Over the last three years, the luxury market has experienced a whirlwind of change. In the lead-up to the pandemic, the personal luxury goods market grew 7 percent in 2019, reaching $300 billion globally. Then in 2020, it suffered a sharp decline, dropping an unprecedented 22 percent to $235 billion, followed by a remarkable rebound in 2021 to $302 billion, according to the Bain-Altagamma Luxury Study.

Throughout 2022 the personal luxury goods market continued its meteoric post-pandemic rise, advancing 24 percent to $376 billion, and the Bain-Altagamma analysts expect the good times to keep rolling in 2023. “The personal luxury market is projected to see further growth of at least 3-8 percent next year, even given a downturn in global economic conditions,” they predict.

For affluent consumers, luxury is a privilege, not a right, and as they look at the challenges they face this coming year, they are signaling a willingness to trade off excess spending on luxury. Many plan to batten down the hatches and ride out any potential economic storm, as they did in the Great Recession of 2008 and 2009.

But, Not So Fast

A look back at what happened during the Great Recession of 2008 and 2009 suggests a different forecast. And although the past is often the best predictor of the future, it may not be relevant today. Global personal goods luxury sales dropped 9 percent from 2007 to 2009, disproving the conventional wisdom that the luxury market is immune to economic downturns. What will the past predict for our future in 2023?

Whether the economy takes a slight tumble or a big fall in 2023, economists are warning about a potential economic decline. “Going into 2023, we have a broad-based slowdown in the global economy,” said International Monetary Fund’s Gita Gopinath at the Wall Street Journal’s CEO Council Summit in December. “The possibility of avoiding a recession is really narrow for the U.S.,” and she added that the outlook is even more challenged in Europe and China.

Heeding advice from motivational writer and speaker William Arthur Ward, “The pessimist complains about the wind; the optimist expects it to change; the realist adjust the sails.” Luxury brands should set their sails for the growing economic headwinds.

And to adjust their sails, luxury brands need to get out in front of the consumer, understand what they are looking for today and prepare for changes to come tomorrow. A new study among 2,000+ affluent consumers – Research the Affluent Luxury Tracker – provides a forward look at how the affluent will adapt their spending and purchase behavior if the economy falters, which these consumers fully expect it will.

Change Is Coming

“Affluent luxury consumers are the most highly-educated and well-informed consumers, and some 69 percent see a recession coming within the next six months, if it isn’t already here,” said Chandler Mount, the study’s lead researcher and founder of Washington, DC-based Affluent Consumer Research Company following ten years heading up YouGov’s Affluent Perspective research practice.

“Anticipating the worst, the affluents aren’t waiting for the other shoe to drop. Nearly half (48 percent) surveyed said, ‘Now is a good time to limit my purchasing,’” he continued, noting that the survey sample was skewed heavily toward high-net-worth-individuals (HNWI) with $1+ million net worth (excluding their primary residence), a notoriously difficult consumer segment to survey. HNWI made up 70 percent of the sample and the remaining 30 percent were high-earners-not-rich-yet (HENRYs) with less than $1 million net worth. All, however, are categorized as affluent.

Not unexpectedly, the HENRYs were more inclined to cut back (52 percent). But even 46 percent of the HNWI are lining up to reduce their purchasing. This will pose significant challenges to luxury brands that depend upon the HNWI’s greater spending power if they do pull back.

In addition, affluent millennials, who represent the largest consumer segment for luxury brands now and in the future, are the most likely to feel that cutting back is a good idea. Some 59 percent of millennials (aged 26-41 years) agreed with that statement.

Hope Rests with the Millennials

Millennials are far and away the most luxury-indulgent generation, with 54 percent saying they most often choose the luxury option, compared with 29 percent of GenXers (aged 42-57) and 17 percent of Boomers (58-75+ years).

Mount explained that the survey includes 29 different luxury purchases across five major categories:

• Consumable Luxury Goods, such as gourmet food, fine wine, luxury spirits and beauty/cosmetics.
• Personal Luxury Goods, including luxury clothing, fashion accessories/leather goods, jewelry, and watches.
• Experiential Luxury Goods, notably autos and recreational vehicles.
• Home Luxury Goods and Services, such as furniture/home decor, luxury major appliances and interior and exterior renovations.
• Luxury Experiences, including luxury hotels/resorts, premium cabin seating, luxury beauty services, cruises, and yachting vacations.

