Back in June, Global Blue together with consultancy cabinet Roland Berger hosted a conference in Paris focused on the Gen Y and their influence on the retail and tourism industries. Below is an extract of their findings.
Millennials are a market obsession: they are the largest generation in Western history, the first generation to grow up with the internet and smartphones, and a driving force in international travel. These factors make them hugely influential, not only in terms of how they spend, but also the impact of their attitudes and preferences on service, pricing and product.
Their spending power is set to grow considerably in the coming years, but already, Global Blue data1 shows that Greater China Millennials in particular, are spending as much as their older peers when shopping abroad (around €4,000). By 2020, millennial wealth could hit $24 trillion according to UBS.
For this group, wealth means exciting experiences and new travelling adventures, more than it means luxury or status. Yet, as a generation, they are the most likely to buy luxury goods while travelling, with 33% of millennials buying luxury abroad, compared to 31% of the total market according to Deloitte.
As the leading force in the luxury market, millennials are redefining what luxury means. According to the latest report by Boston Consulting Group and Altagamma, Millennials are driving growth in the global luxury market, and will make up for half of the customer base by 2024.
In terms of spending power, Global Blue data shows that South East Asia Millennials (Indonesia, Malaysia, Thailand, Vietnam) have the highest shopping budget at €5,200, followed by GCC Millennials (€4,700) and Russians at (€4,600). Most interestingly, different spending gaps exist between Millennials and their elder generations depending on their origin market. Gulf Countries (GCC) and Russian Millennials for example, show major spending gaps in comparison with their elder peers, at -60% and -22% respectively. For Asian Millennial Globe Shoppers, this number drops down to -5%, meaning that they will (almost) spend the same amount when shopping abroad as the older generations.
Research by The Akin and Opinium into leading-edge consumers found that many young people consider luxury to be a feeling, not a category. This means they are finding a sense of luxury in unusual places – not just the major brands, but in limited-edition and sustainable products, or those which have a strong personal value, whether bespoke or personalised. For millennials, exclusivity is now about rarity of experience.
With this mindset, millennials are shifting the luxury product mix into a more casual realm, turning away from formal dressing towards casual pieces. Bain reports that sales of key casual items have increased, with sales of T-shirts increasing +25%, down jackets rising +15% and sneakers +10%. Many brands have been quick to recognise this shift, introducing more lines influenced by street- and sports-wear.
Millennials’ easy-going approach to luxury is also leading to another major shift for the industry – the rejection of head-to-toe luxury dressing. Millennials are keen on mixing their luxury labels with niche brands, premium labels and even mass-market brands, so they can reflect their own style rather than that of a major brand. As many as 55% of millennials are happy to trade down on products such as handbags or T-shirts where they feel that a more specialist or niche brand has more relevance to their unique style.
Still, Millennial Globe Shoppers clearly prioritize one category when shopping abroad. Indeed, according to Global Blue, Leather Goods account for 45% of Millennial Globe Shoppers’ total spend when shopping abroad, before Fashion at 30% and Watch & Jewellery at 20%.
Millennial demand for unique products and experiences are driving “drop culture” – limited edition, much-hyped products and collaborations that are only available for a short time or in a location. Streetwear brands are mastering the concept when producing goods in small quantities or when collaborating with leading luxury brands to create even more sought-after products. Likewise, collaborations between designers and sportswear brands create a sense of occasion and urgency around products, which many Millennials find irresistible.
We’re all millennials now
Millennials are increasingly impacting how other consumers behave, what Bain calls the “millennialisation” of the market. Their demand for unique products, engaging experiences and omnichannel shopping has made shopping more transparent, more efficient and exciting for consumers of all ages. Accenture’s millennials report states that “Millennials are not only transforming their own shopping behaviours but those of their parents, who are increasingly mimicking the demands of their children for seamlessness as they climb the digital learning curve”.
This “millennial state of mind” is permeating product design, services and stores, as Boomers and Generations X and Z also benefit from Millennials’ preference for youthful fashion, seamless online/offline services, and stores that offer limited-edition products, niche brands and experiential environments. Meanwhile, Millennials’ demand for high-value products is pushing many brands to improve the quality and sustainability of their products, while keeping prices fair.
Whatever the target market of your brand, it’s important for brands and retailers to understand the needs of Millennials, not only due to their size and purchasing power, but also as a way to push their products and services forward, to meet the needs of demanding consumers of all ages.