Millennials are critical to luxury brands' future. Image credit: “Meet the HENRYs: The Millennials that Matter Most for Luxury Brands,” by Pamela N. Danziger (Paramount Book Publishing, 2019)
By Alex Song
There is no question about it: brands looking to thrive and even just survive in today’s market are those that understand the millennial consumer. However, not all millennial consumers are created equal, especially when it comes to income and potential spending power.
There are those earning between $50,000 to $99,000 who fall into the traditional middle-class, and there are those earning upwards of $250,000 who fall into the wealthy class.
But in between those two categories, earning between $100,000 to $250,000, is a high-growth sector of the consumer economy: the HENRYs (High-Earners-Not-Rich-Yet).
And while the middle-class and wealthy millennials may each be positioned to naturally align more with particular brands, these in-between millennials — those who have a higher-than-average household income but are not necessarily wealthy — pose a new challenge for today’s brands, especially when it comes to luxury.
Who are the HENRYs and why should they matter to luxury brands?
First things first, who are the HENRYs?
Aside from just being this category of consumers that are earning a lot, but not quite enough to be dubbed “rich,” HENRYs happen to be the most critical consumers in today’s economy.
On the one hand, HENRYs are smaller in numbers than the middle-class, but the latter lost a lot of its spending power and capabilities following the Great Recession.
On the other hand, most HENRYs are making significantly less in household income than the wealthy, yet their combined value — i.e., their population multiplied by their income/spending power — is actually 4x that of the ultra-affluent, according to Pam Danziger, luxury market expert and author of Meet the Henrys: The Millennials That Matter Most for Luxury Brands.
Taking all of that into account, it becomes clear that the HENRYs have quickly become today’s newest focus in consumer marketing – a segment that holds the key to success for contemporary marketers.
For luxury brands, this poses an interesting challenge: how do you compete with traditional mass-market brands to win over this new powerful consumer category that could swing in either direction?
The reality is that because HENRYs fall into this gray area as far as wealth goes — they have a significant amount of disposable income, but they are not beyond being cost-effective — they can just as easily be a logical and winnable target market for affordable brands and mass retailers as they can be for higher-end, more expensive brands.
For luxury brands to win over HENRYs within that unique competitive market, it is critical to understand what HENRYs are looking for and what best resonates with them, including how they view and define luxury today.
HENRYs have changed what luxury means in 2020
Contrary to what one may think, luxury is not a concept that is set in stone. Sure, there are certain characteristics – e.g., exclusive, high-end, expensive –that one might associate with the category, but the reality is that luxury is less fixed than we tend to think it is.
The concept of luxury is a byproduct of consumer expectations and values, relative to alternatives and access points. This means that the definition of luxury shifts as consumer’s interests, values and perspectives adjust.
Ms. Danziger puts it best: “The fact is, luxury isn’t some objective, predetermined category that’s out there that luxury brands get to decide. Luxury is defined by the consumer.”
In the age of the new mass market, this begs the question: what is luxury to a HENRY? It is critical for luxury brands to understand this to create a targeted marketing approach that accounts for changes in what luxury has come to mean today.
To help guide luxury brands – both the legacy brands and those that are just starting out – here is a look at a few of the key characteristics of luxury in the age of the HENRY.
Luxury is high-quality
If there is one thing that has not changed all that much in how luxury is defined, it is quality.
At the end of the day, a product that is considered luxurious in today’s consumer economy is one that is expected to deliver a higher level of quality than competing products. It is a product that likely costs a little – or, in some cases, a lot – more than others out there, but the payoff of the higher price tag is the confidence that comes with purchasing it.
This factor of luxury remains unwavering, and is what has given some legacy brands staying power in the changing luxury landscape.
Take this account from writer Damon Young about how he reluctantly justified the purchase of a $695 pair of Balenciaga sneakers, not because of their name and exclusivity, but because of their next-level comfort and versatility.
Luxury is not exclusive
This is not to say that exclusivity can no longer be a component of luxury, but rather just that exclusivity is no longer a qualifier for luxury.
