Sustainability, a Key to Winning Gen Z in Taiwan Luxury Market
The COVID pandemic has not only significantly changed consumers’ shopping behavior but also strengthened the influence of sustainability on people’s purchase intentions. This trend has also impacted the market in Taiwan, especially among younger Taiwanese consumers, often referred to as Taiwanese Gen Z. Therefore ESG-related factors become the key to success in this country for a luxury brand.
To gain a comprehensive understanding of Gen Z, let’s begin with the definition. According to McKinsey, Gen Z are people who were born between 1996 and 2010. However, this age range is not fixed. For some research, the range is wider. But in general, Gen Z are digital-native, meaning their lives are highly integrated with the internet and smartphones. While they are projected to represent only 5% of global luxury sales by 2025, they are growing rapidly and are estimated to contribute at least 1/4 of the world’s income and will overtake their previous generation in 2031. And by 2035, Gen Z will represent 40% of the luxury market.
Now, here comes the question: how can we target these consumers in Taiwan? According to an online survey by MIC, the social issues that matter most to Gen Z are public health, environmental protection, 5G technology, gender equality, and political issues between Taiwan and China. 2 out of these top 5 issues are ESG-related concepts which offer the most cost-effective opportunities for a brand. A report published by National Chengchi University reveals that not only Gen Z but also in general, Taiwanese consumers are now more aware of ESG issues and expect companies to make their commitments to be environmentally and socially responsible. As a result, environmental protection and gender equality are the 2 aspects that a luxury brand can leverage to build connections with Gen Z and, at the same time, maintain relationships with consumers from other age groups.
Embrace eco-friendly materials
A report from First Insight indicates that more than 60% of Gen Z consumers tend to purchase from sustainable brands and more than 70% of them are willing to pay more for sustainable goods. To seize this opportunity, many luxury brands have already implemented relevant measurements. For instance, in 2021, Kering Group, which owns some of the most popular brands, such as Gucci, Bottega Venetta, and Balenciaga, announced that all the houses under the group will stop using animal fur from the 2022 collection. Sometimes, giving up the use of luxurious materials, like animal leather or fur, may seem paradoxical in the context of luxury goods’ value and even detrimental to a brand’s heritage. But actually, the threat might be much less serious than we thought. Tiffany, renowned for its jewelry products, announced the brand will start using artificial diamonds in 2019. And this year, the jewelry brand has started testing the market by launching its first lab-grown diamond collection. And in the United States, artificial diamonds are gaining more acceptance in the market. Therefore, we can see stopping using not environmentally friendly materials doesn’t necessarily harm a brand and can even open up new sources of revenue.
Enter second-hand market
According to a report published by Thredup, the second-hand market will become more than 2.5 times larger by 2027 with Gen Z and Millennials driving the majority of this growth. This trend is already underway. For example, on The RealReal, one of the biggest luxury 2nd hand platforms, 18% of the sales came from Gen Z consumers in the past year. And in Taiwan, nearly 60% of Gen Zers have shown their interest in second-hand clothes. As for the luxury industry, several players have already entered this blue ocean. For instance, Kering Group invested US$216 million in Vestiaire Collective, a resale platform partnering with Alexander McQueen in 2021. Gucci started its partnership with The RealReal in 2020 and Prada has also expressed interest in the resale market. All of these examples clearly indicate the potential of the second-hand market.
Promote inclusivity
As Taiwanese Gen Z cares about gender equality, addressing this issue should be integrated into a brand’s strategy. The idea of gender equality is not only limited to biological gender, which means male and female but also encompasses the rights of those with different sexual orientations, in short, LGBTQ rights. Research from Ipsos shows that Gen Z is the age group with the highest proportion of people having LGBTQ identity with nearly 20% of them claiming to be part of the community. Promoting inclusivity means more than simply adding a rainbow flag or color to products; it entails authentically demonstrating how a brand supports this community. Here are some examples. Mugler shows its support for the LGBTQ community by launching collections featuring transgender models. Also, the brand creates large-size designs to challenge traditional standards of beauty, making the brand more inclusive. Another example is Versace, which has released limited collections and donated the sales to Lady Gaga’s Born This Way Foundation, aimed at helping the LGBTQ community. For those brands not very engaged and presented in the public sphere when it comes to gender equality issues, promoting inclusivity is definitely a chance to establish a deeper connection with young consumers.
In Taiwan, Gen Z accounts for 15% of the population today. While they may not currently be the dominant force in the market, they are expected to become the most influential consumers in the future. Implementing market strategies that align with the sustainability trend is the most efficient approach for helping a brand succeed in the market.
