Younger consumers have the urge to splurge. Recent data from McKinsey found that 61% of Gen Z intend to splurge in 2023. Similarly, Visa found Gen Z to be the only age group that, in any given month in the past 2.5 years, was spending more than they were a year prior. Gen Z will soon become the largest cohort of consumers, giving brands and retailers a good reason to take a closer look at the world’s youngest shoppers – Generation Z.
Meet Generation Z
Categorized as consumers born in 1995 or later, this demographic is shaking up retail in a big way. Gen Z is more digitally savvy, ethically minded, and optimistic about spending than generations before them. Having grown up in the digital age, they were exposed to social networks, mobile devices, and digital advertising at an early age. As such, their expectations for personalized omnichannel retail experiences are unprecedentedly high.
Gen Z demands frictionless shopping experiences that are tailored to their individual preferences and behaviors wherever they are with your brand. These always-on digital natives are true omnichannel shoppers, frequently switching between channels. Confounding expectations, almost half (47%) of Gen Z prefers to make purchases in store. To win and nurture this audience, it’s essential for brands to create seamless ways to experience the brand and purchase. Gen Z isn’t beholden to a singular channel, or brand, and their behavior reflects an expectation to engage on their terms without derailing their intended purpose.
Gen Z has money to spend. What motivates them to buy?
According to CNBC 48% of Gen Z lives at home, they have minimal bills and they’re not rushing to change this. Their ability to spend is tied to the amount of disposable income they have. Gen Z is saving on payments like rent and utilities, meaning they have more room in their budget for discretionary spending.
So, what motivates Gen Z’s shopping behavior? Having 24/7 access to digital resources and information has made Gen Z more educated and independent in deciding which brands to support or products to choose. They seek out authenticity, deals and promotions, and tailored shopping experiences. Purchasing decisions are heavily influenced by peers, what’s trending on social media, and what is perceived as ethical.
Gen Z purchases are largely influenced by social media.
Having grown up with smartphones, social media is deeply engrained in Gen Z’s everyday life. They use social media to seek inspiration, research products, and connect with their favorite brands. For this generation, brand is more than what you sell; it’s what you share on social platforms. Gen Z gravitates towards authentic, relatable messaging and prefers to consume content on their smartphone, typically in the form of short videos.
How does the content brands share impact the customer journey? Many brands are successfully using social media to engage Gen Z in the discovery stage. Research from Insider Intelligence revealed half of Gen Z social users make purchases directly on social media, with product discovery being the top reason they buy through social media. Shares, likes, and comments from Gen Z elevate a brand as this cohort is largely influenced by recommendations from trustworthy peers.
Gen Z opts for higher quality items while staying savvy.
Gen Z has an appetite for higher-quality items with the average Gen Z shopper making their first luxury purchase at age 15. They opt for quality over quantity. At the same time, Gen Z are savvy spenders, looking to simultaneously save and splurge. They are highly motivated by financial incentives and make use of online channels to search out the best deals. Furthermore, they take advantage of payment options like buy now, pay later to make big-ticket items more accessible.
Gen Z are said to be avid, impulsive shoppers, however, this generation is informed and shops with intention. Edelman Gen Z Lab members confirmed that impluse buying does happen from time to time, but not frequently. They are monitoring their money closely, spending more time thinking about purchases and investing in quality items with longevity.
Gen Z supports brands that are value driven.
When it comes to doing business with brands, Gen Z prefers to support businesses that have values and ethics they agree with. They care about social, cultural, and political issues around them. Gen Z expects brands to align with the issues that matter to them and they’re willing to spend more for their cause. Forbes found that 62% of Gen Z prefer to buy from sustainable brands and are willing to pay more for ethically made products. To maintain loyalty, it’s important for brands to convey that they represent the values of this group.
Personal care brand Dove’s mission is to “make a positive experience of beauty accessible to all women,” which is integrated throughout their marketing approaches. Founded in 2004, the Dove Self-Esteem Project is the one of the largest providers of body confidence education globally. It started as an effort to portray real women in real bodies, so women could see themselves in the media and advertising. Dove’s marketing continues to evolve to promote positive body image and self-esteem through empowering messages and marketing choices that reflect the current needs of women, media, and technology.
Sephora promotes two clean beauty programs to help beauty-lovers make informed, sustainable purchases, while protecting the wellbeing of the planet. The Clean at Sephora program features “brands formulated without phthalates, formaldehyde, formaldehyde releasers, oxybenzone, octinoxate and more.” More recently, Sephora released their Clean + Positive program, which takes into consideration ingredients, as well as the environmental impact of products through climate commitment, responsible sourcing, eco-friendly product labeling, and other sustainable programs.
How can brands and retailers win Gen Z?
It’s a cluttered and competitive marketplace for brands right now. Everyone’s fighting for a slice of attention. Seventy-one percent of Gen Z say they’d buy from competitors, suggesting that other factors like price and convenience are at work, according to Insider Intelligence. To win the fastest growing segment of consumers, keep the following in mind:
- Omnichannel is no longer a nice-to-have. Gen Z has adopted an always on behavior and expects to be able to shop and engage with brands using the most convenient channel in that moment. Knowing what your audience wants and showing up in the right places at the right time is the key to success.
- Focus on personalized offers and rewards that resonate with Gen Z. Personalized experiences are table stakes when it comes to maintaining Gen Z loyalty. By leveraging data to understand their customers, brands can build personalized incentives and rewards programs to attract and retain Gen Z.
- Demonstrate the impact of social and environmental initiatives. Brands that not only express but demonstrate a commitment to societal challenges such as sustainability, diversity, and environmentalism will rise above and build towards long-lasting loyalty.
Rakuten connects shoppers to brands
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Personalization is the key to unlocking brand loyalty. That can’t happen without quality data. Using qualified data to inform relevant customer experiences drives richer engagement for our +17M active shoppers and creates more opportunities for the 4200+ brands on Rakuten.
Our first-party customer data is critical to building personalization strategies that create a clean feedback loop between data and shopper behaviors to drive outcomes for brands.
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