Gen Z consumers are feeling the pinch. For luxury brands, that’s a big problem
- Gen Z were meant to make up a fifth of all luxury spending by 2025, but inflation and unemployment are hitting the discretionary incomes of young consumers
- Brands are particularly concerned about young Chinese shoppers, with youth unemployment in China hitting a record of almost 20 per cent in July
From US$300 bucket hats to US$900 sneakers and US$700 T-shirts, the high-flying luxury sector is fretting over the appetite among financially stretched Gen Z consumers for such “aspirational” purchases.
Executives are troubled in particular by a financial hit to young Chinese shoppers, not only because mainland China has been a major driver of the industry’s growth in recent years, but also because high-end consumers in the world’s second-largest economy are a decade younger than the global average of 38.
Young adults around the world have been “a very strong factor of luxury growth over the past decade”, said Grégory Boutté, chief client and digital officer at Gucci-owner Kering.
Data this week showed China’s economy slowed unexpectedly, prompting a central bank rate cut, while macroeconomic trends are disproportionately affecting the extra funds that those born between 1996 and 2012 might use to enter the world of luxury.
While inflation and a rising cost of living are hitting the discretionary incomes of young consumers especially hard in North America and Europe, China’s problem is different.