Generation Z is coming into its own, with more of its members entering the workforce and earning their own money. Now that the generation has a few dollars to spend, it is turning to luxury brands.
A Bain & Co. report found that luxury goods spending grew “19-21%.” Nearly every facet of luxury goods — whether it be personal luxury goods, dining or experiences — took a step forward last year, and they are reaching their pre-COVID-19 levels of spending. Luxury items are back on the rise, and the younger generation has a lot to do with it.
According to the study, Gen Zers are beginning to buy luxury items as early as 15, which is three to five years earlier than the millennial generation prior. They are expected to grow three times faster in spending than other generations by 2030.
We know that Gen Z is spending more, but why?
Jan Rogers Kniffen, CEO of retail consulting firm J Rogers Kniffen WWE, told CNBC, “What has changed is the affluence level of the U.S. customer, and the prevalence of social media that tells the customer what is cool.”
Afterpay, a popular “Buy now, pay later” company, released a report in November of 2022 explaining just how powerful social media is for the younger generation. In the report, Afterpay claimed that 88% of Gen Zers use one social media platform multiple times per day. Furthermore, 43% of Gen Zers would be willing to buy a product based on a recommendation from an influencer.
Young spenders are also capitalizing on living at home and saving money on housing.
“Census data shows that nearly half of US adults under age 30 still live at home with their parents,” says @therealdyneri in this video. “As parents still help to cover food and rent, these young adults have more disposable income.”
Gen Z’s luxury purchases could also be to resell later. Resale markets are growing nearly four times faster than traditional markets, according to a November 2022 study — which makes having items for down the road a way to make money.
Most of this spending comes during an uncertain economic future, but that hasn’t deterred the younger generation from buying what they want.
“Young consumers know they are facing a difficult economic environment with 77% of Gen Z expecting prices to rise over the next 12 months,” said the Afterpay report. “Gen Z are the most optimistic of all generations with only 20% expecting to do less shopping over the next year.”
Gen Z understands the concerns of the future but isn’t letting that affect it right now. As more Gen Zers become financially independent and continue to be on social media, luxury brands will continue to realize new growth from young shoppers.
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