Most luxury executives in Russia are optimistic about the market’s outlook in the near future, with a new report from McKinsey finding that 85 percent expect to see growth in the next three years.
However, despite these positive projections from those in the business, only 14 percent of Russian luxury consumers are planning to up their spending. As luxury executives look to promote growth in Russia, the top expected growth driver is attracting younger consumers.
McKinsey’s “Mathematics of the Luxury Market in Russia: Growth Potential and Consume Behavior” report was based on interviews with 35 luxury executives, a survey of 1,000 luxury customers and social media analytics. The report focuses on fashion and jewelry categories.
Six in 10 luxury executives in Russia point to millennials and Gen X consumers as key means of growth. However, while outreach to these age groups is understood to be important, many marketers are using international rather than local insights about these shoppers to drive their efforts. Less than 10 percent have conducted studies on the young Russian luxury buyer.
For the purposes of McKinsey’s report, millennials are defined as those younger than 30, while Gen X are aged between 30 and 50.
The top three channels for both generations are online, magazines and brand events. Millennials showed a greater affinity for the Internet and events than their slightly older peers.
While social media is an important channel to reach younger shoppers, only a quarter of Russian millennials follow brands on social media, compared to 43 percent of those in Gen X.
Consumers’ friends are more apt to influence a purchase decision than celebrities. McKinsey’s survey also found that foreign stars or influencers tend to hold more weight than local personalities.
Similarly, three-quarters of the luxury conversation in Russia is tied to personal events rather than being about the brands themselves. For instance, a consumer might post about their day and tag the luxury item they are wearing in a photo.
When looking to buy luxury, product quality is the top aspect considered by both generations, with more than 90 percent saying they consider it. Luxury executives may be missing out on playing up this characteristic, as 90 percent believe millennials do not consider quality a key factor when making a purchase.
Along with quality, millennials are more moved by exclusivity and a brand’s history than Gen X, while Gen X-ers show more interest in aspects such as country of origin than millennials.
Along with reaching out to younger clientele, luxury marketers in Russia expect the market to be driven by efforts surrounding customer loyalty and moving more purchases back home from abroad.
As brands try to lure shoppers to spend locally, they often focus on improving in-store service. However, this factor is less important to international shoppers than aspects such as the newness of merchandise.
Luxury retailers have also not been embracing the full potential of e-commerce, with only 37 percent of those surveyed planning to set up online selling.
McKinsey’s report argues for the use of more advanced data analytics in Russia. By building more detailed consumer profiles, brands can better strategise to court a new consumer group or expand in the market.
adapted from LuxuryDaily
More from ANALYSIS
2019 will be a bumpy ride for most fashion players, according to management consultancy firm McKinsey & Company and website …