Gen Y and Z accounted for all of the luxury market's growth in 2022, per a Bain & Company report.
Younger generations are set to become the largest buyers of luxury goods by 2030, the report says.
Gen Z's and Gen Alpha's spending is set to grow three times faster than other generations through 2030.
Generation Y, Z, and Alpha consumers are not afraid to splurge when it comes to luxury - and their luxury bills are only expected to get bigger.
The luxury market's consumer base will reach 500 million by 2030, according to a report by Bain & Company published on January 17. Bain's study is based on information and data provided by the Fondazione Altagamma, an Italian luxury goods body with over 280 luxury companies as members.
The lion's share of those luxury purchases will be made by the youngest consumers globally, per the report: Generations Y, Z, and Alpha will become the biggest luxury buyers by 2030, accounting for at least 80% of global purchases.
Millennials born between 1980 to 1994 are dubbed Generation Y, whereas Generation Z refers to those born between 1995 and 2009. Those born after 2010 are part of Generation Alpha.
Not only will they be the biggest spending group, but Generation Z's and Generation Alpha's spending is also slated to grow three times faster than other generations by 2030, occupying a third of the luxury market. This is a reflection of the generation's "precocious attitude toward luxury," the Bain report states.
These shifting trends have already become noticeable. Insider's Nidhi Pandurangi reported in December that a vast number of young Americans between the ages of 18 and 29 are opting to live with their parents - at a level not seen since the Great Depression era - which is likely freeing up disposable income for luxury spending. Insider's Dan Latu and Kelsey Neubauer looked at the spending habits of the youth and spoke to 20-somethings who live at home and splash out on cars, designer handbags, and nightclubs.
These habits could also be a result of the booming luxury resale market, where Generation Y, Z, and Alpha are treating luxury goods as valuable investments.
For example, a Chanel Medium Classic Flap bag was sold at an average of $3,900 in 2011, based on data compiled by Nasdaq. A decade later, the value skyrocketed to an average of $7,800. A bag purchased in 2011 could have yielded a 200% return on investment in 2021.
Drawing parallels to the S&P 500 index, a dollar invested in 2011 could net a return of around 149% in 2021, showing that certain luxury goods are not just a fashion investment for self-indulgence, but they have the potential to be profitable financial investments.
Apparel led the growth within personal luxury goods sales in 2022
Personal luxury goods had a good performance last year, with apparel leading the growth within the sector, the Bain report states.
Generation Y, Z, and Alpha are spending more on luxury apparel because of the "post-streetwear" phenomenon. Some elements of post-streetwear include gender fluidity, inclusiveness, and disregard for the occasion. Instead of focusing on what's in trend, younger consumers are more concerned about the techniques, materials, and functions of apparel, per the Bain report.
Bain notes a record growth in luxury shoes, where Generation Y, Z, and Alpha are not splurging on the iconic Nike Air Jordan 1 sneakers, but instead making purchases in Birkenstock-looking shoes - formerly known as "fussbett sandals." These sandals typically have a raised platform sole that's made of lightweight material, and it has straps or buckles to secure your feet.
Bain also said the luxury market will be shifting away from traditional business models to virtual shopping experiences such as Web 3.0 and the metaverse. This is expected to make luxury goods much more accessible and bolster sales to Generation Y, Z, and Alpha consumers.