He observed, “Overall, millennials have the highest probability of purchase in ALL luxury categories tracked, followed by GenZ and GenX, though GenZ is a much smaller segment in the survey sample.”

And he added, “Boomers, while a sizable segment of the affluent, are significantly withdrawn from the luxury market. Their overall average across categories is just 10 percent probability to purchase luxury in the next three months.”

Since millennials are the primary consumers doing the heavy lifting in the luxury market, luxury brands will feel the sting if they put their luxury spending on hold. And millennials may be forced to cut back out of necessity as job cutbacks continue to roll across the high-paying technology and banking/investment sectors.

Narrowcasting Rather than Broadcasting Spending

Overall, HNWI consumers (46 percent) are the most inclined to say they will keep buying high-quality products even in times of financial uncertainty. But given that almost half of HNWI said now is a good time to limit purchases, they will likely become more selective in their luxury purchases.

Rather than spread their spending across a wide range of brands and categories, they will narrowcast purchases across a smaller set of trusted brands and indulge in luxuries where they gain the greatest return on investment. As a result, brands that have won their loyalty will gain, and those that haven’t will lose.

Cutting Back not Spending More

Another cautionary sign revealed in the survey is that more luxury consumers (35 percent) expect to spend less on luxury purchases over the next twelve months than those who plan to spend more (27 percent). While the HENRYs are more likely to be members of the spend-less group, nearly 30 percent of HNWI said they are also likely to spend less on luxury over the next twelve months. “What’s more troubling is that luxury consumers’ negative perspective increased in our December 2022 wave with 41 percent of luxury consumers expecting to spend less,” Mount noted.

The Narrower Shopping List

Topping the list of luxuries affluents plan to buy over the next three months are “little luxury” consumables, such as gourmet food, fine wine, beauty products and chocolates. Also high on their list are fashion accessories/leather goods and luxury-brand fashion apparel. On the other hand, high-end jewelry and timepiece purchases are further down their list.

On the experiential front, luxury travel, including hotels and premium airline cabin seating rank high, as do luxury beauty services, including injections, laser treatments, etc. At home, they plan to continue to lean into interior home renovations but are less motivated to buy furniture/home decor and exterior home renovations.

Trading Down?

Goods, services, and experiences cost more when the luxury label is attached to their name. While higher price doesn’t define luxury, people do expect to pay a premium for what they consider to be luxury. The consensus among half of the luxury consumers surveyed is that luxury just costs too much. However, Mount observed, “How much is ‘too much’ is relative, so we asked affluents to evaluate which of the products, services ,and experiences were ‘more expensive than they should be.”

At the top of the list of luxuries that are judged to cost too much are related to home, including interior and exterior home renovations, kitchen appliances and furniture/home decor. These are categories where brands may experience growing price resistance, and these are also categories where consumers might opt to trade down.

RH is already feeling the pain, with third quarter 2022 revenues down 14 percent from last year, CEO Gary Friedman sees things getting worse before they get better. “We expect our business trends will continue to deteriorate as a result of accelerating weakness in the housing market over the next several quarters,” he said in a statement.

But in an earnings call, he was less measured. “From the housing point of view, there is no soft landing. It’s looking more like a crash landing in the housing market. It’s looking like 2008, 2009.”

Changes in 2023

“For affluent consumers, luxury is a privilege, not a right, and as they look at the challenges they and the world at large face this coming year, they are signaling a willingness to trade off excess spending on luxury. Many plan to batten down the hatches and ride out any potential economic storm, as they did in the Great Recession of 2008 and 2009,” Mount added, “Of course, what people say they are going to do in surveys and what they actually do are two different things.”

Nonetheless, economic uncertainty is growing, and it will surely impact the luxury market just as in the 2008-2009 recession. The luxury brands that have captured the imagination, trust and loyalty of luxury consumers are expected to continue to thrive, while those which haven’t built effective connections with their customers and potential customers will face increased challenges to maintain relevance, sales and revenues.

