21% of these consumers are ready to spend 16% of their income on luxury.
Gen Zs are not shy to spend their money on themselves, particularly in China where more than 20% of Gen Zs are willing to shell out over 16% of their income for luxury products. This puts the Gen Zs well in place to become the luxury market’s largest consumer base, overtaking other age groups.
In a study, KPMG China found that whilst a larger 29% of Gen Zs are willing to pay less than 5% of their annual income for luxury items, the 21% who are willing to pay more stand at the same ratio as Baby Boomers (55+). This is just 11 percentage points behind compared to Millennials (25-34).
In addition, around 43% of Gen Zs are open to paying a premium of more than 5% for products that are aligned with their values, just 4 points lower than Millennials, which signifies the strong propensity to pay amongst this age group.
“Gen Z will soon become the major force of purchase in China. Brands need to understand their values, beliefs, motivations and behaviours, and factor those insights into retail experiences and customer journeys,” Anson Bailey, head of Consumer & Retail ASPAC, KPMG China, said.
The report noted that Gen Zs are considered the wealthiest generation in the market, which is thanks to the one-child policy imposed in China, better education levels, and financial literacy.
Understandably, this generation has greater access to disposable incomes.
“[Gen Zs] will already have been born into a world where luxury is very accessible,” Fflur Roberts, Industry Manager-Luxury Goods Research of Euromonitor, told Retail Asia. “Their parents, and grandparents probably did not have access to luxury, and they would have had to travel to buy these goods, whereas now it’s on their doorstep.”
She noted that for Asians, luxury is perceived as an aspirational product, as opposed for instance, to their Nordic counterparts who are not as interested in luxury despite having a high disposable income.
“It’s very aspirational, and very status driven. This is an environment that they would have already been born into, and there will be that drive to get a good job, and a good education. There will be that kind of aspirational desire to have access to these products,” she said.
Roberts added that whilst it is still difficult to assess at this point, Gen Zs will eventually become the biggest consumer base, which raises the need for brands to focus on this demographic.
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