Where it was once the case that luxury was considered such by virtue of its high barrier, that is less the case today when things such as quality and value alignment are considered more important to these mass affluents.
This particular shift can be considered a result of one of the earliest entrants to the rental luxury space, Rent the Runway, which democratized access to luxury brands.
Luxury is temporary
Here is where things really start to shake up.
One thing that defines luxury for HENRYs that was never a piece of the equation in the past is temporariness.
The fact is that HENRYs are still at a stage where they are relatively non-committal, and the ultimate luxury for them is flexibility.
HENRYs want the option to try something before going all in, or to have something for a limited period of time before they move on to the next thing.
That said, they are also at a point in their lives – both emotionally and financially – where they are willing to spend more for brands and products that improve their quality of living and status.
This is another impetus behind the success of brands that use a “shared luxury” model such as Rent the Runway, including up-and-coming millennial-focused brands including Feather, which allows consumers to rent higher-end furniture from the likes of West Elm and CB2 or Seasons, which offers rentable menswear and streetwear.
Luxury is sustainable
Again, this comes down to values.
Just like HENRYs value impermanence and flexibility, there is also a rising trend in valuing brands and products that champion sustainability. It is about knowing the labor practices, sourcing methods and the carbon footprint-value of everything we wear, use and do.
To that end, HENRYs are more likely to swoon over luxury brands that feed into the circular economy by way of things such as shared products and experiences.
Again, the “shared luxury” players – e.g., Rent the Runway, Season and Feather – are playing on this. But this is also where a lot of the luxury resale players, such as The RealReal and Vestiaire Collective, shine.
Gone are the stigmas that were once associated with secondhand clothing, homewares and accessories.
Where luxury consignment was once snubbed, it is today considered a marker of eco-consciousness, not to mention financial savviness.
Luxury is collaborative
When HENRYs think about what they are willing to spend a little more money on, a key incentive that can drive them is uniqueness. That has ultimately given rise to a growing trend within the luxury sphere of high-end brands collaborating with one another to create limited edition collections that offer something different than the usual.
The Louis Vuitton x Supreme collab is just one example of the trend in action, another being Chanel’s 2019 collection in collaboration with Pharrell Williams.
Luxury is experiential
Luxury is anchored not just in possessions anymore but also in experiences and knowledge. This is where something such as Porsche’s subscription service – Porsche Passport – which offers access to its entire fleet while allowing consumers to bypass ownership may come in.
Another example could be Airbnb Luxe, which affords consumers an opportunity to get a taste of luxurious living in a designer home with luxe amenities and a dedicated trip designer.
Each of these brands has created avenues for consumers to access experiential luxury.
Luxury is connection
HENRYs are hungry for connection, whether they get that through the products they use, the brands they support, or the people they interact with, be that in-person or on social media.
For that reason, there is an evolving sector of luxury that is rooted in building communities and collectives that can connect people through art, design, music, culture and shared goals.
Organizations such as Habitas and Summit Series are examples of this emerging trend, as they seek to build global communities and foster interpersonal connections between like-minded individuals through shared experiences like wellness events, talks and immersive adventures.
At a point in time when people are feeling more disconnected from one another than ever before, HENRYs are willing to invest quite a bit in things that will gain them access to these kinds of communities and to connection-creating experiential luxury.
ULTIMATELY, THESE SHIFTS in what luxury is defined as in the age of the HENRYs pose a critical point for brands looking to gain favor with these new mass affluents.
The unique position and needs of HENRYs today has called for a new approach to luxury brand marketing that caters to these millennials’ desire for higher-quality products, and to get those products at a lower cost and their willingness, if not preference, to forego ownership in favor of temporary access.
As brands continue navigating this new landscape, what we will continue to see is a rise of things like a shared luxury economy, where savvy brands are coming to the table to offer rentable luxury – be it products or experiences – for HENRYs as a way of harnessing the spending power of this pivotal category of consumers.
Alex Song is cofounder/CEO of Innovation Department
Alex Song is cofounder/CEO of Innovation Department, New York. Reach him at alex@innovationdept.com.