Key Takeaways:
While many brands are suffering, and some have had to take drastic measures like permanently closing stores, other brands like Dior or Louis Vuitton have been performing well, indicating that the pandemic is hitting brands with pre-existing conditions harder.
The brands that Gen Zers prefer will necessarily spark interest in Gen Xers. And similarly, they will discourage them from buying the brands they dislike. Therefore, to reach Gen Xers, brands must first be relevant to Gen Zers.
Over 80 percent of managers don’t know how to address Gen Z, and more than 90 percent of brands lack the positioning and storytelling needed to be relevant to them in the future.
We are living in a time of massive disruption. To attribute all the challenges that luxury brands are currently facing to COVID-19 would be myopic. Yes, the pandemic has caused a significant short-term impact, upended markets, and impacted consumer sentiment. However, the Q3 recovery of the GDP in key European countries (Germany, France, and Spain) after a sharp second-quarter decline — and the strong performance of the Chinese economy fueled by consumer spending in the luxury sector — signal a rapid recovery once markets reopen.
While many brands are suffering, and some have had to take drastic measures like permanently closing stores, other brands like Dior or Louis Vuitton have been performing well. That indicates the pandemic is hitting brands with pre-existing conditions harder. But brands that did their homework before the pandemic and used the past months to inspire their audiences are doing relatively well.
A time of disruption calls for a critical self-assessment of strengths and weaknesses. They also call for brands to rigorously fire from all cylinders to create consumer desire, a strategy that many brands have de-emphasized while trying to manage the pandemic.
But, given the magnitude of this disruption, it is dangerous to lose sight of structural changes currently happening. Many brands still focus on Generation X (consumers that are over forty). There is a reluctance to shift the focus to millennials, and even more so to Generation Z (consumers under 25). The standard argument is that “these are not our customers yet.”
While that may be true today for some brands, underestimating Gen Z’s importance is dangerous and can put a brand’s future in peril. That’s because this generation is, in many ways, the most discerning group of consumers. They are the most digital, the best informed, have the highest expectations, and are the least loyal. If a brand does not see them as an actual consumer group, it is likely because they already find the brand irrelevant. And without relevance, a Gen Zer will never opt in to a brand, as consumer preferences are built early in life.
Additionally, the tastes and choices of the younger generations strongly influence the older generations. It is often said: “The mothers shop what their daughters prefer.” It is seldomly the other way around. The brands that Gen Zers prefer will necessarily spark interest in Gen Xers. And similarly, they will discourage them from buying the brands they dislike. Therefore, to reach Gen Xers, brands must first be relevant to Gen Zers. As you can see, without creating relevance in this critical group, a brand has no future.
As digital natives, they have easy access to everything they want. Gen Zers see themselves as personal brands with clearly defined brand equities. Consequently, they only surround themselves with brands that are compatible with their values. And make no mistake – the youngest generation is the most value-driven. They have zero tolerance for brands that are not socially responsible.
Consumers don’t just walk into the stores and start buying anymore. Instead, they question the origin of the leather, inquire about the wellbeing of any animals used, and even ask about working conditions. These have become the decisive criteria for many consumers.
Brands should listen carefully. The real structural disruption is happening through Gen Z — more than ever and at unprecedented speed.
Gen Zers all over the world want to experience many different things. They love to experiment and will follow their own paths. Unlike previous generations, they don’t accept being put into a box. They decide what is good for them, and they don’t care what a brand wants them to do. This seemingly minor shift has a significant impact on brand storytelling.
Most brands still have brand equity definitions that worked for Gen X but are completely wrong for Gen Z. Brands today need much more consumer-focused brand storytelling that puts rational and emotional consumer benefits at the center. Brand-centric content such as “we use the best materials, we have the best craftsmanship,” etc., may have impressed previous generations, but not Gen Z. They want to know what’s in for them, or they move on to other brands that will provide them with extreme value.
The high expectations for experiences, the strong focus on personal branding, and the reduced attachment to always buying the same brand make Gen Z the most difficult generation to win over. Brands that fail to address them have no future, regardless of how large they are today. Size does not protect from failure in today’s hyper-competitive market.
It is a matter of survival for luxury brands to focus on Generation Z. Most companies lack the tools to generate actionable real-time insights, which allow them to keep track of rapidly changing preferences by generating critical insights. And more than 90 percent of brands lack the positioning and storytelling needed to be future-ready.
The best brands, such as Dior or Gucci, have already reinvented themselves years ago in preparation for this younger, more discerning generation. And they keep pushing the envelope to extend their lead in the luxury arena. There is no time to waste. If a brand waits until the future to solve this, it will have no future.