A recent Deloitte study among the leading 100 companies in the luxury industry confirms this. The research showed that the strong keep getting stronger as the smaller companies have grown weaker since 2018. Specifically, Deloitte found that only ten companies at the top of the luxury market pyramid generated some 56 percent of luxury goods revenues. The longtail 90 companies underneath got only 44 percent of the total market share. Further, the top ten companies contributed 81 percent of the year-over-year growth and 85 percent of the net profits among the top 100 luxury goods companies. The top ten luxury companies are sitting pretty and will weather an economic storm, while many others are at risk of falling by the wayside.

Caution Ahead

Affluent consumers are cautious about their prospects should an economic downturn occur. High-net-worth consumers are watching their investment portfolios closely, which some 46 percent rely upon as a primary source of income. HENRYs are more dependent upon their wages and salaries, so they could be impacted as more layoffs occur in high-paying employment sectors.

Three factors are lining up for luxury brands to prepare for:

1. The last global recession proved that the luxury market rises and falls in an economic downturn just like other markets.
2. The rich don’t get rich by spending all their money, so they will hold tight to their cash and be prudent in their spending.
3. The less financially secure millennial HENRYs may decide their extravagant spending post-pandemic will suffice for awhile.

For 2023, luxury brands are advised to follow the widely quoted maxim, “Hope for the best. Plan for the worst.”

For years we’ve talked about the 72-million strong millennial generation (born between 1981 and 1996) as the next-gen customers for luxury brands. But now there is an even younger generation on the horizon, Gen Z (born from 1997 to 2012), 67 million and counting. Note to self: immigration continues to add to their numbers.

Similar But Different

Like siblings born in the same family, millennials and Gen Z share similarities, but the greater the age difference, the greater the differences in the worlds they grew up in. Sixteen years separate the midpoints between these generations – 1988 for millennials and 2004 for Gen Z.

With the even younger Gen Z cohort on the horizon, we are tempted to carry over the aspirational consumer tag to describe them. But that would be a mistake. Intentional is a far more appropriate way to describe them.

Millennials are 26 through 41 years old this year, so they are, shockingly, beginning to reach middle age. Gen Zers are only 10 to 25 years old, some still children and the rest teens or young adults at best.

The age differences between millennials and Gen Z color their perceptions, values and consumer intent as they continue to mature in income and buying power. Gen Z is important for all consumer-facing marketers to understand, but none more so than luxury brands whose future is dependent upon attracting the spending power from the most affluent members of this cohort.

Today, Gen Z makes up about 20 percent of the luxury market, but they won’t hit their stride in the luxury market until they reach full adulthood and their incomes grow. By 2025 the millennials are projected to make up 50 percent of the luxury market – they’ll be 29 to 44 years by then. If Gen Z follows the same trajectory,it won’t be until about 2040 before they are the dominant generational cohort in luxury.

Gen Z Shapes Luxury

From my perspective as a longtime student of the luxury market, which I’ve studied for the last 20-some years, here are three observations about how Gen Z is going to shape and transform the luxury market in the years ahead — and some ideas to help luxury brands to get ready for this powerful consumer.

Think Intentional, Not Aspirational

Aspiration is programmed into our human DNA, but it expresses itself in different ways throughout our lives. For Gen Z, aspiration is about who they want to become as they grow up and what kind of world they want to live in. As people reach middle age like the millennials, their aspirational desires morph from becoming toward being. In other words, being the best they can be throughout the rest of their lives and for the future lives of their children and society.

Aspiration is a value the luxury market holds dear. Luxury brands leverage people’s embedded aspiration for the finer things in life. Sales and marketing are informed by tapping into customers’ aspirations, entitlement and “dream” fulfillment and aspiration is an important motivation for consumers no matter their level of wealth and privilege.

But in the recent past, the term “aspirational consumer” has been most closely associated with millennials. In this context, aspiration refers to the customer who has not yet reached a level of income that allows a full-on luxury lifestyle, but one high enough to permit an occasional luxury indulgence. From my perspective, that aspirational consumer label lacks specificity so I prefer a more precise term defined by their income and spending power, i.e. HENRY – high-earner-not-rich-yet. Incomes in the U.S. reach their peak between the ages of 35 and 55 years of age, where millennials are approaching and Gen Z will be in 20-odd years.

