If you’re tired of hearing about millennials, you’re not alone—but now Gen Z coming up behind them is commanding the lion’s share of attention from brands and marketers searching for answers on these teens and college kids.
It’s a common misconception that Gen Z, who are now younger in their mid-teens and up to the millennial cut off of 23, are just an amped-up version of their elders. This first truly digital native generation that comprises 16 percent of the U.S. population is showing distinct attitudes, behaviors and expectations that companies must meet if they want to capture their estimated spending power and influence north of $500 billion, according to data from Packaged Facts.
“Gen Z is already on track to become the largest generation of consumers by the year 2020, and, according to Forbes, they account for $29 billion to $143 billion in direct spending,” said Jason Dorsey, president of The Center for Generational Kinetics. “But their impact on the market doesn’t stop there. Ninety-three percent of parents today say their children influence family and household purchases, according to a report by CASSANDRA, meaning a significant portion of overall market spend is because of this generation.”
More so than other generations, Gen Z sees internet connectivity not merely as a utility—as their elders do—but as “an extension of their lives,” according to the Center for Generational Kinetics, which worked with WP Engine on the report “Reality bytes: The digital experience is the human experience.”
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The companies heard from 1,258 Americans as young as 14 and as old as 59, including a 250-person sample of Gen Z consumers ages 14-21. What they found is that, in contrast to older consumers, Gen Z sees little distinction between online and offline, and looks to the World Wide Web for virtually every facet of their lives, from shopping and entertainment to social connection and information gathering.
Many might harbor hang-ups about “creepy” predictive capabilities but more Gen Zers than other consumers assume this is simply the way of the world. More than a third (35 percent) of the youngest consumers expect that in the next five years, pervasive digital connectivity means they’ll be notified of what they need before they actually need it. By contrast, 28 percent of millennials have similar expectations, as do fewer in Gen X and the baby boomer cohorts, according to the “Reality bytes” report.
Personalization is another table stakes expectation for these always-on shoppers. “Gen Z has grown up in an internet world that provides targeted experiences, and due to this their expectations for personalization goes hand in hand with how personalization happens—by providing detailed data,” Dorsey noted. “Forty-four percent of Gen Z is willing to provide personal data to enable a more personalized experience and another 44 percent of Gen Z would stop visiting a website completely if it did not anticipate what they needed, liked or wanted.”
That’s a startling statistic for brands that have been dragging their feet on refurbishing their websites to meet the personalization imperative.
“Predictive personalization to Gen Z means getting a highly tailored online experience, whether it’s on social media platforms or from online shopping,” Dorsey explained. “This generation of digital natives grew up with Spotify, Amazon and Netflix providing them customized content based on their online actions. They will even tolerate ads as long as they are based on their personal wants and needs. Having predictive personalization makes it easier for them to find what they’re looking for or have recommendations for items or ads that fit their needs.”
With the average Gen Z attention span being just 8 seconds, businesses can’t risk these consumers getting fed up as they’re willing to walk away quickly.
Unlike millennials who will stretch themselves for a desired purchase, Gen Z seems to be prioritizing value when spending, according to “Reality bytes.” They like using their smartphones to read up on online product reviews and evaluate prices across channels. But when it comes to making transactions online, Gen Z still prefers to do so on a company’s website (61 percent) versus a mobile app, the report found.
Like millennials, Gen Z is shaping up to be a generation of cause-conscious consumers. The majority (69 percent) show an affinity for businesses that invest in social initiatives while one-third would end their relationship with companies giving more to a cause they don’t like, the report found.
“For Gen Z, being aligned with companies who support the same causes is an important factor in making purchase decisions,” Dorsey explained. “It’s apparent that the actions taken by Gen Z on how they choose to spend backs up the idea that Gen Z is a socially aware generation and takes action to support their ideologies.”
Gen Z sees a close link between social activism and authenticity, preferring to give their money to companies they view as “real.” Most (79 percent) of these consumers believe a company is more trustworthy if they don’t photoshop their images, while even more (84 percent) trust businesses that highlight actual paying customers in their advertising.
Further demonstrating their faith in the web, three-quarters of the Gen Z cohort think an internet-only business is just as trustworthy as a company with real-world roots, the “Reality bytes” report found. The upside, though, is that they prefer a company that operates across channels, meeting their needs wherever they happen to be and “further reflecting the blending they see between digital and reality.”
This might be why Gen Z prefers stores more than millennials, according to research from LIM College, which discovered that they’re shopping the entire spectrum of retail outposts, from department stores and specialty shops to fast-fashion chains and outlet locations.
In what could be a departure from their millennial elders, young Gen Zers are showing a strong interest in fashion and style—perhaps because they’re still young and crafting their identity through what they choose to wear. A fashion spending spree sounds great to plenty of Gen Zers. Asked how they’d spend $1,000, two-fifths would put that windfall toward their wardrobe, LIM found, while just 23 percent of millennials would spend the same way.
Gen Zers buy clothing and footwear more often than experience-driven millennials. Nearly two-thirds (60 percent) of these young shoppers purchase apparel once monthly (or less often, LIM said), 16 percent more than their millennial counterparts. However, budget-friendly prices remain the biggest influence in getting both demographics to spend.
For their “Millennials and Gen Z: What Now and What Next?” study, LIM College professors Robert Conrad and Dr. Kenneth M. Kambara polled 450 millennials and Gen Zers ages 15 to 38 years old.
“Gen Z seems to be more drawn to ‘things’ than the Millennials are and they are keen to buy apparel and fashion accessories for themselves,” Conrad said, noting that this finding “bodes well” for apparel brands and retailers.
That Gen Z still likes visiting physical stores is another potential bright spot for retail, Conrad added, though there might be practical reasons driving this behavior, including their lack of credit cards that would allow them to purchase online, plus that need for instant gratification. “Yet the main reason,” he noted, “is that they enjoy visiting the malls, seeing people, socializing and being with their friends.”
Gen Z teens might need to thank millennials for their influence on retail, according to Kambara, as the millennial craving for experiences has forced merchants to reconfigure their stores.
“The retail industry has responded and, as a result, the best malls and stores have transformed themselves into destinations with contests, events, entertainment, and more choices for food and shopping,” he explained.
With hundreds of stores closing up shop, malls are losing the stores that don’t work while adding more of what’s attractive to young shoppers, evolving just in time to cater to Gen Z, Kambara continued.
“Or, the Gen Z shoppers got the message about the change in stores and malls and like what they see,” he offered. “Either way, we believe that Gen Z wanting to buy apparel and accessories for themselves at the right prices in an experiential shopping environment represents an exciting new chapter in the great American retail story.”