Luxury Brands Navigate the Shifting Tides of Gen Z Consumerism

By Reuters
Published: September 19, 2025

As luxury brands grapple with the evolving preferences of younger consumers, the spotlight is increasingly on Generation Z, those born between 1998 and 2012. This demographic is projected to account for a staggering 25% of global luxury spending by 2030, a significant leap from the mere 4% they represented before the pandemic, according to a report by the Boston Consulting Group.

The Changing Landscape of Luxury Shopping

Recently, two 24-year-olds from France, Fleur Arbel and Christophe Kairouz, found themselves drawn into Louis Vuitton’s flagship store in New York City, captivated by a whimsical sculpture of a monogrammed giraffe and ostrich. However, their enthusiasm quickly waned as they expressed a preference for brands that resonate more with their values and aesthetics. “I think they failed to keep the luxury image in a way,” Kairouz remarked, emphasizing the need for innovation in the luxury sector.

This sentiment reflects a broader trend among Gen Z consumers, who are increasingly discerning and eclectic in their shopping habits. Unlike previous generations, they blend high-end items with more affordable, trendy labels, often sourcing their fashion inspiration from platforms like TikTok and thrift stores.

The Influence of Social Media

The rise of social media has fundamentally altered the landscape of luxury retail. Brands are now competing not just with each other but also with a plethora of smaller, emerging labels that resonate with younger audiences. Scott Roe, CFO and COO of Tapestry, the parent company of Coach, noted that Gen Z’s preferences are remarkably similar across global cities like Shanghai, Los Angeles, and London.

To capture this elusive demographic, many legacy brands have turned to influencers, pop-up shops, and affordable luxury items. Coach, for instance, has seen a revenue increase of 9.9% to approximately $5.6 billion for the year ending June 2025, largely attributed to its successful engagement with Gen Z through personalized services and sustainability initiatives.

The Rise of Affordable Luxury

While traditional luxury brands face challenges, more affordable luxury companies are thriving. Brands like Coach and Ralph Lauren have successfully adapted to the changing market dynamics, with Coach’s revenue rising by 6.8% in the year ending March 2025. Tapestry’s increased marketing budget, which has grown from 3% to 10% of sales since the pandemic, underscores the importance of reaching Gen Z consumers effectively.

Emerging brands such as Collina Strada and The Row are also gaining traction. Collina Strada, for example, has seen 58% of its business come from Gen Z and Millennials, thanks to its focus on sustainability and a playful aesthetic that resonates with younger shoppers.

The Allure of Smaller Brands

Interestingly, not all luxury brands are struggling. Kering-owned Bottega Veneta, Prada Group’s Miu Miu, and LVMH-owned Loewe continue to perform well among Gen Z consumers. Miu Miu, in particular, has seen a remarkable 49% increase in sales in the first half of 2025 compared to the previous year, largely due to its appealing leather bag charms priced between $240 and $1,250.

Achim Berg, founder of FashionSIGHTS, noted that Miu Miu’s success lies in its ability to offer pieces that reflect the brand’s identity, allowing Gen Z consumers to engage without committing to a full outfit. This strategy aligns with the budget-conscious nature of younger shoppers, who are more selective about their luxury purchases.

The Budget-Conscious Generation

Despite their growing purchasing power, Gen Z remains cautious with their spending. A recent report from Bank of America revealed that spending among Gen Z and Millennials rose by only 0.5% in August compared to the previous year, in stark contrast to a 2.4% increase among Baby Boomers. This cautious approach is reflected in the shopping habits of individuals like Kendall Still, a 26-year-old from Los Angeles, who prioritizes longevity and timelessness in her luxury purchases.

The Struggles of Legacy Brands

While some brands adapt successfully, others are facing significant challenges. Kering-owned Gucci, for instance, reported a 25% decline in sales during the second quarter of 2025, leading to the ousting of CEO Stefano Cantino after just nine months. Data from Gen Z researcher dcdx indicated that Gucci experienced the sharpest decline in social media engagement among top luxury labels over the past year.

Frederica Levato, a senior partner at Bain & Company, noted that the luxury market is increasingly polarized, with clear winners and losers emerging. As Kering’s shares plummeted by 43% over the past two years, Tapestry’s stock has more than tripled, highlighting the shifting dynamics in the luxury sector.

The Future of Luxury Brands

Looking ahead, the next wave of luxury brands may emerge from China, with companies like Uma Wang and Shushu/Tong gaining popularity among younger consumers. Chanel CEO Leena Nair emphasized the importance of staying relevant and modern in a rapidly changing market, stating, “You cannot take the longevity of a brand for granted.”

As luxury brands navigate this generational shift, the ability to adapt to the preferences and values of Gen Z will be crucial for their survival. The challenge lies not only in maintaining brand prestige but also in fostering a connection with a demographic that values authenticity, sustainability, and innovation.

Conclusion

The luxury market is at a crossroads, with Generation Z poised to redefine its landscape. As brands strive to capture the attention of this influential cohort, the emphasis on creativity, sustainability, and affordability will likely shape the future of luxury retail. The ability to resonate with younger consumers will determine which brands thrive and which fall by the wayside in this ever-evolving industry.