With the even younger Gen Z cohort on the horizon, we are tempted to carry over the aspirational consumer tag to describe them. But that would be a mistake. Intentional is a far more appropriate way to describe them. Intentional means “done with purpose; deliberate.”. They weigh every purchase and give careful consideration whether a particular brand is one that they want to do business with. Many more factors, besides features, benefits and price, influence their purchase decisions. Aspiration is part of it, but so are many others, like a brand’s purpose, mission and position on things that matter most to them.

And it is easy to see why Gen Z is the most intentional consumer generation. The number of choices in what to buy and how to buy them is exponentially greater for Gen Z than any generation that has come before. For example, several years ago a Harvard professor estimated that some 30,000 new consumer products are introduced each year. I’d venture to guess that number is exponentially greater now. Just count the number of new products on Etsy.

Then there has been an explosion of old products that are new to Gen Z in the resale, secondhand market. The RealReal reports it has sold 22+ million luxury items since its launch in 2010 – that’s some two million per year.

In its latest luxury study, Bain finds the secondhand luxury market reached $38 billion in 2021 making resale nearly half as large as each of the three largest categories in the personal luxury goods market – leather accessories ($71 billion), beauty ($69 billion) and apparel ($65 billion). And it grew five times faster than the firsthand market from 2017 to 2021, up 65 percent compared with 12 percent for the primary market.

Gen Z has taken to the emerging intentional consumer paradigm like a duck to water. They thoroughly enjoy the intentional purchase process: learning about products, brands, companies, what they stand for and what their friends think – all in order to find their best, most optimal choice.

For luxury brands, the most important takeaway is that for any product available, there are hundreds if not thousands of comparable products that consumers also can choose from — and most of those are less expensive. So luxury brands need to be as intentional in marketing to these new customers as they are in their purchase decision making. Luxury brands must, understand what Gen Z value most and deliver it to them. And given their young age and lifestage, their values are sure to evolve as they mature.

The Metaverse

We’ve all heard the term metaverse. Like “Alice Through the Looking Glass,” the metaverse is the fusion of the analog world and the digital; or the real world and the hyper-real virtual world. As Mark Zuckerberg said, “You can think about the metaverse as an embodied internet, where instead of just viewing content — you are in it.”

The metaverse is a strange, new world for many of us, but Gen Zers are already living in it. That shouldn’t be a surprise since this cohort has been weaned on social media, ecommerce, digital media, games and entertainment.

Gen Z has retained a childlike imagination and fused it with their own reality in the metaverse. Their experience in the real and virtual worlds is becoming seamless. Online shopping and in-store shopping are basically the same in the metaverse. In fact, Gen Z shops in virtual worlds and purchasing virtual merchandise. And with NFTs, you can buy a physical object, as well as its NFT twin.

Brands have tipped their toes in the metaverse. Balenciaga and Nike are now making real money in the metaverse. Oliver Wright, managing director for consumer goods and services at Accenture, says most CPG brands are now looking at ways to be engaged in the metaverse and trying to figure out what percentage of revenues will come from digitally-related products and services. While products for the metaverse have costs associated with design, the margins for selling digital products are much higher because they have lower associated manufacturing or distribution costs.

The metaverse is not just a marketing or branding opportunity, but something that will have real meaning to a company’s ROI and P&L statement and to Gen Z customers who live in the meta ecosystem.

Gen Z Caution: What Happens When They Grow Up?

That is a big question. Any of us who’ve reached a certain age know that the person we were at 20 is very different from the person we are at 40 or 50 or 60. The 20-something you is still there, but an older, more mature and grounded person has overtaken the impressionable, more impulsive younger you. With maturity comes a a longer-term perspective.

What was important at age 10 or 20 isn’t important at 40 as Marc and Angel Chernoff, authors of the best-selling book Getting Back to Happy, observe:

“It’s funny how we outgrow what we once thought we couldn’t live without, and then we fall in love with what we didn’t even know we wanted. Life keeps leading us on journeys we would never go on if it were up to us. Don’t be afraid. Have faith. Find the lessons. Trust the journey.”

