BoF LIVE: How Gen-Z Buys Luxury

Set to account for 40 percent of the global personal luxury goods market by 2035, gaining a share of Gen-Z spend is emerging as a critical growth lever for the luxury sector. Bain and Company estimates that millennials and Gen Z will contribute 130 percent of market growth between now and 2025. But winning over this cohort means adhering to a growing shift towards more value-driven spending. Indeed, nine out of 10 Gen-Z consumers believe brands should detail their stances on environmental and social issues, as reported in BoF and McKinsey’s State of Fashion Report 2021.

Zalando, Europe’s leading online platform for fashion and lifestyle, is focusing on the luxury opportunity, and Zalando Designer has evolved into a distinct proposition dedicated to luxury shopping and featuring elevated experience throughout the entire customer journey. In 2021, Zalando Designer has already welcomed over 50 brands onto the dedicated platform, including 032C, Missoni, Christopher Kane and Mansur Gavriel, and has introduced a new and personalised Zalando designer onsite experience.

To better serve its Gen-Z shoppers by providing access to unique and considered luxury brands, Zalando Designer entered into a new partnership with Not Just a Label, to stock its community of brands. Representing more than 45,000 designers from over 150 countries, Not Just a Label was founded by Stefan Siegel in 2008. The London and Los Angeles-based global fashion industry platform that works to empower emerging voices and facilitate industry exposure at no cost.

In conversation with BoF’s Alice Gividen last week, Anaheta v. Berenberg, Zalando Designer’s buying director, and Stefan Siegel, founder of Not Just a Label, shared their insights on the retail channels, product strategies and service standards that successfully engage the Gen-Z shopper as their share of market spend increases. BoF identifies the key insights from the conversation below.

Ethics Inform Gen-Z Purchasing Decisions

AvB: Interacting with brands that they believe are addressing environmental and ethical or social issues continues to be super key for [the Gen-Z cohort]. You need to enable them to make decisions based on their values. So, giving them transparency in the shopping journey… to make decisions based on the things that matter to them, while also celebrating the fun of fashion, celebrating luxury and celebrating the creative process.

We definitely see a very significant cultural shift. We see that they care about sustainability and Zalando is a place where you can shop more sustainably quite transparently. When they actually come to that decision point, have we enabled them to do it? We reference it as an attitude-behaviour gap. Do they feel empowered? Do they feel knowledgeable enough to make decisions based on their values? I think this is a really important point. Whether it is shopping the more sustainable flag on Zalando or shopping by value, like animal welfare or water consumption, they are creating a curated section of their site based on their values.

SS: It’s really interesting times for [Not Just a Label] and emerging designers. Over the last 10 to 12 years that Not Just a Label has been around, the product of emerging designers has always been the same: they create locally, they create things in small batches, made to order items and that has not changed. But what has changed is that the luxury item that has been made for you by a designer that nobody else knows, 10 years ago, it was seen as the sideshow to the bigger brands. I think if we jumped forward to what has been happening [in] the last couple of weeks, our sales in August have gone up by 362 percent. That all comes from Gen Z. People buy with a conviction now.

The same applies to sustainability and fashion. It is no longer something that you say ‘okay, I’m just going to buy this item because I think sustainability is the future.’ I think it is here now and people are doing this out of conviction. They’re saying, ‘I want something that I love. I want something that has been made for me, I want to know where my money goes.’ And with all these parameters emerging designers are central to what the Gen Z customer wants. Gen Z is driven by conviction; we can’t fake it. We can’t fake, we can’t greenwash, we can’t jump on certain trends.

Cross-Category Curation is Critical

AvB: Today, actually mixing and matching and buying different types of brands at different price points continues to be a major part of [Gen Z] consumer behaviour, there’s all these variables that are intertwined in their consumer behaviour. On Zalando, they’re not only engaging in pure luxury, but they also care about pre-owned, an area of the site where they can buy second-hand products. They are shopping beauty, they’re shopping cool, hot drop sneakers and… really shopping across price points, across brands, across propositions. It’s just so much more apparent in this generation, which is exciting because they’re really representative of themselves in their own buying behaviour: knocking down barriers and that’s cool, that’s exciting.

The major difference is that curation for us is defined by personalisation, it’s defined by inspiration, it’s defined by engagement. So, if you think about personalisation, your [hypothetical department store ground floor], is going to be different to another [hypothetical department store ground floor]. Because [each consumer] interacts with the platform in different ways, bought different things, looked at different things, etc. That personalisation, that’s exciting. That’s an exciting curation, especially for a young consumer.

SS: We’re dealing with the most informed customer ever. They’re running around with smartphones. We’re dealing with the most ethnically diverse generation ever. And I think we see that in their fashion as well. What is also different is that I grew up with social paradigms of how you should be dressed if you go to this occasion, what you should wear when you go to university and so on.

I think what we’re seeing now is this liberty of pretty much doing what you want but driven by different cultural aspects. Because we’re connecting the designer directly with the consumer, we’re seeing really interesting requests. We had a customer [who identified as male] who bought eight pieces [marketed to individuals who identify as women], who said, ‘can you actually make these pieces for me in men’s size extra-large?’

Provide Access to Local Market and Local Talent

AvB: I was recently at Copenhagen Fashion Week, and I was walking through the street, and I really noticed that the vast majority of the young consumers were dressed head to toe in Danish or Scandi brands. There’s this sense of community and the sense of supporting the local businesses and supporting the local, creative world. The strategies need to come locally. What that means is that we actually have local markets teams really addressing what resonates locally and what communication needs to look at, what the customer engagement strategy needs and who the local partners need to be.

[What] we need to ensure is that those consumers get to have the brands that they love, their local brands are offered to them, and then simultaneously we need to give the brands a platform to push their own strategy. That might be to grow in Southern Europe or Eastern Europe or whatever it may be and allow for that local approach but a global opportunity or European opportunity to be really instilled in the strategy.

SS: For me, the biggest strategy is to stop the destruction of our planet. There’s nothing else that is more important than that and that needs to drive [in] your brand, fashion and anywhere else. I think if we put that first, a lot of things will become clear. A lot of things show us also how inefficient we are, especially in fashion and how brands work. I think the answer lies somewhere in making our business more sustainable, but also giving Gen Z what they want.

I think the solution there is on demand manufacturing. Being able to provide them with something different. I think the most astonishing trend that we’ve seen is, after we carefully introduced designers who cannot ship an item within 48 hours. We said [we expect] designers to dispatch an item within 21 days. [As a result], designers started making things made to order, or as they are calling it ‘cut to order’ where they have the fabric ready, but they only start cutting it once the order comes in. Over August 60/70 percent of our orders were made to order which I think is astonishing. I think that just shows that [Gen Z] are ready to wait almost a month for a piece and we’re seeing this cross category.

This is a sponsored feature paid for by Zalando Designer as part of a BoF partnership. This interview has been edited and condensed for clarity.