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The Price of Extravagance: Generation MZ, Seize the Moment!

기사승인 [351호] 2021.09.06  

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What is Luxury Today? Luxury has generally been for the upper class, representing a life of great comfort and extravagance. However, as our world continues to move forward, the main targets and consumers of luxury brands have changed from just a small group of people to an entire generation: Generation MZ. Generation MZ or Gen MZ, is a pairing of two groups- Millennials, born in 1981 to 1995, and Generation Z, born in 1996 to 2005. Although these two groups may be distinctly separated by age, there exists many similarities in terms of being digitally fluent and being the new consumer target of many brands.

The Price of Luxury: Then and Now A c c o r d i n g t o t h e C a m b r i d g e Dictionary, “luxury” is defined as “something expensive that is pleasant to have but is not necessary”. In the previous generations, luxury products represented a higher class, or those who were able to afford such unnecessary items. Additionally, these people were the only ones who could afford them. The price of a bag from an average luxury brand ranges from $920 to over $400,000. However, these products have now changed in meaning as more people began to purchase them. Last year, South Korea’s sales of luxury products were around 14 trillion won, which was similar to the previous year. While noting that the current global pandemic has caused luxury brand sales to fall drastically in other parts of the world, the continuous thrive in the Korean market shows how the products are not only purchased by the original buyers from the past but also by the new consumers of the present. F u r t h e r m o r e , t h e i m a g e o r m e a n i n g t h a t such items now a c c o u n t f o r has gone in an entirely different direction: from directing one’s wealth and prosperity to holding one’s thoughts or values. With this underlying idea, Professor Ryoo Woong-jae, from the Department of Media and Communication at Hanyang University said, “The consumption of luxury goods in present-day society seems to be in conjunction with the process of pursuing a set of personal and social values through individual and subjective judgments, rather than simply copying someone.” In other words, the specific type of luxury product that is purchased now acts as a way to show one’s individualism, originality, or even their personality. Current Statistics: Why South Korea’s Luxury Market Continues to Thrive Due to the current global pandemic, the market of luxury products has fallen on a world-wide scale: Japan, France, the United Kingdom, and even the number one ranked country for luxury product consumption, the United States. These nations have all shown a drastic decrease in numbers of sales in the market. According to Bain.com, the pandemic has caused a fall in market size so drastic that the luxury product industry is back to the size it was in 2014. With the luxury goods industry being heavily impacted by the global crisis, South Korea has shown surprising growth as it even surpassed Germany and climbed to seventh place on the list of luxury c o n s u m p t i o n nations. This b o o m i n t h e domestic luxury m a r k e t c a n be understood through the rising consumption of Generation MZ, especially because of their urge for “retaliatory consumption”. “Retaliatory consumption”, also known as “compensatory consumption”, is a desire to buy and spend after an inability to do so. This epidemic has stimulated the desire to consume, and with South Korea’s online shopping platform at a state of high development, this form of consumption has been rapidly taking place. Another reason for the continuous consumption of luxury products is due to using the items as a form of “money management”. Koh In-kon, a Professor in the Department of Global Finance at Gangnam University said, “As the use of second-hand item trading platforms, such as ‘Dan-gun Market’ or ‘Bungae-jangter’, have recently been proliferating, luxury goods have also been purchased for financial purposes as well.” As the act of “re-selling” has emerged as a new means of money management, more people are jumping into the re-sell market to generate profit by trading limited and rare luxury products, such as “Chanel” and “Rolex”, through the second-hand market. The Truth of Generation MZ: What is Really on Their Mind? According to “Must-it”, an online luxury commerce website, the number of customers in their 10s and 20s have shown continuous increase during the last three years. The proportion of teenage customers increased to 2.8 percent in the first quarter of 2018, 11.1 percent in the first quarter of 2019, and 13.8 percent in the first quarter of 2020. Furthermore, the proportion of customers in their 20s increased to 40.8 percent, 50.2 percent, and 55.6 percent during the same period. As can be seen, Generation MZ has played a large and continuous role in feeding the luxury market, helping it thrive. Why is this so? There are several reasons for this to occur, among them are “the desire to show off”, “FOMO (fear of missing out)”, the “FOR-ME” group, and retaliatory consumption. Due to the original image of luxuries, the consumption of items has had an impact to one emotionally. To further explain, the luxury goods may act as a form of therapy as a single click for purchase can result in an enhancement of one’s self-esteem or sense of belonging. Furthermore, the increasing use of SNS (social networking