Higher costs of living and shrinking disposable incomes have put 46% of Millennials into credit card debt, according to a study from NBC News and GenForward. Even so, half of Millennials are unafraid to spend on luxury: 50.9% prefer to use their disposable income for luxury products, entertainment, meals and high-end experiences rather than a better health care plan, according to a report from The Pearl Source.
The survey took a peek into Millennial luxury spending habits, revealing that even though luxury retail had struggled prior to 2017, high-end brands still may have a lot to look forward to:
- 36.5% said they’d forego paying down credit card debt for more disposable income for luxury products and experiences;
- 49.9% are spending up to $500 per month on luxury items; and
- 50.2% admitted that they were buying those items knowing they were not able to afford them.
“Millennials still spend a lot of money, and they’re quite unapologetic about how they choose to do so,” said Sos Nazaryan, Content Specialist at The Pearl Source. “From Uber to farm-to-table foods and premium coffee, the generation certainly has preferences for what are traditionally more expensive products and services. This is particularly true for luxury items, including but not limited to designer clothing, handbags, shoes and jewelry.”
The global luxury market grew 5% to an estimated $1.36 trillion in 2017, with Millennials and Gen Z driving a whopping 85% of that growth, according to a report from Bain & Co. Bain estimated that growth will continue at a 4% to 5% compound annual rate into 2020.
With Millennials overtaking Baby Boomers in spending power, luxury retailers should continue to offer personalized products and services and to focus on shopper engagement across all touch points. For example, luxury brands are reinterpreting streetwear to appeal to younger consumers: T-shirts, down jackets and sneakers were among the standout categories, growing by 25%, 15% and 10%, respectively.
Millennials Want To Pay Later For Luxury Purchases
But while Millennials are willing to make luxury purchases, they are approaching the payment process differently than older generations. The Pearl Source study indicated that Millennials prefer to finance their luxury purchases over time as opposed to paying everything up front:
- 57% were more willing to spend on luxury purchases, such as jewelry, when financing was available;
- More than 40% financed their engagement rings;
- Nearly 70% took on debt for their engagement rings;
- 22% took up to two years to pay down the debt; and
- 9% took more than two years to pay down the debt.
Most Millennials Consider Cost And Quality Top-Of-Mind, But Don’t Share Ethics Concerns
The research also revealed that while Millennial tastes are changing, the “death” of some luxury industries is probably exaggerated. Diamonds were still the most preferred luxury gemstone among the Millennials polled; however, 46% of Millennials indicated that they prefer alternative gemstones, such as rubies, sapphires and pearls.
As many as 90% of Millennials identified cost and quality as the two most important buying considerations with regard to jewelry; only 9% weighed ethical and environmental considerations when it came to luxury purchases.
The Pearl Source conducted the study of 1,000 randomly selected individuals aged 22 to 37 across the U.S. The study was designed to gather more insights and a greater understanding of how Millennials spend on luxury goods and services.