From Lars Rensing, CEO of enterprise blockchain and Web3 solutions provider Protokol
Younger generations are continuing to encroach on the luxury market, and for brands it is important they get their share. Set to make up 50% of the whole market by 2025, Gen Zs and Millennials are fast becoming key stakeholders in the industry. For luxury brands embedded with longstanding history and tradition, connecting with younger generations presents a new set of challenges.
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.
These new generations represent a huge challenge for luxury brands, but also an opportunity. In order for brands to continue growing and to take advantage of the opportunity this market presents, luxury brands must understand how to connect with, relate to and reach them.
A digital-first future
Gen Zs and most Millennials grew up online and 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 Gen Z and Millennial respondents who have already heard of the metaverse say they are interested in purchasing luxury goods via this new channel. Louis Vuitton 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.
The fashion industry has also adopted other ways to reach younger audiences, following the trend of digital assets, as NFTs take the world by storm. For luxury brands, NFTs go hand-in-hand with the interests of their target audiences. 23% of Millennials now collect NFTs and brands can engage audiences with these blockchain-based digital tokens through exclusive rewards or collectibles.
Luxury brands can even appeal to this audience by offering exclusive experiences in the metaverse, paired with NFTs and digital collectibles. For instance, Louis Vuitton’s adventure game in the metaverse, paid homage to its founder and its history, and players could win one of 30 exclusive NFTs. By offering NFTs for users to purchase and engage with in their favourite metaverse worlds, 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 their 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.
Building trust through blockchain
Younger generations value the authenticity and integrity of brands, often making purchasing decisions for this reason. 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 have a tamper-proof record 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 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. The importance and power of this younger generation over the future of luxury brands should not be underestimated.