Gen Z, like all of us, are on that happiness journey. And all the happiness psychological research proves our happiness comes not from our material possession but from the things we do and experience and through the people and relationships we experience those things with.

Material things might give us a momentary uplift and an emotional high, but that is not true, lasting happiness. This is why I say that at its core, luxury is in the happiness business.

Gen Z’s Search for Meaning

Luxury brands offer material goods that are meant to impart greater happiness through the cultural associations they impart. As such, luxury brands are infused with meaning. Symbolic values and associations make a luxury item more than the sum of its individual parts. But as luxury brands chase after more and more customers, their meaning becomes compromised.

Rejecting old ways of thinking about brands’ relationship with consumers and creating new more authentic, humanistic ways of relating is the challenge for appealing to the intentional Gen Z consumers. Founder of Meaning.Global and a leading authority on brand meaning, Dr. Martina Olbertbelieves that the implicit social contract between brands and their customers is undergoing a paradigm shift. “The consumer model as we know it is hitting its limits today as it is no longer socially and culturally aligned with what people value,” she explains.

In her new white paper ”Reimagining Consumerism as a Force For Good,” Olbert identifies a growing cultural awareness propagated by brands “to seduce consumers to fulfill their desires of material comfort and greater well-being” is leaving people unfulfilled, “trapped in a constant mode of becoming but never really getting there.” This especially relates to Gen Z who are still in the becoming stage of life. This gives luxury brands time to figure out how they can become a brand that Gen Z will truly value when they finally make it to the being lifestage. “There is a meaning gap in consumerism – a missing context of people’s lives, its effect on people and how it makes us feel,” she continues. “It goes against our own best interest, which makes the consumption model we still use today unsustainable and unfit for the future we are heading toward as humanity.”

Based on Dr. Olbert’s analysis, the traditional aspirational model used to drive more consumption – “the fear of being ‘less-than without this new something’”– must evolve to a conscious, conscientious and intentional consumption model.

The new consumer model she envisions is one where the value exchange between brands and people is measured in more than a commercial transaction. The brand must help consumers more fully realize their own human potential.

“For this, consumption needs to switch from the outcome [i.e. buy this product] to a vehicle toward an outcome,” she explains. “If we keep applying outdated ideas to new situations, we will only recreate the past. But we are not going back. We are going forward. As such, we need to look ahead and anticipate change.”

For example, many luxury brands talk about sustainability in a narrow context, using it as a badge of honor rather than what is expected for doing business in the 21st century.“Sustainability is not only a more responsible production cycle and ethically sourced materials,” she shares.

Rather, sustainability is the opposite of exploitation,“whether it’s people, natural resources, the environment, ideas, profits or rewards.” She continues, “This [exploitation] was the operating principle we inherited in business as a legacy mindset from the twentieth century.” The recent controversy surrounding alleged forced labor of Uyghurs in China’s Xinjiang province has implicated many brands, including adidas, Nike, Burberry, Puma, BMW, Apple and more.

Therefore, sustainability is “business done with consciousness and moral conscience. A sustainable business is a humanized business.” It’s about doing what is right morally and in the best interest of all brand stakeholders – consumers, employees, business partners – not just stockholders and senior executives.

“Brands have bombarded consumers with marketing messages that exploit our human aspirations and deepest desires to benefit their own revenue stream. But that value is illusory,” she reflects. “The real power for brands can be found in empowering customers to live their own authentic lives.”

Change Is Coming

The old model of aspirational luxury consumerism – I am a lesser person if I don’t have this brand – is giving way to a new consumerism model – I want this brand to become more of who I really am. It is a shift from aspiration to intention, becoming to being and Gen Z are on that journey.

The aspirational consumer model is about buying ready-made meanings imparted by the brand. The new consumption model is to help people create new meaning in and for themselves intentionally.

“The consumer narrative is shifting from brand aspiration to human well-being,” Dr. Olbert concludes. “As we enter the new era of conscious consumption, we need to create conscious commerce to satisfy our rapidly evolving human needs, values, preferences and lifestyles.”

This new more human, intentional consumerism model taking shape is still in its early stages, but it is advancing more rapidly due to the profound changes in people’s value systems brought on by the pandemic. And of all generations, Gen Z is at the forefront of this paradigm shift.

