Don’t overvalue their love of technology too much. Left to their own devices, today’s 18- to 23-year-olds may devise a shopping experience that transcends digital engagement — and they’ve got $44 billion in spending power to inspire it.
That makes the members of Generation Z, the oldest of whom were born in the mid-1990s and the youngest in the early 2000s, difficult to undervalue from a retailer perspective. At more than 74 million members, Gen Z is expected to account for 40% of all U.S. consumers by 2020, according to Adweek. As they grow, their spending likely will as well.
Here are seven descriptors that define Gen Z, none of which include “digital.”
- Diverse. Roughly half of the Generation Z population is nonwhite, according to a report in Forbes, citing the U.S. Census Bureau. Specifically, 22% are Hispanic and 15% are non-Hispanic blacks — the largest percentages of any generation, according to research by Nielsen. This means these young consumers are more familiar with and open to different cultures and customs, translating to fewer barriers to purchase (including among Caucasian consumers). Wariness of the unfamiliar is more likely to have been replaced by curiosity and inclusion.
- 2. Savers. Perhaps the 2008 recession slapped the frivolity out of them, because members of Gen Z tend to be more financially conservative and risk-averse, meaning they are less willing to take on major debt. One-third have bank accounts in their names, and another third — likely teens — share accounts with their parents. Nearly half, 48%, prefer to do their banking face-to-face with a teller, a possible indication that saving money is important enough to them to require personal interactions that support a sense of security. Retailers, think interest-free layaway.
- Bargain-hunters. Those who are trying to save money also tend to be cautious spenders, Gen Zers included, and they’ll shop big-box stores if necessary. Roughly 55% of the Gen Z population is increasing the amount of time spent in dollar stores and mass merchandisers, according to research by the global consulting group WSL Strategic Retail. About 40% say they’re spending more time in consignment shops and supermarkets. When it comes to specific brands, they prefer Walmart, Ulta and local grocery stores, at 56%, 48% and 45%, respectively.
- Commute-averse. Neighborhoods and their shopping options mean less to Gen Zers than does the work commute. In choosing a place to live, 34% said their decisions are not at all influenced by neighborhood amenities such as shopping centers, according to the Zillow Group Consumer Housing Trends Report 2017. That compares with a quarter of total renters. Instead, members of Gen Z prefer a short commute to work, and just 17% require being in a preferred neighborhood, compared with 39% of the total population. Retailers should increasingly cross-analyze the spending power of employment hubs to residential communities.
- Vegan. It seems small, but subtle preferences can reveal broader beliefs and passions. Nearly one-third (29%) of consumers ages 18 to 21 say the word “vegan” on products makes them more appealing. This compares with just 14% of baby boomers, according to a May study by the market research firm Morning Consult. The younger generation’s preference for animal-free goods likely extends to non-food products, such as pet-safe household goods and non-leather apparel. It may be worth testing animal-friendly aisles or departments.
- Mall-agnostic. Gen Z shoppers could represent a critically well-timed opportunity for shopping malls. Of shoppers ages 18 to 29, which includes a large segment of Gen Z, 35% said they shop at malls less now than they did five years ago, but 45% said they shop them more, according to a January survey by Morning Consult. That’s a close but promising split, especially when considering 54% of all adults said they shop at malls less often (19% more often). Youth-targeted promotions, particularly of the cost-savings kind, would likely be well received.
- Loyal-ready. Loyalty programs that offer benefits such as free tailoring or special events are largely lost on Gen Zers. Just 30% say a loyalty program makes a store special to them, according to Ernst & Young. That compares with 45% of millennials. When it comes to making reward programs special, 31% of Gen Z shoppers prefer members-only events, compared with 44% of millennials, while 80% of Gen Zers chose free delivery (74% for millennials). Retailers trying to appeal to this segment using loyalty programs should focus on the practical perks.
The old adage laments that youth is wasted on the young. The future won’t be. The youngest generation of shoppers will pass up poorly conceived retail notions and experiences as readily as those shoppers before them — regardless of technology.