Luxury Sneakers May Not Be in the Budget for Gen-Z

Gen-Z are well known for their love of fashion, specifically luxury brands, which allow them to show-off their taste for the finer things in life. But the rising cost of living coupled with high rates of unemployment is impacting their spending habits.

Luxury Sneakers May Not Be in the Budget for Gen-Z

Gen-Z are well known for their love of fashion, specifically luxury brands, which allow them to show-off their taste for the finer things in life. They are also big spenders, and according to Gregory Boutte, Gucci-owner Kering’s chief client and digital officer, they have been driving growth in sales in the luxury brands industry for the last decade. However, the recent downturn in the economy has seriously hit the pockets of many young adults, leaving them with no discretionary funds to spend on luxury items.

There are a few factors that have contributed to this. Whereas a high inflation and the rising cost of living seem to have affected mostly Europe and North America’s young people, in China, the second-largest economy in the world, the high unemployment rate seems to be the biggest factor. This is due to some lay-offs the country experienced recently as a result of the Covid-19 lockdowns.

Many young people are concerned about the possibility of going into a recession, as this would mean cutting down their spending even more. This includes people like U.S.-based luxury lifestyle and travel TikToker, Jeffrey Huang (28), who has a huge following. He was recently quoted saying “If a recession happens, then I will 100% buy less or maybe even stop buying altogether.”

How are luxury brands responding?

A new study by Oliver Wyman shows that some luxury brands are responding to these conditions by lowering their sales expectations, especially for the Chinese market, although it’s not clear which brands those may be.

Despite the state of the economy, it’s worth noting though that some luxury brands, like LVMH and Kering, remain unaffected as they continue to ride the wave of post-pandemic spending by their wealthy clients. Some big brands have even hinted at growing their top end sales of $5,000 coats and $10,000 handbags instead of focusing on attracting new entrants who come in at the bottom rung of the ladder. Brands like LV, Chanel and Dior have raised their prices on high margin leather goods and Chanel is planning to open VIP stores.

What then of Gen-Z spenders?

The Gen-Z consumers who are not affected by inflation will obviously continue to buy big ticket items even with increasing prices, however the entry-point buyers, who were only able to afford cheaper items like earrings, sneakers and slides will definitely be impacted, as recently noted by Burberry.

If luxury brands want to continue attracting the “not-so-affluent” Gen-Z buyers they have to lower their prices and offer entry-point items to increase affordability for these young people. Here we are talking about offering items like cell phone cases, earrings and perfumes which still allow the youngsters to spot the logo without spending too much money. Some brands like Balenciaga and Dior have responded by being creative. They are offering metaverse fashion so young people can at least kit out their virtual identities. A pair of virtual Gucci sneakers sells for $17.99.

The good news for luxury brands is that young people’s love of fashion remains undimmed, even with the current state of the economy. If these brands want to retain the young consumers all they have to do is be creative and offer entry-level products that will attract and retain the interests of young consumers.