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Rich millennials' spending habits are turning the luxury sector on its head.
Like the rest of their generation, rich millennials prefer to spend on experiences - but unlike the rest of their generation, they pay extra to heighten these experiences with VIP treatments and customization.
Rich millennials are also creating new trends and status symbols, namely expensive sneakers and streetwear, the latter of which has become entwined with luxury fashion. This is largely due to the role of social media - as more millennials take to Instagram, brands and fashion magazines are losing some of their clout to influencers.
That's not to mention millennials' preference for the share economy, which has trickled into the luxury world. Rental services like Rent the Runway have made luxury goods more accessible to others.
Like the rest of their generation, rich millennials prefer to spend on experiences instead of things. What sets them apart is their willingness to pay more for heightened comfort or service during these experiences to match their lifestyles, wrote Larissa Faw in a post for Forbes.
"For instance, millennials, regardless of socioeconomic status, attend the music festival Bonnaroo, but while non-affluent guests stay in basic tents and use communal showers, affluent Millennials pay more for the VIP experience with a gourmet private chef and golf-cart chauffeur service," she wrote, adding that many festivals and concerts have developed VIP programs for this reason.
She added: "Likewise, millennials may party at the same nightclub, but only the affluent are escorted past the velvet rope to a separate (often elevated) section."
They seek exclusivity and customization in their experiences.
Affluent millennials also prefer to customize their experiences — an added bonus they're willing to spend extra money on. As the elite shift their focus away from goods, "they want personalized experiences that are either inherently unique or specifically tailored to them," Business Insider's Lina Batarags wrote.
This is especially true for the affluent millennial traveler, who seeks luxury hotels that offer personalized amenities and attention like cocktail butlers mixing drinks in your room or drink trolleys in the hallways, Batarags reported.
"Personalization is what they want," Jenni Benzaquen, vice president of luxury brands in Europe for Marriott International, told Ting. "Luxury used to be one thing to one person but it's no longer about white gloves and white tablecloths. There's no more formality in luxury and hotels need to understand our guests. They want what's unforgettable and unique, and they have a thirst for the unknown and they are going to markets where their friends haven’t been before."
They choose brands based on their mission and values.
But heightened experiences aren't the end all, be all. Instead of replacing the role of brands in wealthy people's lives outright, experiences are augmenting the significance of and consideration that goes into buying a particular brand, Batarags reported.
"Younger generations are less likely to be staunch loyalists to a single brand when compared to their parents and grandparents," Mike Phillips, Wealth-X's vice president of marketing and communications, told Batarags. "They're more likely to try something new if it speaks to their personal values and passions."
He continued: "More and more, the wealthy are evaluating a brand in terms of: What mission does this brand represent? How does it contribute to the greater good ... If I choose to purchase this product, what does that say about me and my values?"
That kind of awareness extends beyond just products, too.
Entire industries are developing or adjusting services to cater to this customer interest, Batarags wrote. Consider wellness, which is increasingly regarded as a modern embodiment of luxury. Accordingly, an array of spas and studios offering treatments like cryofacials, weeklong retreats, and vitamin IV drips are delivering those experiences.
They invest in a new kind of status symbol: the luxury sneaker.
But that doesn't mean rich millennials shy away from shopping — they're more likely to invest in a pair of luxury sneakers as a status symbol.
Footwear is the most powerful category in the online luxury market, according to a recent report by The NPD Group — and at the forefront is the sneaker.
Thanks to their desire for comfort and athleisure, millennials are largely behind this trend, Beth Goldstein, fashion and accessories analyst at The NPD Group previously told Business Insider. Celebrities and fashion editors are dropping $900 on Balenciaga's Triple S sneakers and Silicon Valley tech CEOs are spending $495 on Lanvin low-tops.
As a result, affluent millennials have helped drive up the price of the sneaker and have given it a foothold in the tech industry and fashion world.
They're bringing streetwear to the luxury market.
Their appetite for athleisure has led millennials to bring streetwear out from the underground. Many luxury brands have been partnering with streetwear brands to cater to millennials, Business Insider previously reported.
While the subculture of streetwear has been around for decades, it's seen a spike in popularity because of Instagram, Jessica Sulima of Adweek reported.
"Streetwear’s loud aesthetic allows the trend to make noise on social media," Sulima wrote. "And as younger shoppers are beginning to favor uniqueness over craftsmanship, out goes the desire for traditional luxury."
She added: "As high fashion houses tap more and more into this growing social media trend, streetwear is occupying a larger space within the upper echelons of style."
It's making Gucci cool again — in 2015, the brand brought on Alessandro Michele as creative director, who helped Gucci embrace streetwear and the influence of popular culture.
Rich millennials are using social media to exert influence over fashion trends — and they're taking some of that power away from magazines.
Streetwear is a prime example of how rich millennials are using Instagram to influence luxury fashion. Influencers, from celebrities like Kim Kardashian West to bloggers like Chiara Ferragni, are dictating what's hot in the luxury world — and the trends they flaunt on social media then trickle down to the masses.
"The explosion of social media flips the old paradigm, where brands mostly created their own public image from the top down, through advertisements and by building relationships with fashion magazines and editors such as Vogue's Anna Wintour," wrote Marc Bain for Quartz.
He added: "But now anyone with a smartphone can become an 'influencer,' crafting their own share of a brand's image through the pictures they post and what they say. It has shifted the balance of power, and while brands still retain much of it, influencers are increasing in clout."
Because of this, magazines don't have as strong a pull as they used to when it comes to fashion, according to Bain.
They're making luxury accessible and shareable.
Millennials are all about the share economy.
"Battered by student loan debt and the Great Recession, millennials place less emphasis on owning and more on sharing, bartering and trading to access coveted goods," wrote Jilian Mincer of Reuters. "These behaviors have propelled businesses such as car rental service Zipcar, taxi service Uber, and home rental site Airbnb."
Similar services are appearing in the luxury world, according to Bain: "Now, you can rent a Narciso Rodriguez dress for an evening, or a Marni jacket for a month, with Rent the Runway. If you want to show off your discerning taste with a Rolex or a Patek Philippe watch, but don't have several thousand dollars to spend, there's Eleven James."
These services make luxury more accessible to others, thereby diluting "luxury's emotional power," Bain wrote, citing sentiments expressed by Gary Wassner, CEO of Hilldun Corporation and chairman of Interluxe Holdings, at a 2018 conference organized by the French-American Chamber of Commerce.
