(Source: Inside Retail Asia | 16 September 2016)
Meet Generation Z. The next big consumer retail power has grown up with social media and assuming instant access to almost all things digital, from music to video to information.
They’re today’s image-savvy teens and tweens and they want it all – and they want it now as they acquire apparel, cosmetics and experiences.
That’s the conclusion of a new report Gen Z: Get Ready for the Most Self-Conscious, Demanding Consumer Segment, from Fung Global Retail & Technology.
“Retailers, restaurants and leisure companies will have to adapt to the wants and needs of Gen Zers, who have not all even been born yet and so possess substantial growth potential as a demographic group”, explains Deborah Weinswig, MD of the think tank.
Born in 2001 and later, and the first generation to grow up “in public” online, Gen Zers attach great importance to their physical appearance. Their presence on social media also pressures them and those who support them to spend on travel and events, Weinswig writes, a phenomenon she dubs “the Instagram effect.”
“The new technology products and services have broadened consumers’ range of choice and quickened the pace of life,” Weinswig observes. “It is hard not to see these creating a more demanding, image-conscious consumer.”
Fung Global Retail & Technology estimates that consumers in the US spent $829.5 billion on Gen Zers last year, and that approximately $66 billion of that was spent on discretionary categories. Generation Z comprises 19 per cent of the US population, and will rise to 25 per cent in 2020. In the EU, the generation accounts for 16 per cent of the population, and is forecast to peak at 21 per cent in five years. Across Asia, that percentage is higher in most markets.
The influence of technology on these consumers’ habits cannot be underestimated. The first members of Generation Z are only a few months older than the Apple iPod, which debuted in 2001. The generation is typified by three dominant characteristics related to its relationship with tech:
The importance of self-image, with their vanity influenced by social media, dating apps and video chat.
The demand for experiences, and a change in consumption habits shaped by booking and delivery apps as well as social media; and
The demand for immediacy, propelled by Amazon Prime Now, among other delivery apps.
Social media and selfies have spurred Gen Zers to be more concerned with personal appearance than any other previous generations, boosting sales of cosmetics, skincare and hair products among boys and girls, the report notes. New brands are even emerging from social media stars such as Kylie Jenner from the US and British blogger Zoella.
This generation’s habit of documenting interesting and fun experiences on social media means they are spending more on events, dining out and travel. Mobile connectivity makes it ever easier to book these activities, and in 2015 UK consumers increased their spending on recreational services by 15.9 per cent and their spending on cultural services by 6.7 per cent, while retail sales rose just 1.9 per cent. In the US, restaurant and hotel spending rose by 7.4 per cent and 7.3 per cent, respectively, in 2015, while retail sales rose just by 3.5 per cent.
“While these figures reflect all consumer spending, not just Gen Z’s spending, we think that the forces driving leisure spending are likely to be stronger for Gen Z than they will be for older age groups,” Weinswig writes. “Gen Zers are, and will almost certainly continue to be, the heaviest users of technologies, including apps that allow users to find and book leisure services.”
The only generation to grow up with the on-demand economy, Gen Zers likely will continue to be highly demanding consumers, whether they are requesting instant access to video, ride-hailing apps or delivery services.
“Exposure to near-infinite choice and access to near-endless information makes this generation more demanding than any of its predecessors. As Generation Z matures, it will become more discerning, but its demanding nature is unlikely to be diluted,” Weinswig says. “We think brands and retailers will be the ones that need to change, because Generation Z looks unlikely to compromise on its high expectations.”
Fung Global Retail & Technology is a think tank whose research team, based in New York, London and Hong Kong, follows emerging retail and tech trends, specialising in the ways retail and technology intersect, and in building collaborative communities.
Led by Deborah Weinswig, a former Wall Street and retail tech analyst and startup advisor, the team publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omni-channel retail, luxury and fashion trends and disruptive technologies.