Generation Z, officially known as the those born between 1996-2012, were the first generation to grow up along with the internet and social media. The ‘iGen’ are now beginning to enter the early years of the workforce and are rapidly transforming the economy. Millennial Marketing reports that the generation is already responsible for up to $128B USD in direct spending and a further $333B USD in indirect spending in the US alone.
Gen Z are emerging as a powerhouse in their own right, demonstrating significant influence and buying power. They aren’t a small segment of the population, either: McKinsey has reported that by 2025 the group will account for 25% of the APAC population – the same proportion as millennials. Yet brands would be remiss to approach this group in the same way they appeal to the millennial population, with Gen Z demonstrating their own unique opinions and consumer preferences. Here, we delve into 4 of the ways that Gen Z is set to transform the retail landscape.
It may come as a surprise to some that Gen Z, the digital generation, still mostly opt for in-store retail over e-commerce. According to a study by the National Retail Federation (NRF), 67% of Gen Z consumers primarily choose to shop in-store, compared to only 22% who prefer to shop via web browser and 13% using an app. Yet they are shopping in a different way to other consumer groups, relying heavily on digital and mobile to enhance the in-store experience.
Gen Z consumers rely heavily on their mobiles, using the devices most or all of the time to check stores for alternate products (53%), check other stores for price comparisons (52%) and look for discounts/promotions (51%), while less than 20% of Gen Z consumers never do these activities, as reported by the NRF. These behaviors indicate an increasingly fractured approach to retail with consumers encountering a multitude of brand touchpoints across digital and offline before making a purchase.
Takeaway for brands: While physical retail sales may outweigh online sales, brands must ensure they are investing in both their in-store and online retail experiences to provide a seamless experience for customers. Equally important is scalable content production to meet the needs of an “every channel” marketing approach.
Gen Z is more susceptible than ever to the influence of trend-driven consumption, with the rise of social media paving the way for the rise of influencers as a legitimate advertising medium. Conversely, the generation are less likely to form loyal or emotional attachments to brands, choosing to instead buy from brands that are relevant to them, their friends and their idols in that moment in time.
Gen Z’ers are all about the here and now, expecting brands to communicate through the channels and mediums that are most relevant to them. D2C beauty brand Glossier is one example of a business who has successfully marketed to both millennials and Gen Z, turning their storefronts into highly ‘Instagrammable’ locations and offering added value to their consumers with a mobile-first approach, delivering enhanced value for that moment in time such as via Spotify playlists and downloadable mobile content.
Takeaway for brands: Businesses must be more attuned to fast-changing market trends while also seeking to drive their own trends (e.g. through influencer marketing strategies). In an increasingly disloyal market, brands need to stay top-of-mind via relevant and authentic messaging and channel selection.
Gone are the days where brands could lean on movie stars or musicians to endorse their brands. Gen Z seek their inspiration from a new brand of celebrity, who are more likely to be making TikToks in their bedrooms over filming on a movie set. In fact, the most-followed person on Gen-Z’s favored social platform, TikTok, is American teenager Charli D’Amelio, who is only 15 years old – yet boasts over 66 million followers.
That’s not to say that more ‘traditional’ celebrities should be ousted completely, brands just need to carefully choose who they engage and ensure their brand values align with their personal values. Luxury brand Gucci saw success amongst the younger generations when enlisting musician Harry Styles as a brand ambassador. The brand consulted with a ‘millennial shadow committee’ to tap into the mindset of their younger audience, and the results paid off with Gen Z now reportedly the brand’s fastest growing consumer segment.
Takeaway for brands: While many brands have a legacy of A-list celebrities as their ambassadors, the tides are changing towards a more social-media focused approach to influencers, and brands that fail to keep up may be seen as out of touch with the new generation. Brands must ensure their chosen influencers resonate with Gen Z in order to build relevancy and maximize return on investment.
Gen Z are a driving force in social responsibility, with McKinsey research indicating 60-80% of Gen Z’ers think brands should be held to account for the ethics of their actions. The generation consistently votes with their wallets. Driving the success of brands such as sustainable fashion retailer The Reformation, and Fenty Beauty the cosmetics retailer who cater for a wider more inclusive range of skin tones.
Brands who are not already investing in sustainable practices, promoting inclusivity or investing in other social initiatives may find themselves quickly becoming irrelevant as this generation comes of age. We are already seeing movement from major retailers including French luxury group Kering, who have recently appointed actress/activist Emma Watson to their board of directors to drive sustainability initiatives.
Takeaway for brands: While consumers expect their brands to be socially responsible businesses, they are not willing to pay for the privilege. To capitalize on this consumer group, brands must be willing to find a way to implement these practices into their operations without passing the cost on to consumers.
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