How do Gen Z impact retail markets?

Answer

Who are Gen Z?

Born between 1997 and 2012, they’re the first generation of ‘digital natives’. They grew up with the internet, which means they’re very accustomed to instant and easy service. It also means that social media has a presence in their lives that hasn’t been true of any other generation, giving a defining feeling of global citizenship and interconnectedness.

More than one-quarter of the US population belongs to Gen Z and, considering that the oldest are now 25, many are entering the workforce for the first time. With that comes financial independence and disposable income. Bloomberg reported last year that they have $360 billion in disposable income. Retail markets must adapt to the challenges and opportunities that are presented by this significant shift in the consumer demographic.

Why do Gen Z have such influence?

Their buying power is important, but the way they choose to spend their money is arguably even more so. They see consumption as an expression of individual identity and as a way to communicate and address their ethical concerns. Forbes found that Gen Z value diversity and equality, family and success, while their concerns include terrorism, gun violence and the economy. Research by Marketo found that 76% are worried about humanity's impact on the planet.

More influentially, research shows that Gen Z are unlike other generations in the way that their values shape their consumer decisions. Research from Qualtrics shows that Gen Z is nearly three times as likely as Baby Boomers to say they were "very familiar" with the brand values of the products they choose, and 45% more likely than Baby Boomers to say that feeling disconnected from a brand would "probably or definitely" stop them to stop purchasing. Gen Z consumers were also nearly twice as likely as Baby Boomers to say the brands they purchase from are doing enough to address societal and environmental issues.

Why is this important for retail?

In short, Gen Z have considerable spending power and are easily influenced in their purchasing decisions by the extent to which they can identify their own values in those of the brands they shop with. It’s therefore essential that retailers recognise and overcome the challenges presented by this modified landscape to take advantage of the opportunities which can be found.

How can retailers do this?

Customer Service

Good customer service is a priority for Gen Z; 70% say they’ve switched brands because the customer experience didn’t live up to the brand promise as advertised. They’re also the generation least likely to report being happy with their customer service, on a scale of ‘upset’ to ‘delighted’. Online shopping is a way of life for Gen Z and as a result they’re more likely to switch providers if they encounter problems with a website or mobile shopping experience.

Brands therefore must be acutely aware not to make promises they can’t keep; Gen Z have high expectations about the consumer experience and aren’t afraid to vote with their feet if expectations aren’t met.

Brand values

Lessons can be learnt by looking to the brands held in high esteem by Gen Z. Nike, for example, are well-respected because its adverts feature a diverse range of people wearing its products. Top athletes are seen alongside normal people, which caters to the motivated and ambitious side of Gen Z, while demonstrating a respect for inclusivity and equality.

Gen Z also favours brands and products that are highly sustainable. Patagonia and Hydro Flask share the same ethical concerns as Gen Z over environmental damage, and this is reflected throughout their marketing, products, and brand ethos.

It’s essential that brands practice what they preach in their marketing and work ethics. Bloomberg found that if Gen Z doesn’t agree with the morals of a company, many will boycott their products altogether and encourage friends to do the same.

Social media marketing

Gen Z are the most sociable generation to date. They’ve grown up with social media and are accustomed to near-constant connectivity with the online world. The way brands communicate with and market themselves to Gen Z, therefore, needs to reflect this.

Gen Z ranked maintaining a social media presence as the second most important way for brands to maintain relevance, second only to "providing superior products or service quality". No other generation ranked social media in the top three; only 13% of Baby Boomers listed social media presence as important and 58% of Gen Z say they’ve purchased from a brand they discovered on social media.

Brands that tap into this effectively include Duolingo, which uses TikTok to advertise. A quick look at the Duolingo account shows that the company isn’t even really using TikTok to advertise, but rather to participate in trends in a humorous way that Gen Z relate to. It has 4.8 million followers and 96.3 million likes, so the reach is considerable.

Conclusions

The impact of Gen Z on consumer markets cannot be understated. Making up a significant portion of the population, and with many experiencing an increase in disposable income for the first time, they’re key players in the consumer demographic. In addition, Gen Z are stricter than any other generation about the standards to which they hold brands. They want to see their own values reflected in the brands they consume and aren’t afraid to switch to alternatives if their expectations aren’t met. Finally, Gen Z are the most online generation which means retailers must adapt their marketing strategies to reach Gen Z in a way that encourages them to part with their newly found disposable income.

Rebecca James is a trainee solicitor at RPC.