Consequently, his team has launched the first luxury crypto-wallet (in collaboration with Trezor, a maker of cryptocurrency wallet hardware) for items priced at US$1,000 and upwards – prices that are way above most luxury wallets working with traditional banknotes. At a time when most luxury managers have scarcely any experience with cryptocurrencies, young companies like Gray are thinking differently to build up new markets: the definition of disrupting.

A similar tendency to innovate is sweeping through the sneaker market, too. With roots in skateboarding, the Venice Beach-based brand No. One intends to disrupt the shoe market with bespoke sneakers made with the finest leather available and using traditional dress shoemaking techniques. The company’s online collection “drops” are selling out in minutes, and its shoes reach consumers all over the world.

This Gen Z-driven sneaker hype is in its infancy. Looking at the growing offerings from Off-White, Gucci, Louis Vuitton and Balenciaga, and even Adidas and Nike’s hi-tech, high-end lines, we have an idea of how much more disruption to expect in the luxury shoe business.

Fortunately for the industry, shoe creativity seems to have no limits. Take Maison Margiela’s dirt sock sneakers – a shoe that stretches the idea of what most people consider “luxury”. When I showed them to a sneaker-obsessed Gen-Z friend, she said, “They are dope!”

Gen Z’s tastes disrupt the luxury business as much as their tech-savvy natives, and those tastes have implications for their point-of-sale preferences. Their feeling is that the time of boring and arrogant luxury stores is over. These “temples” – where merchandise is hidden behind glass counters with grim-looking sales personnel hovering – are made to impress, not to immerse. Instead, the youngest generation of consumers demands shopping experiences that make them feel comfortable; places that inspire them and where they feel “at home.”

Therefore, do not be surprised that you can now buy ice cream in the luxury shoe store Kith or that you can listen to hip-hop at Opening Ceremony, both of which are major disrupters in Gen Z-oriented luxury retail and are located in New York City. The theory is that if consumers are digital first, then bricks-and-mortar stores need to be experiential first, otherwise, they have no reason to exist for these consumers.

Traditional luxury, premium, and lifestyle brands need to reconsider their approach when it comes to creating consumer experiences. They also need to beware of ill-considered attempts – marketing failures will erode brand equity as they will not feel authentic to consumers.

Instead, a company needs to undergo a strict assessment of how they’re positioned in the eyes of consumers. This is not an easy task; even with leading brands, I find a lot of room for improvement. During a recent visit to Adidas’ Hong Kong flagship store, which employs a traditional store layout that is less contemporary than newer brands, I noticed that it was empty at rush hour, while many Gen Z-geared indie stores nearby were overflowing with shoppers. It’s a sign that action is needed from Adidas.

These miscues are not limited to sports apparel or sneaker brands. Just a short distance from the Adidas store is Mercedes-Benz’s Hong Kong “Mercedes Me” space. Here, the luxury car brand is using a lifestyle concept to try to connect with younger urban consumers in a context that is vastly different from a traditional car dealership. The idea is to combine a cafe, a casual restaurant, a car showroom and a retail space for Mercedes-branded accessories into one holistic shopping experience. What is striking is how none of these components connect to each other.

Inside the store, a two-tone US$250,000 Mercedes Maybach is squeezed into one corner, looking miscast given the setting. The cafe and restaurant areas feel out of place with their strange mix of colours, materials and props, most of which have no association with the Mercedes brand.

The worst part is the accessories store, where cheap brand charms and plastic iPhone cases were on offer for about US$10. I left feeling confused about what the Mercedes brand stands for – was this a self-confident luxury brand, a mediocre cafe, or a cheap accessory shop? There was no “brand feel”, nor was there anything inspiring or authentic. Executions like this will not give Mercedes an edge in luring a young, urban target group because it makes the brand look disconnected from what younger consumers expect – and get – from more informed brands.

Another example of a failed attempt to become more relevant to Gen Z and millennials was the recent launch of Louis Vuitton’s in-ear headphones. In my view, this execution represents a common problem in luxury: Priced at US$1,000, the headphones are technically and aesthetically identical to headphones of a common headphone brand, save for an LV sticker and a pumped-up US$1,000 price.

That is a staggering US$700 more than an identical brand. There is neither additional craftsmanship nor anything else that the Louis Vuitton brand adds in terms of value. A simple Google search reveals consumer comments decrying the headphones as a “scam”. This isn’t surprising, as the internet’s youngest consumers are also the most discerning. Brand actions like these look desperate while weakening the credibility and equity of the entire brand. It’s good to remember that incompatible line extensions always weaken brand perception – they are never just neutral. That is what makes them so dangerous.

With this in mind, how can a brand best manage disruption from younger consumers? When I advise luxury and lifestyle brands how to manage a consumer-centric transition, how to increase their relevance among Generation Z and millennials, and how to envision their “store of the future”, I tell them that their most important need is to have 100 per cent clarity about what their brand stands for, both rationally and emotionally.

Brands need to first understand how they want to inspire consumers, and then all the following measures and actions must follow those definitions. While it sounds easy to do, I see many brands struggling, especially when it comes to marketing to China’s young and demanding luxury consumers. Their sophistication is often sorely underestimated by traditional brands and managers unfamiliar with the country, which gives a window to authentic new brands that have a genuine Asian mindset and born from within this desirable target group.

Those brands are necessarily built on authentic values, so only brands that can create relevant and authentic messaging across all measures and touch points will compete with these more authentic and agile brands for Gen Z’s dollars. Those that do not are relying on luck.

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