services) as a method to show-off one’s belongings and lifestyle has been shown to further impact the buying of such products. Youm Dongsup, a Professor from the Division of Advertising & PR Communications at Mokwon University, explained the phenomenon of wanting to show off: “One of the most representative reasons for the consumption of luxury products is from the desire to show off, which is based on the value of materialism that has been a part of our society for a long time. Going further, the consumption of luxury goods give the sense of belonging to a higher class, which is defined as the ‘Panoplie Effect’.” Furthermore, Professor Ryoo continued to address this characteristic of Generation MZ: “They can be seen as a generation that has higher sensitivity regarding how others see them or drawing attention to themselves, when comparing them to the previous generation of their parents.” When going beyond the desire to show-off, someone can find themselves in a slightly more serious situation commonly referred to as FOMO, or the “Fear of Missing Out”. FOMO refers to the feeling or perception that others are having more fun, living better lives, or experiencing better things than you are. This phenomenon occurs usually when comparing your own life to the perceived better parts of others’ lives. Although it might seem like a passing, temporary feeling, without proper recognition, FOMO can cause high levels of stress in someone’s life, negatively affecting their happiness as well. With the increasing use of SNS, FOMO has been seen more often, especially with Generation MZ as they are the main users of SNS. Choi Seo-yeon, a Freshman at Chungnam University and a big consumer of luxury products, said, “I believe that the increasing number of contents in various SNS that show off luxury goods has a significant impact on the consumption life of Generation MZ, including myself.” Generation MZ has also introduced a new term: “FOR-ME”, which is an acronym for “For health, One, Recreation, more convenient and Expensive”. In other words, “FOR-ME” living acquires the trait of showing rather bold investments in the products that they value, even if they are somewhat expensive, an example of this being luxury products. Professor Koh further explained the traits of “FOR-ME” b e l i e v e r s b y stating, “These people tend to value their own personality and taste, showing l o w o r n o h e s i t a t i o n i n s h o w i n g o f f these values to the public.” The current global pandemic also plays an important role in the increase of luxury product consumption within Generation MZ in the form of “retaliatory consumption”, as mentioned earlier. Professor Koh explained, “In terms of consumption, Generation MZ tends to purchase products that show off their personal values or acquire special messages instead of simple products; emphasizing individual satisfaction compared to groups, sharing compared to ownership, and experience compared to goods. This consumption trend has recently shown more evidence in the form of retaliatory consumption as COVID-19 has negatively impacted the economy and heightened the public’s anxiety about the future.” As the virus has made our future unclear, consumers are buying luxuries to comfort themselves, because they are in a situation where consumption for their self-development is difficult. Sales Strategy of Luxury Companies: What do you say? Known as luxury business strategy, luxury companies maintain a special sales strategy with a psychological approach. The basic process of luxury sales is high quality product in small quantities, which enables only a few consumers to buy those luxury products. Such scarcity inculcates customers with a sense of aspiration for the product, and at the same time, a sense of envy towards those people who own the product. After all, they make a ceaseless effort to buy the product, no matter how expensive it is. According to Yoo Hyun-jung, a Professor from the Department of Consumer Science at Chungbuk National University, the trickle-down effect from Georg Simmel explains how the trend spreads and disappears. “When the upper class consumes luxury, the lower classes compete to follow them. In this moment, the feeling they have, called emulation, becomes a driving force that triggers consumption. Currently, with the high level of income, consumers want products that can easily draw attention to themselves, where the ‘scarcity strategy’ easily functions as intended. Especially, the more valuable a product is the higher the luxury market soars.” Furthermore, Professor Koh points out how luxury companies utilize the second-hand market; “When it comes to flagship products, a second-hand price becomes the standard to estimate brand value. Therefore, they monitor the development of second-hand prices to predict demand and adjust supply. With supply being under control, the price between the flagship store and the second-hand store interacts, where brand value and profits are enhanced in succession.” However, considering that the luxury-consuming group is greatly limited, and other groups have emulous jealousy in regard to (everything related to) luxury, luxury companies tend to be seen in a negative light. For instance, there has been criticism that luxury companies are less involved in public activity compared to their high income. According to a 2019 inspection report on ten global luxury brands, only two brands donated to society, while eight brands never paid anything. Some people criticize that most luxury brands tend to ignore any social responsibility, in spite