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Luxury

Opinion / Luxury brands just don’t understand Gen Z – and it’s killing them: why BMW needs to be more like Tesla, and Louis Vuitton more like MCM

STORYDaniel Langer
Luxury brands cannot ignore the needs of the Gen Z population. Photo: Getty Images
Luxury brands cannot ignore the needs of the Gen Z population. Photo: Getty Images
Inside Luxury

  • Brands like Art Basel must reinvent themselves to remain relevant in the face of competitors like ArtLife
  • More empowered and connected than ever before, the new breed of consumers expect exceptional brand experiences that the old powerhouses just don’t provide

This article is part of Style’s luxury column.

The pandemic has disrupted the luxury industry like never before. However, there is a much deeper shift that many brands still underestimate. It’s led by Gen Z consumers – those under 25. “They don’t buy us yet, why should we care”, “They don’t have the money”, “They have still other preferences, in a few years they will purchase our products”, “They are weird.” The list of reductive, foolish misconceptions I’ve overheard goes on and on. This attitude of many managers will cost them their future.

When managers think this way, they will be out of business soon. I predict many categories will undergo a dramatic change, and even be irrelevant in their current form. The reason is a different preference structure of young affluent consumers. And a different approach to brands.

Luxury resorts and hotels aren’t immune from catering to Gen Zers either. Photo: Mint Hotels and Resorts
Luxury resorts and hotels aren’t immune from catering to Gen Zers either. Photo: Mint Hotels and Resorts
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If you run a luxury art gallery, a luxury hotel, a luxury restaurant, a luxury fashion brand or a luxury car company, you will need to rethink everything urgently. All other categories need to reinvent too. Let’s start with luxury galleries. For more than a century, galleries were the gatekeepers of fine art. They were the “make or break” for artists. If they believed in an artist and featured him or her, fame and fortune was guaranteed. They were the brand builders in the art world.

Fast forward to 2021, and the revenue of a large number of art galleries has dropped significantly according to industry insiders. The only segment that still experiences some demand are the very few collectible art pieces worth over a million US dollars that are bought merely for investments and anticipated value gains, and for entry level art for a couple of hundred dollars.

The business model of selling has barely changed over decades. Art is shown in a showroom or at fancy events like Art Basel, the galleries act as an interface between the artist and the customer, and they take a cut of 30 to 70 per cent. As a result, when a customer buys art, they pay to a large extend not for the painting, but for the gallery.

Too many gallerists at Hong Kong’s Art Basel fair were indifferent or failed to add a personal touch – which is likely to become unsustainable. Photo: Dickson Lee
Too many gallerists at Hong Kong’s Art Basel fair were indifferent or failed to add a personal touch – which is likely to become unsustainable. Photo: Dickson Lee
This is a bad deal for the buyer, as the artwork would have to appreciate dramatically to have any gain from the investment over time. Those who have ever visited a fancy gallery, whether in London, New York, Chicago, Shanghai or Monaco, has often been confronted with arrogant behaviour, indifferent service, and been left uncertain of buying at a fair rate. I remember my visit at the last Art Basel in Hong Kong and was shocked by how indifferent and detached most gallerists there were. This business model worked as long as galleries could build what I call a local monopoly. Since they were representing certain artists in a certain location, the model worked despite a lack of service and transparency. But the model has no future. Because there is no value creation.

New Gen Z consumers change everything. Digital disrupters like ArtLife have put a significant dent in the market, allowing to directly buy and sell art, cutting out the gallery. Their business model works perfectly for the new digital native generation who does their homework before buying. No other generation is so super-empowered like Gen Zers, scrutinising the value that brands provide, and only associating themselves with brands that represent similar values than they have. If a luxury brand – in this case a luxury art gallery – does not provide an exceptional branded experience, there is no reason to visit. Using social media, many contemporary artists already build their own following, hence the “middlemen” won’t be needed any more unless they reinvent their value creation model.