The luxury market has been built on exclusivity. The U.S. is still the largest global luxury market and luxury sector sales continue to soar – even through the pandemic. But how we define luxury is changing. First of all, the very tenets that the legacy fashion houses hung their hats on –– exclusivity, high price points, etc. –– are proving less relevant to younger customers. Luxury has always been about status. The concepts of craftsmanship, style, innovation and the desire to be “the person in the know” still resonate with today’s young upscale consumers. However, marketing to them and retaining them as loyal, lifelong customers is no easy feat.

The emerging luxury paradigm is focused on discovery, not unreachable aspiration. Differentiation is still in play, a desire that so defines next generation shoppers. A luxury house that positions itself as the judge, jury, and executioner of what’s fashionable doesn’t feel relevant today.

For next gens in the U.S., entry level luxury has lower price points than their global contemporaries. We’re talking about entry level luxury brands here –– lower price points and more focus on discovery, while also delivering the transparency that has come to define next gen purchasing behavior. Let’s take a look.

Getting Branding Right

Marketing luxury to next gens is filled with landmines. Take the case of Tiffany. This legacy brand is so immersed in American folklore that it’s canonized in the legendary Audrey Hepburn film. But the brand just can’t seem to find its way with next-gen luxury consumers.

What’s the reason for Tiffany’s struggle? After all, it would seem that the brand would appeal to both millennial nostalgia and Gen Z’s fixation on the 90s. But Tiffany, like many legacy luxury brands, was built on reverence, not the irreverence that defines next gen mindsets. It seems to be trying too hard with its new marketing campaign (Not Your Mother’s Tiffany) and selecting Beyonce and JAY-Z to be its new brand ambassadors. Tiffany’s true marketing success, however, was achieved through the brand’s 2018 marketing push with Elle Fanning. The ad featured graffiti and fresh music, managing to capture the irreverence that defines next gen purchasing behavior.

However, if anyone can reposition Tiffany for the next generation, it’s new owner LVMH. François Pinault, owner of Kering and rival to LVMH, put it like this, “Millennials and Gen Z care little about brand heritage, it’s about brand interaction in the here and now.”

Discovery

The emerging luxury paradigm is focused on discovery, not on unreachable aspiration. And, yes, differentiation is still in play, a desire that so defines next generation shoppers. A luxury house that positions itself as the judge, jury, and executioner of what’s fashionable doesn’t feel relevant today. Certainly not for generations that steer clear of anything resembling a pre-dictated life. They want to pave their own path and smart emerging luxury marketers have discovered how to let them do this in exciting ways.

There are four key shifts needed to make entry-level luxury appealing to next gens: choice, makers, transparency and empowerment.

Choice

Remember the old “show, don’t tell” adage from high school English class? Well, the same can be said of today’s luxury market. Next gens don’t want to be told what’s cool. They want brands to show them different options so that they can choose the products that ring true to them and make them cool.

Don’t believe me? Just take a look at how online entry level luxury small business marketplaces such as Wolf and Badger and Maimoun are showcasing new luxury designers. Wolf and Badger is a certified B Corp urging consumers to “shop your values,” focusing on the ethical nature of the products in their repertoire.

The intersection among culture, experiences, product and ethos on their website appeals to next gens’ sense of social justice. None of the brands featured on Wolf and Badger are tested on animals, there’s no fur used in the products, and plentiful vegan and vegetarian apparel selections are available. A section of the online magazine is dedicated to the environment, and there’s another full section dedicated to conscious travel. The online magazine also covers the origin stories and ethos of the different makers featured on the site.

Makers

Next up is Maimoun. The luxury marketplace invites customers to enjoy their visit in its “online home.” One could define Maimoun as highly curated edgy luxury and the store’s artist maker profiles are presented as “dialogues.” With entry level luxury marketplaces like Maimoun, the makers are the brand. Intimate maker portraits and how they engage with customers give the brand an accessible, interconnected feel. This is a large departure from the aloofness that characterizes legacy luxury brands.

