From $300 bucket hats to $900 sneakers and $700 t-shirts, the high-flying luxury sector is fretting over the appetite among financially stretched Gen Z consumers for such “aspirational” purchases.
Executives are troubled in particular by a hit to young Chinese shoppers, not only because mainland China has been a major driver of the industry’s growth in recent years, but also because high end consumers in the world’s second-largest economy are a decade younger than the global average of 38.
Young adults around the world have been “a very strong factor of luxury growth over the past decade,” said Gregory Boutte, chief client and digital officer at Gucci-owner Kering.
Data this week showed China’s economy slowed unexpectedly, prompting a central bank rate cut, while macroeconomic trends are disproportionately impacting the extra funds that those born between 1996 and 2012 might use to enter the world of luxury.
Whereas in North America and Europe, inflation and a rising cost-of-living are hitting discretionary incomes of young consumers especially hard, China’s problem is different.
“In the U.S., inflation is a huge issue, the major focus of a lot of luxury companies … In China, it’s the youth unemployment rate that’s alarming right now,” Kenneth Chow, principal at consultancy Oliver Wyman said.