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DTC vs. Marketplaces: Which Do Millennials and Gen Z Prefer?

Marketplaces have their role in the retail distribution channel, but direct to consumer (DTC) is the preference of Gen Z and millennial shoppers.

A survey from DTC e-commerce firm ESW shows that 60 percent of Gen Z and 63 percent of millennials prefer buying direct from international e-commerce brands over marketplace platforms. In addition, 69 percent of Gen Z shoppers and 73 percent of millennials —versus 63 percent of Gen X and 50 percent of baby boomers—said shopping DTC channels provide a more personalized experience, with offers and promotions targeting their specific preferences.

The ESW survey “Global Voices: Q2 2022” polled more than 14,000 consumers across 14 countries. The survey indicated that social media is the key driver for product discovery, while in-store ranked third for discovery. Gen Z consumers said they look to Instagram (52 percent), YouTube (51 percent) and TikTok (43 percent) for social media product discovery. Meanwhile, 45 percent of millennials look to Facebook to learn about products. Other top millennial channels were YouTube at 46 percent and Instagram at 44 percent. For this older cohort, TikTok trailed in product discovery at just 32 percent.

“Our research with consumers, and our experience taking brands around the world outside their home markets, leads us to strongly believe in the power of direct-to-consumer e-commerce to build long lasting, profitable customer relationships,” Patrick Bousquet-Chavanne, ESW’s president and CEO, Americas, said in an e-mailed statement. “There is simply no substitute for delivering a localized, branded e-commerce capability that not only creates more loyalty, but also provides insight into merchandising and product opportunities in various regions as well as the richness of data that is lost when selling though marketplaces.”

Luxury marketplaces such as Farfetch are in a different class, however. “Farfetch differentiates itself with its branding, aspirational  content, and overall luxury experience which resonates with the luxury consumer. They benefit from a very strong luxury market that we also see translate in our numbers with luxury clients,” he said.

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Data shows that millennials and Gen Z exhibit similar behavior no matter where they live., Bousquet-Chavanne added. In the U.S., just over 50 percent of Gen Z believe that shopping direct with an international brand feels more personalized than buying from a large marketplace—that’s compared with 60 percent in China and 67 percent in India, he said. Among millennials, 60 percent in the U.S., almost 80 percent in China and 76 percent in India prefer DTC.

“Younger consumers increasingly enjoy being a part of a brand’s community and experiencing the authenticity and  engagement that comes with it,” he said.

The study also showed that Gen Z and millennial shoppers have a greater degree of trust for online retailers located outside of their home country, or about 30 percent higher than Gen X and two times that of baby boomers. Moreover, younger consumers shop across borders twice as often as Gen X and three times as often as boomers. More than 25 percent of all cross-border shoppers said they did so because the product wasn’t available through local retailers.

Of note, each age group cohort in the ESW survey said inflation and other economic concerns will curb their online shopping by 30 percent over the next year. Boomers are twice as worried about the economy than Gen Z.

Consumer confidence improved in August, with the Consumer Confidence Index at 103.2 from July’s 95.3 for the first increase after three months of consecutive declines. Lynn Franco, senior director of economic indicators at The Conference Board, said concerns about inflation may have retreated, but haven’t disappeared completely.

“Inflation and additional rate hikes still pose risks to economic growth in the short term,” she said.

Fed chair Jerome Powell said last month that interest rates would continue to rise as the Federal Reserve sticks with a 2 percent inflation target. After firing off two 0.75 percent hikes in June and July, the Fed expects to hike them again later this month.

Meanwhile, 81 percent of CEOs expect that a shallow recession could take hold over the next 12 to 18 months, according to the latest Conference Board Measure of CEO Confidence survey.