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How Gen Z is Shaping the Next $1T Market and Why Brands Need to Act

ConsumerGeniuses

ConsumerGeniuses

Gen Z consumers exhibit a higher degree of financial independence and diversity than previous generations. It is imperative for companies to understand their shopping behaviours and attitudes that will help them market products effectively to this generation. Gen Z is the most ethnically diverse generation, that cares about brand name and image. They account for $143 billion in direct spending.

What Makes Gen Z Consumers Different from their Peers? (The use of technology and media)

Gen Z is still students on a budget, and they are also the first generation to be in a majority-minority situation. They show an influx of new acculturation dynamics compared to Millennials. Social Media sites that were once thought dead are now experiencing a renaissance among Gen Z. Brands would need to readjust their social media spending to reach the maximum of Gen Z consumers. Tumblr, Snapchat, and Twitter are the most significant social media platforms for Gen Z consumers, while Facebook and Reddit have much lesser user cases. Social media acts as a discovery tool for Gen-Z, enabling them to create and develop communities, be aware of brands, and participate in events.

  • Social media has evolved to become a tool for building relationships, as Gen Z is 44% more likely to make new friends through social media than their older counterparts.
  • Gen Z is 10% more likely to be using social media to discover new products.
  • Social media is an increasingly important source of news and current events for Gen Z.
  • This Generation is 18% more likely to discover exciting events from social media platforms.

Where is Gen Z Spending its Money?

Gen Z consumers are shifting their spending from mass merchandise channels to food and convenience stores, as well as online. In the past year, Gen Z consumers spent less money on mass merchandise retailers like department stores and outlet malls and more money on restaurants, entertainment centers, and online shopping sites. As compared to the previous year, 20% and 19% is less spent on food and mass channels while gas & convenience and online channels experienced a rise of 8% and 7% respectively.

Categories that are Crucial for Gen Z Shoppers

Online retailers now capture 7.4% of Gen Z’s total spending. 45.6% of Gen Z consumers buy health and beauty products from online sources, while 24.4% of them do online groceries. To buy household products 21.3% look for reliable online channels while 15.7% feed their pets by ordering their food online. Electronics and apparel account for 52.2% and 44.3% of Gen Z’s eCommerce purchases.

Despite spending more time on mobile devices than their Millennial peers, Gen Z has a smaller share of its total retail spend going to eCommerce than Millennials. As compared to the 10.4% of millennials only 7.4% of Gen Zs are purchasing goods from online channels.

Patterns Defining Gen Z’s Online Shopping Behaviours

  1. 53% of Gen Z shoppers make an online purchase because they believe online shopping saves their time.
  2. 40% of them hold that shopping online saves money.
  3. 26% find it more convenient to have orders delivered at the doorstep.
  4. 24% of Gen Z, on the other hand, have a difficulty in finding their desired items.

Gen Zs from Around the Globe

The Generation Z in America

Generation Z members are more likely than millennials to shop in brick-and-mortar stores. This is partly because they shop more often on any device and in any format or channel, but they also like the experience of being in a store, where they can touch and feel the merchandise. Because Generation Zers are more interested in standing out than fitting in, brands do not play as strong a role in their lives. They are always looking for the next big new product. Of the adult members of Generation Z, almost 40 percent say that their purchasing decisions are most influenced by social media. For millennials, however, less than half say the same thing.

The Generation Z in the APAC Region

Like the American Generation of Gen Z, social media influences the purchase patterns of Gen Z in the APAC region. They prefer brands that show their personality and uniqueness and they want it all. Video content is another significant channel influencing their brand selection and they are an environmentally conscious Generation but are not ready to pay extra for it.

6 kinds of Generation Z Consumers in the APAC Region

McKinsey and Company conducted a survey on Generation Z consumers in APAC and found six segments that described the specific needs of this Generation. Brands need to understand these segments to develop products and services that meet the needs of Gen Z.

