Younger generation without mortgages preferring quality over fast fashion

Millennial and Gen Z consumers with an appetite for luxury brands have propelled stores selling Louis Vuitton, Richemont and Hermes.

A Louis Vuitton store in the Sydney CBD. Picture: Bianca De Marchi

The appetite for high-end goods among the younger generation of Australians is thriving, despite tougher economic times for mortgage holders slugged by higher interest rates.

With home ownership sliding out of reach for many young people, some now appear to be devoting their pay cheques to spending on luxury brands, rather than saving for more traditional goals.

The spending shift is not only driving a move away from traditional department store shopping, but it is also fuelling the growth of flagship stores devoted to top brands in major cities.

The flagship properties have become a feature of central business districts for young shoppers, helping spur a revival of city strips which is disconnected from the dwindling occupancy rates hitting office towers.

The stores are also becoming a bigger feature for shopping centres like Melbourne’s Chadstone, which has made fashion a focus, and Chatswood Chase on Sydney’s wealthy north shore.

The return of international tourism and a rising number of Millennial and Gen Z consumers with an appetite for luxury brands had underpinned this strong performance in luxury retail, according to a new CBRE research report.

CBRE said that luxury retail trade in Australia hit a record $6.2bn in 2023 with 483 retailers, – international and domestic – operating nationally.

While luxury goods attract a higher price point, Australia’s inflow of wealthy migrants, the recovery of international and domestic tourism, and increasing discretionary spending contributed to the strength of the retail market.

The top performing luxury brands in Australia were Louis Vuitton, Richemont and Hermes. The three brands performed well over the past four years, achieving revenue growth of 87 per cent, 153 per cent and 177 per cent, respectively, since 2019.

According to IBISWorld, top-tier brands have either established stores or expanded their footprint by securing leases in Sydney, Melbourne, Brisbane, Perth and Adelaide.

The agency said there had been a consumer shift in Australia’s luxury market with the rise of Millennial and Gen Z generations preferring high-quality and sustainable products.

Although they are engaging with brands online, consumers are also still making purchases in-store. As of April, people aged between 15 to 54 accounted for more than half of all high-end spending in Australia.

CBRE head of retail property management and leasing, Pacific Sheree Griff highlighted the shift by the younger generation. “The trend of younger consumers showing a preference for premium products over ‘fast fashion’ is a key driver behind the robust performance of Australia’s luxury retail market in 2023,” Ms Griff said.

“Social media, particularly TikTok and Instagram, has become a significant platform for younger consumers to discover and engage with luxury brands,” she said.

“Short-form videos and viral content, often featuring celebrities and influencers, heavily influence purchasing decisions of Millennials and Gen Z who want to align with fashion trends and brand status.”

Ms Griff said consumers were discovering luxury goods online but still valued the experience offered in flagship stores, prompting many top-tier brands to expand in major cities.

“The luxury market’s dynamic nature and shifting consumer preferences present exciting opportunities for growth and innovation in Australia,” Ms Griff said.

Luxury consumers are focused on clothing and footwear, accounting for $4.3bn (69 per cent) of total revenue in 2024.

Jewellery and watches had a significant share, making up a quarter of purchases at $1.5bn. Luxury luggage sales have also jumped in recent years, outperforming all luxury markets, as travel recovered.

Originally published as Younger generation without mortgages preferring quality over fast fashion