With the country now experiencing unemployment nearing levels last seen in the Great Depression and with 70% of adults reporting that they’re stressed over the state of the economy, it’s little surprise that Americans are not racing to buy Rolex Submariners and Goyard Saint-Louis Claire tote bags just now. A recent report by consultancy Bain & Co. predicted that the luxury market could shrink by as much as 35% for the year, while sales of personal luxury goods may plummet by 60% for the second quarter.
Seen any luxury ads lately? Probably not. Fifty-seven percent of luxury brands report they’ve eased back on the marketing throttle since the pandemic started.
But a just-released survey from Adobe Marketing Cloud reveals that a significant chunk of the American population is still buying luxury goods and still, surprisingly enough, wants to see luxury advertising. What’s more, that group is Gen Z, the under-25 consumers who statistically lack the job security and affluence that many older buyers enjoy.
Adobe conducted its survey earlier this month, interviewing over a thousand shoppers to learn their feelings about brand advertising during the era of Covid-19. To an appreciable degree, the survey delivers many of the results you’d expect, most notably that pandemic and its resulting layoffs, furloughs, and fear in general have all conspired to lead households (61%) to cut back on planned purchases.
“While turning off all advertising may be tempting to brands, our findings show us that this isn’t the best solution.”
Adobe Advertising Cloud’s Ryan Fleisch
That doesn’t mean that Americans have no patience for advertising, however, though Adobe’s research suggests that there are certain types that’ll work better than others. Gift-with-purchase offers are out, while discounts are in.
But the survey’s most surprising finding deals with young consumers and luxury. While a huge swath of Gen Z (72%) report that it’s been negatively affected by Covid and the associated economic bedlam, that fact doesn’t seem to have dampened the young adults’ desire to shop. Over half of Gen Z respondents said they “aren’t hesitating when considering luxury good purchases,” and 40% report that they would actually like to see luxury (or “non-essential”) brand advertising right now.
Which suggests that the luxe brands that have curbed their marketing efforts in the last two months may want to consider loosening the restrictions, albeit carefully.
“While turning off all advertising may be tempting to brands, our findings show us that this isn’t the best solution,” Adobe Advertising Cloud’s product marketing head Ryan Fleisch told nitronet. “Pockets of opportunity still exist. The fact that a large percentage of Generation Z still desires luxury and non-essential brand is one example of this, despite this generation also being the one most negatively affected by Covid fallout.”
But it’s not a risk-free environment for luxury brands by any means. Twenty percent of the consumers Adobe talked to said they don’t want to see ads for luxury goods, period, so there’s an implied reputation risk for the makers of opulent goods who push their messages into the public sphere. Still, when reaching out to the 80% of shoppers who are open to those ads in some way, luxe brands stand a fair chance of reaching a receptive audience, assuming they get the targeting right.
“Advertisers need more detailed individual customer profiles,” Fleisch added, “to understand which individuals can be engaged with and which ones may want to avoid certain messages at any given time. One-size-fits-all won’t work.”
One demo that luxury brands may wish to avoid are older shoppers—Gen X and the Boomers, who each report by a margin of 76% that they’re “hesitant” to buy luxury goods at this time. Millennials aren’t far behind, with 75% saying they’re not feeling great about luxury shopping. Only Gen Z seems to be into the idea by a significant margin.
But if the budgets of Gen Z have been hit hard by the pandemic, why are they the ones admitting that they still have luxe in mind? There are a couple of theories. One is simple youth: Today’s early twentysomethings didn’t really feel the bite of the last recession and may tend to be dismissive of how menacing it can be. Another possibility: Many Gen Z Americans either haven’t left home or have been forced to move back in with mom and dad in the wake of the pandemic. A TD Ameritrade survey performed last year found that student debt is the reason 1 in 5 Gen Zers give for staying in their childhood bedrooms, and that the “stigma around living at home in [your] early 20s is decreasing.” No doubt, Covid-19 has only lessened that stigma.
Meanwhile, despite having been hit hard by Covid-19, luxury brands haven’t exactly been hibernating. Many have quietly directed their marketing efforts at small-screen diversions, notably Christian Dior’s “Designer of Dreams” Paris exhibition opened to a virtual audience on Instagram. Luxe wristwatch brands including Patek Philippe and Rolex report they’re still receiving a steady stream of inquiries from prospective buyers. And handbag icons Chanel and Louis Vuitton have quietly boosted prices in the United States.