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The American luxury market is undergoing a radical transformation, adapting to the growing spending power of Gen Z. Together with Millennials, these consumers represented "the entire growth of the luxury market in 2022," according to Bain & Company, and are expected to account for 70% of luxury spending by 2025, or $87.1 billion out of a total of $124.4 billion [Source: eMarketer].
The challenge for luxury brands is that Gen Z has value systems, lifestyles, and consumer habits that are increasingly divergent from previous generations of consumers. To attract and retain them, luxury brands must quickly move beyond traditional notions of luxury – such as status, heritage, prestige, and wealth – towards a new set of values: inclusivity, sustainability, transparency, technology, and circular innovation.
The unusual entry of eBay into the luxury market was perhaps the most successful example of this evolution. The recent pop-up Luxury Exchange opened by eBay in New York invited shoppers to have their luxury goods appraised and priced, which they could then use to purchase items from the platform's top luxury sellers, including Bottega Veneta and Cartier. This demonstrates how a utilitarian brand like eBay can reposition itself at the forefront of luxury. It also shows the willingness of luxury brands to form unusual partnerships as a way to express these emerging values and reach potential American consumers from the new generations.
The luxury sector is also evolving to meet the growing demand for pre-owned luxury goods, a market estimated to be worth $46 billion in 2022. This trend is driven by the importance younger consumers place on sustainability and circular economies. 84% of Gen Z consumers and 73% of Millennials are willing to spend more on products made sustainably and sourced ethically, according to Tata Consultancy Services.
This is partly due to their desire to become "collectors" in their own right and purchase pre-owned luxury items as sustainable investments and assets to trade later, rather than as status symbols or pristine heirlooms.
Rolex recently launched a certification program for pre-owned items. De Beers is already committed to tracking every single diamond used with blockchain technology.
These are developments that would have been unimaginable for traditional luxury goods brands just a few years ago. It is a clear sign of how new generations, values, lifestyles, and consumption habits are influencing the approach to the luxury goods market. These are profound changes, at least for the American market, which traditionally sets new trends but are destined to expand to other markets. The implications in terms of marketing, communication, and branding for luxury brands looking to sell in the American market are significant and in the coming years will certainly need to be considered by small and medium-sized enterprises entering the USA market.
ExportUSA offers a well-established market research and product positioning service. We put our experience and direct contact with importers, distributors, and representatives in numerous sectors in the United States to use.
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