  1. Brand conscious followers: 34% Chinese, 26% Indonesian, 32% Thailand consumers, and 24% Australian and Japanese consumers are brand conscious. They love all kinds of brands and follow trends but don’t shop from them more often.
  2. Premium shopaholics: 17% Australian, 23% Chinese, 24% Indonesian, and 26% of Thailand’s consumers are premium shopaholics who love to shop. they take time to research and compare online sources prior to making a purchase.
  3. Ethical confidents: 18% Australian and Indonesian, 23% Chinese, 26% south Korean, and 12% of Thailand’s consumers prefer environmentally responsible and socially ethical brands.
  4. Value researchers: 9% Chinese, 14% Indonesian and Australian, 21% Japanese and 26% south Korean consumers are always on the hunt for the best deals and offers.
  5. Quality conscious: 8% Chinese, 6% Japanese, 8% south Korean, and 12% of Thailand’s shoppers seeking out quality are willing to pay more for it.
  6. Disengaged conformists: 12% Australian, 4% Chinese and Indonesian, 15% Japanese, and 10% south Koreans want to spend less time shopping.

Gen Z and Restaurants & Dining Trends

For both Gen Z and Millennials, McDonald’s is the top fast-food chain. Taco Bell comes in second among Gen Z, while subway (3rd) and chick-fil-a (4th) respectively rank among Gen Z Generation. Gen Z shoppers are more likely than older Generations to consider dining out as an indulgence, and one in five (19.4%) Gen Z shoppers dines out 4-5 times a week. 53% of Gen Zs dine out to satisfy their craving while 33% of them go out for a meal to treat themselves. This is reflected in their grocery shopping behaviours as value is more important for Gen Z consumers than organic or private label brands.

Gen Z shoppers are more likely to visit grocers with a strong value proposition and less likely to visit food retailers with a natural or organic focus. They tend to avoid retailers with a significant private label presence. Private label brands have yet to win over Gen Z Generation. Retailers have the opportunity to attract Gen Z shoppers with loyalty programs, but brands need to start building those relationships now. Over time, however, Gen Z’s perception of private label brands has transformed with 32% thinking that private label quality has improved with time and 14% of them have started to hold that private label product are just as good as brand name products.

Brands Connecting with Gen Z with their Creative Mix

Gen Z is a more engaged, mobile-oriented shopper than previous Generations. They are less likely to use their computers as the primary source of advertising and more likely to engage in in-store and special event experiences. Brands that resonate with Gen Z are increasingly turning to social media as a means of connecting with this growing demographic. Brands like kit kat, Cheetos, Wrigley gum, and Powerade changed their advertising creative mix as a means of connecting with this growing demographic.

Levers Brands can Pull to Attract Gen Z Consumers

Brick and mortar stores:

Even though half of Gen Z purchased on Amazon, they are still visiting brick-and-mortar stores. they are less likely than Millennials to have made a purchase on Walmart or Target’s online equivalents than in the past year. As per the figures, 93.8% of Gen Z shoppers visited Walmart to buy goods while 83.1% went to target for shopping.

Relevance and speed:

Gen Zers are more likely than millennials to see a major brand as an asset; they may associate the brand with quality or simply see it as an easy choice. Gen Zers are 20 percent more likely than millennials to try out new brands and products, and they won’t be loyal to brands that don’t deliver.

The right quality and price equation:

Generation Z’s high digital literacy, easy access to information, and ability to choose to make it difficult for them to spend money on something they don’t want. In a world in which most consumers research significantly before they buy, being competitive in both quality and price is a prerequisite for winning their loyalty.

Social media marketing:

A video is a powerful tool, with young consumers consuming significantly more video media than other Generations do. Brands can use this to their advantage, by creating videos that are informative, fun, or inspiring. But many brands do not realise this potential; they fail to engage with Generation Z in the right way. Brands need to establish a presence on social media and develop strategies that will help them break through the noise and be recognised by consumers.

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