collecting memories like merit badges and actively seeking unique experiences.”
We should also not ignore one of the most important trends of the last five years: the sharing economy. According to PBJS, young adults now view access as the new ownership, and four out of five consumers agree that there are real advantages to renting over owning. Moreover, a 2015 Pricewaterhouse Coopers report on the sharing economy pointed out that 25 percent of Americans who participate in the sharing economy had an annual income of over $100,000, early proof that affluent consumers perceive true value in renting versus owning. These numbers make even more sense as shared-assets prices went down after the advancement of technology (and especially the smartphone), dramatically lowered transaction costs. A great example is the JetSmarter App, which connects customers with unused private jets, allowing them to book a seat on a plane for a tenth of the original price.
What is interesting about the sharing economy is that it might be the missing link between traditional luxury companies, who struggle in this transitional phase, and young affluent consumers. In fact, even though many luxury executives now believe that the sharing economy is rapidly penetrating the luxury market, they aren’t convinced it’s there to stay. Rather, they’re certain that the only reason why young luxury consumers would want to rent instead of own is because they don’t have the financial means to do otherwise. Indeed, while flying on a private jet is reserved for high-net-worth individuals, buying a seat on a private plane is a whole different story now. While in the first case you are buying privacy and time convenience, in the second case you are certainly reducing your travel time, but you are sharing the plane with other passengers you don’t know, and you don’t have the luxury of choosing your departure time. In other words, you’re buying a better experience than commercial flights, yet, a different experience than renting out the entire plane.
Nevertheless, the sharing economy provides HENRYs with a first taste of true luxury services. This is something entirely new, as just fifteen years ago, if young affluents wanted to experience luxury, they were limited to mass-produced luxury goods. Now they can have a black car drive them around the city (Uber), they can book a seat on a private jet (JetSmarter), and they can call on a personal lifestyle and nightlife concierge (OWL App). They are, consequently, way more knowledgeable, and in some ways educated, about what a true luxury experience is today. Thus, HENRYs can satisfy their luxury needs through the use of the sharing economy, but ultimately, it will only give them more reasons to become true luxury consumers.
Jeremie Lahmi is the founder of explorism.co. In 2016, he received his Master’s in Global Luxury Management at NC State. If you want to learn more about modern luxury consumers and Jeremie’s year-long research on the topic, please visit rethink-luxury.com. The views reflected here are those of the author and do not necessarily reflect the views of Lean Luxe.