From Lars Rensing, CEO of enterprise blockchain and Web3 solutions provider Protokol…
Set to make up as much as 50% of the whole luxury market by 2025, millennials and Gen Z have a huge power over the industry. As younger generations embed themselves into the luxury markets, they present a new set of challenges to the industry. While Millenials and Gen Z have had their differences, they have one major thing in common for the luxury industry – they are both making up more and more of luxury brands’ customer bases.
From February 2021 to February 2022, Gen Z and millennial luxury purchases made up 60% and 63% of the total luxury market sales respectively. As digital natives, they expect intuitive and modern online experiences. Not only this, but also value authenticity and integrity from the brands they choose. Sustainability, in particular, cannot be an afterthought; it must be honest, transparent and backed by action.
To continue growing and take advantage of the opportunities these generations present, luxury brands must understand how to connect, relate and reach them.
A digital-first future
With technology embedded in their lives, Millennials and GenZ tend to expect intuitive and modern online experiences from the brands that they follow or choose to buy from.
While the metaverse may seem daunting, it is an important medium for luxury brands to explore. A recent report from Klarna revealed that more than six out of ten respondents from GenZ and Millenials who have already heard of the metaverse say they are interested in purchasing luxury goods via this new channel. Louis Vuttion has recently taken a leap into the metaverse through its new adventure game. According to a survey from Statistica, 74% of gamers in the metaverse were between the ages of 10-35, comprising current and future customers for luxury brands.
NFTs are also taking the world by storm, and for luxury brands they go hand-in-hand with reaching their target audiences. 23% of Millennials now collect NFTs and brands can engage with these blockchain-based digital tokens through exclusive rewards or collectibles.
For luxury brands a way to harness this audience is through offering exclusive experiences in the metaverse, paired with NFTs and digital collectibles. For instance, through Louis Vuttion’s adventure game in the metaverse, it paid homage to its founder and players could win one of 30 exclusive NFTs. By offering NFTs for users to purchase, such as NFTs of famous designs from a fashion brand, luxury companies can not only create new revenue streams for themselves but also engage their younger audiences and foster more loyalty and engagement amongst its customer base.
We also saw something similar when Gucci launched its Gucci Garden in Roblox, drawing in a new audience. Customers could come to the Garden within the metaverse, and also buy exclusive NFTs.
Luxury brands could even go further by offering customers exclusive ‘wearable’ NFTs, which they could purchase and then have their avatar wear within popular games and the metaverse. These NFTs could even be customised, such as having the customer’s name written across the back. Pairing NFTs with the metaverse in this way not only lets luxury brands engage with younger generations in their spaces and generate more loyalty with them, but it also lets them provide new opportunities for existing customers and new customers alike, particularly NFT collectors. These kinds of offerings also let brands benefit from new revenue streams, growing as a result of their younger audiences.
The technology transforming sustainable luxury
Sustainability is one of the most important elements for younger consumers; with climate change a major concern, conscientious consumers want to make sure that they are choosing brands that are as sustainable as possible. As such, luxury brands need to take all the necessary steps to ensure that younger audiences can be assured that materials are sustainable and that sourcing practices are ethical.
Transforming supply chains in a way which is transparent for consumers will be a huge priority for brands looking to appeal to younger generations – and recent technological developments hold the key. One technology that brands can harness to authenticate their sustainability and processes is blockchain. Blockchain’s inherent transparency means that brands can harness unchangeable digital ledgers which underpin ‘product passports’ for items. This would then allow them to prove the source of materials both across their supplier network, with auditors and ultimately with their customers.
Blockchain can also give customers details about sustainable sourcing. By giving customers access to a product’s history stored on the blockchain, where data cannot be tampered with, brands can increase trust. They can also assure customers that the product they are purchasing, whether first hand or at resale, meets their expectations for sustainability, giving brands a competitive advantage and appealing to younger customers. With applications such as track and trace, digital twins, or product passports, assets can be traced on the blockchain from source to shelf, proving sustainability, ethical sourcing practices, fair labour practices and more.
The application of technologies like blockchain will be key for brands implementing solutions that appeal to this younger and more conscientious audience. Although they present challenges, younger generations also present an opportunity for luxury brands to harness new and innovative technologies, not only to grow with this unfamiliar audience, but also to present new rewards to their existing customers.
As new generations come into the fold, alongside them will always be new technology. Technology is a trend that is here to stay.