Millennials. They’re the group that’s hard to pin down, and the group whose spending power every retailer imaginable is fighting for.
And according to a new study by investment bank and financial services company UBS, if you’re a company in the luxury sector, millennials are quickly grabbing their wallets and are more likely to give you their money.
Part of this is due to the fact that millennials are feeling pretty good about their personal finances. According to the study, nearly 50 percent of American millennials expect their personal financial situation to improve in the next 12 months, compared to 35 percent of U.S. respondents aged 35 or older. The disparity is even higher in France, where almost 60 percent of millennials are confident their earnings will increase in the near future, against 30 percent of those belonging to older generations. And in China, both millennials and older consumers feel very optimistic: 70 percent and 65 percent, respectively.
And considering millennials drove 85 percent of the luxury sector’s growth last year and will represent 45 percent of total high-end spending by 2025, this is good news for luxury fashion companies.
In fact, some of the top luxury fashion labels that have been performing well lately have a high percentage of sales from millennials. UBS estimates 65 percent of Saint Laurent’s revenues to have come from millennials in 2017, while Gucci’s sales from the age group were estimated in 50 percent, and Louis Vuitton obtained approximately 33 percent of its profits from consumers aged 21-37.
Speaking of Gucci and Louis Vuitton, the two fashion houses are sitting on top: 23 percent of millennial respondents in France, Italy, and the U.S. mentioned the label as their favorite, while Louis Vuitton was mentioned by 19 percent. These results match a previous study by UBS, which found that the two brands get the highest amount of likes per post on social media.
Gucci and Louis Vuitton are followed by Alexander McQueen, Rolex, and Hugo Boss in France, while in Italy millennials have placed Prada, Rolex, and Bulgari in the third, fourth, and fifth places, respectively. In China, where millennials allocate an average of 20 percent of their discretionary income to purchasing luxury goods, the top five luxury fashion labels are Hermès, Chanel, Cartier, Gucci, and Dior.
However, the study indicates millennials care less about brand names than previous generations, with social media activity and celebrity endorsements showing up as more important factors driving their purchases in Europe and China. U.S. millennials, on the other hand, are surprisingly less inclined to be influenced by celebrities or social media, attributing higher value to brand name and craftsmanship.
While e-commerce is a big part of the retail industry and the intent to buy online is higher for millennials than among older consumers, physical stores continue to feature highly among preferred places to shop.
For those in the luxury landscape, UBS’s study provides two main takeaways. First, that luxury brand’s marketing efforts should heavily cater to millennials, as they present the largest opportunity for sales growth, and they have the spending power to prove it. And second, brick-and-mortar spaces still play a huge part in millennials’ buying decisions—so creating a unique, enrapturing experience is key to drawing in new customers and keeping them.
So, even if millennials remain an elusive group, money doesn’t lie. And they’re willing to spend a little extra.