Luxury brands may have to adjust their marketing. Today, most Millennials aren’t interested in spending their hard earned money for “status” brands as everyday brands close the gap with what luxury brands have to offer.
Here in Southwest Florida it’s not uncommon to see a lot of people driving around in Bentley’s or other high end cars, but I have yet to see someone without gray hair drive one of these expensive cars. In addition, it seems that the expensive home overlooking the Gulf are staying on the market longer. So what’s going on? In one word, Millennials.
You may have read that Millennial’s aren’t willing to put down roots buying expensive homes and for good reason. Most homes in cities like New York, San Francisco or Boston are pricing younger demographics out of the market. It’s not uncommon, for example, to walk through a well appointed model home only to find out that the upgrades raise the price of the home by almost 100%.
When it comes to cars, Millennial’s prefer function over status. I was surprised recently when a young CEO, whose startup is valued over $50 million, chose to purchase a Subaru over a BMW or Mercedes. As she said to me “why in the world would I spend $50 or $60K on a car when I just want to go from point A to point B?” When I told her of all the Bentley’s I see down here she went off the rail and said “even if I was worth $100 million there is like no way I would spend $145,000 on a car, please”.
Of course, Boomers have a lot of money and they are the ones who like to flash their expensive homes and cars at other, but as the tiny house trend clearly shows a lot of people are saying “enough is enough”. Millennial’s don’t want to be tied down to a mortgage. They value their freedom and want to be able to change jobs or location at a minimum of inconvenience.
Some brands are adapting to the new luxury market. Mercedes, for example, is adding lower cost models and BMW has added a 1 series for the budget conscience who still value performance.
Should brands like Roll’s Royce and Bentley worry? Well Rolls Royce just posted a huge loss and the Bentley dealer here in Naples has a LOT of unsold cars on the lot. Call it the “common sense economy” but it still has some things that marketers scratch their heads. Millennials, for example, seem very willing to pay $4-$5 for their daily Starbucks treat, but then again this is something they feel they earned.
Luxury brands will always have a market but that market is going to shrink as Millennials become a bigger force.