A large portion of affluent Generation Y attains their wealth from their parents—but they may not be on track for it in the future, according to Digitas‘ study “Affluence in America: The Next Generation.”
Affluent and Aspiring Children spend between two and four times their own income, due to access to their parents’ wealth.Many of these millennials choose careers that do not put them on track to become as affluent as their parents.
The study, which follows on previous research released last year—”Affluence in America: The New Consumer Landscape“—reveals how crucial Generation Y has become for luxury marketers. The affluent segment of Generation Y (those ages 18-34, living in a household that earns over $100K in annual income), has both the largest current and potential spending for luxury items. Research shows that by 2017, they could be outspending the boomer generation.
What makes millennials buy luxury products? Authenticity, nostalgia and utility, states the authors of the study.
Authenticity: Unique, ‘ever-cool’ brands, i.e. Ray-Ban, Levi’s, Volvo, and YSL.
Nostalgia: Heritage brands with a sense of history, i.e. Louis Vuitton, Chanel, and BMW.
Utility: Products that fit specific needs of the users, i.e. Hulu, Netflix, and HBO on Demand.
“Luxury spending is increasingly becoming the domain of Generation Y” said George Scribner, SVP/Account Planning, Digitas. “It’s important for luxury marketers—and really, all retail marketers—to hone in on how the millennial generation is redefining the experience of luxury. Only then can they create the bold ideas and programs that connect with the Gen Y growth engine.”
“Luxury has changed significantly in the past few years, becoming more personal, more intimate, more value -focused, and more tech-savvy. Looking ahead, Gen Y will lead these and other trends in luxury – marketers must heed this generational shift, and heighten their understanding of Gen Y and its many sub-segments,” said Dr. Stephen Kraus, SVP & Chief Insights Officer, Audience Measurement Group, Ipsos MediaCT.
Key Findings of the study:
The study broke down affluent millennials (population: 16.6 million) into five segments across Aspiring, Emerging, and Affluent.
ASPIRING: Annual HHI: $100-$199K
1. Aspiring Head of Household: Mean Age: 30/ Location: Midwest, South
They tend to be married with children, and are likely to prioritize family (and work-life balance), which can impact future earnings. They are considered the least wealthy of the Gen Y subsets.
Career paths: Technology or finance, but in non-metro regions.
2. Aspiring Children: Mean Age: 23/ Location: Northeast
They live at home with their parents. They earn a modest personal income, but are spending four times that due to access to household income.
Career paths: Retail jobs rather than careers, or pursuing “passion” careers like acting or entertainment.
EMERGING Annual HHI: $100-$199K
3. Emerging Head of Household: Mean Age: 28/ Location: South, West
They tend to be unmarried. They spend frugally now, but many are pursuing career paths that will put them on track to become wealthy in the next decade.
Career paths: Creative, upwardly mobile in financial services, technology, architecture, advertising and real estate.
AFFLUENT Annual HHI: $200K+
4. Affluent Children: Mean Age: 23/ Location: Northeast, South
They live at home with their parents. They spend 3x what they earn due to access to a household income that’s 10x their own earnings.
Career paths: “Mission” careers like education, the arts, nonprofits or counseling.
5. Affluent Head of Household: Mean Age: 30/ Location: Northeast, West
They’re likely to be married with children, and say that work dominates their lives.
Career paths: Traditional high-paying careers like medicine, legal and finance, as well as software design and engineering.