US And China Millennials Do Not Mark The End Of European Luxury

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UBS | Following our recent launch report on European luxury we have undertaken an analysis of US and Chinese millennial (18-34 years) spending together with UBS Evidence Lab based on our survey of 2,109 consumers. We conclude that millennials will not mark the end to luxury consumption that some fear.


In fact there are indicators that brands may gain more traction targeting this consumer in the US. This could be an opportunity for Burberry (Buy, PT 1500p) in its US brand elevation strategy especially given its digital presence. The brand outperforms with both US and Chinese millennials. Louis Vuitton scores consistently well across nationalities and generations. This is another sign of the strength of the brand – a core rationale behind our Buy rating on LVMH (PT €175).


Question 1: Do millennial consumers still care about luxury?

A bear argument for the long-term growth in luxury is that millennial consumers care more about experiences than spending on luxury when compared to the older generation. Our sample is based on luxury consumers rather than the general population but responses suggest little evidence of this. Chinese millennials appear to act broadly in line with the 35+ age group. We are more sceptical on the US underpenetration argument overall but there are some indications that European Luxury brands may gain traction targeting millennials. The under 35s told us that they spent c10-20% more than the older generation on luxury goods last year and 60% of consumers see their personal finances improving compared to 33% of 35+ year olds. 3Price is not the core purchasing driver with quality and timelessness more important.


Question 2: Who is best placed to win with the millennial consumer?

The results from our survey suggest that the brands need to work hard to win over the Chinese millennial consumers who appear less brand loyal than the older generation. It is a different picture in the US where the millennial consumers appear less sceptical of luxury brands with higher brand loyalty. Overall we believe that having a strong online presence is important to presenting the right image to millennials and companies advanced here such as Burberry but also Gucci and Louis Vuitton are well placed to win. This is especially the case in China where the millennial consumer is more likely to purchase via Daigou (grey market) which we see as a risk to brand equity.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.