Once upon a time, luxury brands were reserved for the wealthy and the settled – those who had already made it in life and were now enjoying the fruits of their labour by splurging on opulent fashion, high-end cars and lavish holidays.
But in 2023, luxury brands are working hard to appeal to millennial and Generation Z consumers, who have considerably more disposable income than Boomers and those who came before them did in their 20s and 30s – even in spite of the current cost of living crisis.
Over recent years, we’ve seen some of the biggest names in luxury fashion – take Gucci, for example – fully embracing the world of influencer marketing in a bid to connect with a younger, hipper audience, launching exciting Instagram campaigns and debuting on favourite Gen Z app, TikTok.
In a further bid to stay relevant, they’ve also been dipping their toes into the world of crypto and the metaverse – the latter being set to transform the way we live, work and shop over the next decade.
In today’s modern world, we’re used to having what we want, when we want it, as opposed to saving up for months or even years to buy one expensive item. And, whilst it’s true that younger generations do have more to spend, some more expensive goods could still feel a little bit out of reach if it wasn’t for installment payment providers like Klarna and Laybuy. Advanced payments systems like these have made luxury goods more accessible than ever before to aspirational customers, in turn, driving sales figures through the roof.
While this type of system doesn’t necessarily align with the traditional concept of luxury, the brands that are willing to move with the times and embrace what’s new are almost certainly those that will come out on top.
The rise of BNPL in the luxury world
Buy now, pay later (BNPL) offerings don’t just make it easier for would-be customers to get the goods, but also encourages them to splash out on higher-ticket items by making them feel more affordable. And for retailers, it’s a win-win, because they get the sales without having to run promotions or discounts, which are widely thought to cheapen luxury brands and are rarely associated with the most esteemed names in the world.
In the UK, Klarna is by far the most popular BNPL provider, followed by Clearpay and Laybuy – but such models have now expanded beyond fashion and retail and into the travel realm, too. Platforms like Fly Now, Pay Later have made long-haul flights more affordable by allowing users to pay a deposit and split the remaining cost into up to ten installments – in turn, making business and first class upgrades more accessible. And Alternative Airlines has embraced Klarna as its BNPL payment provider for those looking to split the cost of their bookings, offering payment in up to three installments, as well as on a ‘buy now, pay in 30 days’ option that even allows passengers to have already flown before the balance is due.
The only way is up
The fintech companies behind Klarna and co are well established in the ecommerce space, and over the past three years, have seen some impressive growth. Many BNPL systems really came into their own during the Covid-19 pandemic, when disposable income took a hit thanks to ongoing lockdowns and furloughing schemes and in 2021, 60 percent of consumers globally were thought to have used a buy now, pay later system to pay for goods and services.
Now, with the cost of living on the rise, that number is expected to continue to grow significantly over the year ahead in the UK.
While the majority of providers still generally offer payment in up to three installments, that could be about to change – which in turn, will continue to make products and services more accessible. The greater the number of installments, the more likely younger customers are to buy – and as the market for BNPL continues to gain popularity with both retailers and consumers alike, it’s already outpacing growth for credit cards and personal loans.
Millennials and Gen-Z-ers might have more money to spend in general, but they are also surprisingly financially savvy. Less afraid to take risks and more likely to embrace adventure and travel than Boomers, they are also clued up when it comes to budgeting. So, although they’re more likely to embrace the opportunity to access the high-end and designer goods and services they covet, they’re also likely to do so in the savviest possible way rather than splurging a large amount of money upfront that they don’t have.
They might seem an unlikely pairing, but make no mistake: the luxury world and pay later payment systems are a match made in heaven that together, are only set to thrive. In 2023, we can expect to see them become more prevalent than ever, and the high-end brands who embrace them are only set to gain from doing so. And if you’re a millennial or Gen-Z shopper, then it’s good news for you, too – because splurging on that new designer handbag just got even easier.
