Consumers between the ages of 18 and 35 years of age, who collectively comprise the generational group known as Millennials, were responsible for 85 percent of the growth in the luxury market in 2017, and by 2025 will represent as much as 45 percent of all high-end spending. This according to a survey conducted by the UBS Group of more than 3,000 consumers in China, Europe and the United States.
And why are they so dominant, despite the fact that they still are unlikely to have realized their full earning capacity? According to the UBS study, the very awareness that their economic situation is likely to improve further is responsible, at least in part. Since they more optimistic about future earnings than older consumers, they also are ready to spend more on luxury in the here and now.
The UBS study, which looked at polling and social media data, noted that Gucci and Louis Vuitton are the Millennials’ favorite brands. Unsurprisingly members of the generation are considerably more ready to make purchases online than older consumers, but brick and mortar stores continue to be among the preferred places to shop.
But not all Millennials are equal. A major driving force behind the growth in sales are the Chinese Millennials, who allocate about 20 percent of discretionary income to purchasing luxury goods. Interestingly, states the UBS study, that is a similar percentage to that allocated by older generations of Chinese buyers. This is in contrast to younger people in Italy and the United States, who tend to have higher spending budgets than their elders.
A report just released by released jointly by the Boston Consulting Group and Tencent, a Chinese Internet conglomerate, showed similar results, indicating that the average age of luxury consumers in China is 28 years old, which is a full 10 years younger than the average age of luxury buyers in other parts of the world.
Individuals between 18 to 30 account for 58 of luxury spenders in China, while those aged 18 to 20 account for 26 percent, which means that nearly one-third of Chinese luxury consumers are just out of their teens.
According to the BCG/Tencet report, by 2024 the compound annual growth rate of China’s personal luxury goods market will be as high as 6 percent, and Chinese consumers will contribute 40 percent of the global luxury goods market
One particularly interesting titbit from the BCG/Tencet was that, although Chinese Millennials dominate, it is not only the Chinese market that is benefiting. Because of prices and the styles in stores, 45 percent of Chinese consumers prefer to travel abroad in order to buy luxury goods.