Redefining luxury for Gen Z—How the metaverse can help brands evolve

Set to account for 40% of luxury purchases by 2035, Gen Z (those born between 1997 and 2012) are transforming the luxury market. Yet this new generation of consumers—having grown up analyzing the world through smartphones and confronted with the impact of their consumption habits—is proving to be a complex target for luxury brands. In short, they are very different customers than their parents.

Sign up for Ad Age’s Influencer Marketing newsletter.

While Gen Zers wearing luxury items, they simultaneously hate the values that most luxury brands embody. They are often seen as a remnant of old capitalism that is reluctant to shift toward sustainability, with many established brands yet to ditch exotic skins and animal fur, for example.

It is no surprise that luxury brands are not synonymous with digital acuity. Many players have barely scratched the surface of the ground-breaking technologies in which Gen Z is fluent. Such marketers failed to adapt their business model to the digital transformations of the 2010s, leaving them in no position to explore the possibilities offered by the metaverse, gaming or NFTs. Yet, the modern digital sphere shares many values with luxury brands: innovation, traceability, creativity, and perhaps most importantly, exclusivity.    

Here are five ways luxury brands can use tech to align their value proposition with an increasingly demanding and discerning audience:

Think beyond the real world

Luxury brands should pay attention to how other retailers are enabling consumers to participate in their brands. Thousands of people took part in Adidas and Prada’s photography contest as part of their Re-Nylon collaboration, which included the winning photos in a 3,000-picture NFT. The project not only demonstrated an awareness of social and environmental impact (the collection was made from recycled nylon and all proceeds from the NFT were given to charity), but its collaborative spirit broke the codes of the elitist luxury market while maintaining the feeling of community that is valued by both luxury brands and Gen Z.

Digital experiences are also enabling consumers to wear clothes and accessories that other people love, whether as a filter on social networks including DressX or The Fabricant, or as a wearable in games and virtual worlds such as Nike’s RTFKT.

Luxury brands should harness the possibility of permanently tying a real-life object to its digital counterpart–as a wearable for digital worlds, or as proof of authenticity when reselling or using warranty–increasing the value of the object.

Leverage the metaverse to shape a greener physical world

With 64% of Gen Z saying sustainability influences their purchases, digital plays a critical in incentivizing consumers to adopt more responsible buying behaviors.

For its partnership with Animal Crossing, H&M launched a virtual vegan collection where customers could buy clothes via an in-game app, while also learning about its sustainability initiatives and how to reuse, remake and recycle unwanted garments. The hope is that players will replicate IRL the environmentally friendly habits discovered in the game.

Luxury brands could go one step further by encouraging consumers to reduce their purchase of physical goods by selling more digital goods–without losing profit. Reducing the material used for clothing would reduce the tension on agriculture (for fabrics), metals and mining (for jewelery) and on society (for production that is relocated in lower-wage countries).

Add virtual to the brand strategy

An omnichannel strategy that gives the same priority to digital assets as physical assets is pivotal if luxury brands are to successfully attract Gen Z.

Forward-thinking brands will consider the future potential for digital assets to be used in games, in the metaverse and as filters or profile pictures on social media. Digital assets may even be an entry point for these digitally native consumers, helping to build brand awareness, affinity and ultimately encourage them to make a physical purchase.

BCG reported that among the 39% of luxury consumers aware of some brands interacting with online games, half had already bought luxury in-game items and 86% purchased their physical version. This is a trend that will only intensify as physical and digital worlds merge.

Embrace collaboration

Gen Zers love collaborations among brands they like. While these were once dominated by streetwear and fashion brands, the phenomenon has given rise to even the most unlikely partnerships (Off-White x Ikea, Supreme x LV) as brands look to surprise the market and grab the attention of the 67% of Gen Zers that purchase items from collaborations.

Gen Z’s distrustful and critical look of the past is forcing luxury brands to adapt their culture and prove they are fit for the modern world. Collaborating with more youth-focused brands will allow luxury houses to reach new audiences, while maintaining relevance to their heritage and shifting those negative perceptions in the process. It will also be a strong leverage for change, as luxury brands will be more inclined to pursue a sustainable way of working in order to attract these customers.

Mutualize your efforts

Contrary to millennials, Gen Zers are used to accessing simple services that have advanced functionalities, such as Instagram. Luxury brands should build on this trend and focus on creating comprehensive services with simple interfaces.

This might require them to mutualize their efforts and propose one common solution for customers, as LVMH & Prada Group and Richemont’s did when they built the Aura Blockchain consortium in 2021, a digital authentication of physical goods with high-quality certificate content and efficient user experience.

Ultimately, luxury brands that embrace technology, collaborate and embed sustainability into everything they do will have a competitive advantage when it comes to reaching this new generation of consumers.

Sign up for Ad Age’s Metaverse Marketing newsletter.