Transparency

Luxury consumers haven’t historically been interested in where the money from their purchases end up. In their defense, it was only until a few years ago when political and social activists revealed the back stories of sourcing and manufacturing and showed consumers what the power of their dollar could do. But modern next gen luxury consumers aren’t only concerned with the ethics of their purchases, they also don’t want to pay more than necessary for the designs simply for the luxury marque or provenance. Let’s take a look at what the late great (and ever controversial) Virgil Abloh said: “I want to put culture on a track so that it becomes more inclusive, more open source.”

Modern luxury brands want to thwart the intimidation factor to appeal to a new generation of consumers. This means a future for explanatory pricing for luxury products. Young upstart luxury brands need to answer the question of the “why” behind the products. This doesn’t mean that Gucci and Balenciaga are going to start pricing like Everlane, by any means. But young upstart B Corp luxury brands are about to get a lot more transparent in the years to come.

Empowerment

Take a look at Mejuri and Awe Inspired jewelry brands. Mejuri’s brand position encourages women to self-gift fine jewelry. While some would argue that the brand’s price points are too low to be considered luxury, it’s many women’s first experience self-gifting fine jewelry. The brand’s feminist message, commitment to sustainability, and commitment to creating “fine jewelry at a fair price” has made it the go-to fine jeweler for millennials from coast-to-coast.

Awe Inspired jewelry is mission driven and, like Mejuri, it’s female founded. A whopping 20 percent of proceeds benefit charity partners like RAINN, The Trevor Project and NAMI. We’re talking about entry level luxury purchases consumers can feel good about no matter what is happening on a global level.

Start a Conversation

Luxury is no longer defined by price alone. It’s defined by quality and starting a conversation, particularly for brands striving to recruit next gen customers to buy high ticket items. It’s also safe to assume that millennials and Gen Z are sustainability focused, so brands need to have a strong mission statement to cater to these next gens. It’s time for legacy houses to become more accessible through transparency and offering a wide selection of options. Welcome to the era of friendly luxury brands.

Let’s talk context. The origins of luxury goods go back to the 18^th century when the retail model was developed for an aristocracy – the landed gentry with money to spend. In France, Italy, Spain, and England, aristocratic wealth spawned a category of high-quality expensive goods. Jewelry and clothing were just the entry points. Look at the history of Gucci, Rolex, LVMH, Rolls Royce and you will see the clear link between money and privilege. In their brand origin stories, money had a peaches and crème complexion.

First Generation Wealth

In the 1990s an exploding entrepreneurial economy fostered the birth of first-generation wealth. Today, the overwhelming percentage of global wealth is in the hands of people who earned it in their own lifetimes. Carlos Slim, Elon Musk, Jeff Bezos, Murkesh Amabani, and Jack Ma are just a few of the new money billionaires. With first-generation wealth came a profound change in the traffic luxury merchants received. There also came a paradigm shift in luxury brands helping self-made wealth (versus legacy generational wealth) understand and master the symbols and behaviors of a luxury lifestyle. The new face of affluence threw the old rules out the window. Some of us were amused when it was pointed out that dot-com billionaires were cruising in $100 million yachts but dressing out of the Land’s End catalog.

Before the pandemic, tour operators packaged shopping vacations for Middle Eastern and Indian families that picked them up at their homes, took them to the airport and got them to London or Paris and then to hotels close to the shopping venues. And more importantly, they helped customers get whatever they purchased through customs.

European merchants in the 90s were first horrified when hordes of Middle Eastern and Asian tourists invaded and altered the in-store climate. What was shocking to the merchants was their new visitors’ desire not to buy one handbag, but rather six or ten. Over the past 10 years, merchants like Canada Goose have experienced the same shopping behavior as many Asian customers bought multiple coats and paid in cash. Some stores took in a healthy six figures in cash almost daily.

Shopping Tourism

It didn’t take too long before the merchant community realized that Asian shoppers were often financing their trips by reselling the luxury goods they brought home. In Japan, China, and Korea, luxury goods were also viewed as a form of savings like gold coins and art. My Japanese friends describe cleaning out a deceased parent’s home and finding handbags and other brand name luxury goods stuffed into closets; liquid assets to convert into cash when needed.

At the time, the merchants’ first response was to selectively limit the number of items that one tourist could buy. Many of us may remember being approached by Asian tourists on the Champs-Élysées and Rue Saint Honoré asking us to make purchases for them.