of their excessive profits in Korea. Professor Yoo adds a different viewpoint: “It would be desirable if luxury companies practice social contribution for minorities. Nevertheless, they would not do so when these activities do not positively influence sales. After all, companies move when consumers buy products from good companies. In this sense, social contributions cannot be compulsory.” A n o t h e r i s s u e i s t h a t l u x u r y companies abuse their power over customers, drawing criticism in the same vein. On August 5, 2021, Chanel, a luxury brand, had an accident where a customer’s personal information leaked due to a hacking attack. However, their post measures seemed insufficient, in that they posted a vague statement of apology, without any explanation for their management of customer information. Considering how often Chanel raises the prices in Korea, which was once in five months in this year alone, many customers argue that Chanel views domestic consumers as pushovers. While the on-going sales strategy for luxury products may be offensive to consumers, it is a very clever sales strategy in terms of business. Still, in order to be loved by domestic consumers in the longer term, it is expected that luxury companies show more customerfriendly and society-friendly attitude that deserves the value of “luxuries”. Problems of Luxury Consumption Although luxury consumption can be seen as a unique way to express oneself, there are some problems that should not be overlooked. F o r e x a m p l e , m a n y y o u n g people focus on happiness in the present so much that they rarely hesitate to spend beyond their budget. Especially the customers in their twenties, who are mostly beginners in a society, find it difficult to afford luxuries on their own. Therefore, being overly ambitious, they either manage to pull everything together, or go into debt to buy luxury products. Particularly, without self-control and self-efficacy, there is a high possibility for someone to be carried along by the social atmosphere and fall into conspicuous consumption. As a result, it is easy to lose one’s own standard and compare oneself to others. Furthermore, excessive luxury consumption leads Generation MZ to form wrong consumption habits. Driven by the fancy appearance of luxuries, young people start to reach for vanity and ostentation, which are nothing more than anodizing oneself. This “show off” value has even created a new phrase called “flexing scrooge”, which refers to consumers who drastically buy expensive products in fashion and IT, but look for cost-effective products in groceries. These consumers prefer to budget on inexpensive products as much as possible, so that they can pour everything into luxuries. After all, ostentacious consumption cultivates hundreds of materialists and “lookists” in our society, who continuously compare and discriminate against one another. Additionally, in terms of economy, luxury consumption may intensify the polarization of consumption. Unlike luxury companies from department stores, which renew its highest sales all the time, self-employed sellers from traditional markets barely make ends meet. Considering the severe economic depression caused by COVID-19, there must be a distinct gap between the two markets. In other words, invisible classes would clearly come to light through polarized consumption behaviors. How to be a Smart Consumer Living in a capitalistic society, luxury consumption has clearly settled down as a social phenomenon to raise self-satisfaction and express oneself. Now, the important point lies in how to be a smart consumer with proper values. Professor Yoo gives a piece of advice for this: “I don’t think that luxuries are bad. Sometimes, it is possible to buy a luxury product, even though you are not particularly wealthy. Consumer consciousness is something that is much more important than consumption. Although the reason and motive for consumption may sound unconvincing to others sometimes, it is not a problem if one perceives and decides it. It would be a desirable consumption when one has a sense of ownership on their consumption and does not have any regret.” Still, as most people know, one should try to avoid reckless consumption. Since each consumer has various assets and investment costs, making an affordable consumption habit is highly needed. Before buying a product, one should reconsider if it is really necessary to buy it so that a rational consumption culture could be created. Clothes, bags, and shoes are not a standard of evaluating one’s value, but a tool expressing one’s individuality. Moreover, excessive comparison between oneself and others should be avoided. One s h o u l d k e e p i n m i n d t h a t comparison with others, especially those with a wide gap in economic ability, only leads to a sense of deprivation. In the worst case, it can also result in losing one’s way in life. Therefore, instead of raising one’s self-esteem based on compliments and evaluations from others, it should be formed in more positive ways, such as through one’s mature thinking and a proper set of values. In the end, the reason why luxury products became so luxurious is because the right person chooses them. If not, the value of luxuries would rather be damaged. This leaves an important implication to Generation MZ that making themselves a luxury should be prioritized, so that the value of luxuries would shine brighter together. 

Jeon Eun-jin & Shin Yoo-bin mglory19@hanyang.ac.kr & yoobinie22@hanyang.ac.kr

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