Walk into Galleries Lafayette in Paris today and the in-store luxury boutiques have waiting lines. Luxury retail in emerging markets has documented an increase in gawker traffic necessitating a security presence at the door. In any case, shopping tourism is real. Some brands have realized that a back door and “membership” hours are a solution. I was told several years ago that 80 percent of purchases at the Ralph Lauren Store on Madison Avenue came from “back door” customers. Holt Renfrew, the Canadian department store in Toronto has a separate entrance for key customers through a doorway in the office building next door. Selfridges has separate dressing rooms for “private shoppers.” Neiman Marcus stores in their prime, prospered on the purchasing habits of only 100 key customers in an individual market.

Before the pandemic, tour operators packaged shopping vacations for Middle Eastern and Indian families that picked them up at their homes, took them to the airport and got them to London or Paris and then to hotels close to the shopping venues. And more importantly, they helped customers get whatever they purchased through customs.

By 2005, some high-end London stores reported 60 percent of their transactions were to offshore credit cards and had never in their history taken in more cash, much of it from Middle Eastern women. Those women prompted some basic changes both in operating culture and merchandise offerings. If you are a well-to-do English woman with an attractive young man kneeing at your feet helping you try on shoes, it is part of a pampered pleasure. For a good Muslim woman, it is unacceptable to have a strange man touching any part of you. Shoe sales increased dramatically when the sales help started adjusting who helped whom. In a typical Middle Eastern or Indian home, it is common to have three, sometimes four generations living under the same roof. Rethinking sleepwear offerings was also important. What does your brother’s wife wear pre-bedtime in the company of your mother and within eyeshot of other family males?

Cultural Mores

Will international shopping ever return to London, Paris, and New York? The answer is not to pre-pandemic levels. Other cities across the world are poised to supersede these shopping destinations. The language skills at the shopping malls in Dubai are impressive. The staffs’ skillsets are fluid, adjusting their style of service based on a shopper’s origin: the wife of Sudanese warlord and the Iranian woman wearing a Chanel scarf are interacted with differently. I was in the fine jewelry section of Bloomingdale’s last month and asked about language skills on the floor and if anyone spoke Portuguese; all I got was a blank look.

Expanded Services

Dubai, Doha, Singapore, and Bangkok have started to package medical services with shopping. Shopping malls in Bangkok have doctors and dental offices. The hospitals are very modern, very digital and the staff is often trained in prestigious western universities. The quality of care and costs put American hospitals to shame. More than one medical care pundit has asked when American insurance companies will recognize that it might be cheaper to fly a patient to Bangkok or Dubai for planned surgeries or dental implants at significant cost savings to them. Earlier this month the Mayo Clinic announced they would partner building a hospital on the Indonesian island of Bali –one of Southeast Asia’s key tourist destinations

Cultural Shifts

Hotels are readjusting. A friend from the UAE vacations with a family group of 22 – sons, daughters, wives, children, and maids. The typical western hotel may have adjoining rooms, but it is designed for singles, couples, and nuclear families. The idea that a luxury hotel has the flexibility to fit a large family group is a tough one for operators of classic properties. Before the pandemic hit there was talk that the Waldorf might consider a redesign based on the perception of its new Chinese owners. We’ll see.

The UAE family vacations and shops in Thailand. My friend Abdulla talks about comfort and the quality of the welcome as being so different than in Paris, London, or New York. If his mother wants to cover her head, no one stares at her. The restaurants make it clear they serve Halal meats and aren‘t offended when the Muslim family passes on consuming alcohol at a fancy restaurant. Try not ordering wine at dinner at a five-star restaurant in Paris. Affluence has many faces and traditions.

A Connected World

The retail world has to address its cultural conscious and unconscious biases. With the expansion of global travel and cross-cultural exposure, it is irresponsible to ignore the sensibilities of visitors from other countries. Retail tops the list of activities that all cultures enjoy and seek out when traveling. Luxury brands know how to cater to international customers; the same can’t be said for many major legacy retailers. Offering language services and being sensitive to different cultural traditions are table stakes. Take a page out of the luxury playbook to serve customers with respect and empathy. Global luxury looks different today, and we can’t make assumptions about customers based on our own perceptions.