Generation Z—those born from the mid-1990s to the early 2000s—is already the largest generation in most of the western world, having surpassed the Millennials in 2019. When combined with their younger Generation Alpha counterparts (those born after 2010), they represent nearly 30 percent of the U.S. population. They are matriculating into the consumer marketplace at a rate of several million per year, and by 2023 will be the largest generational cohort in the economy.
Gen Zers in the U.S. spend an estimated $143 billion a year, which does not include the money spent on them by their parents, or the indirect spending influence they have on overall household spending (more than $600 billion). To put that into perspective, that's roughly equivalent to Amazon's 2018 product sales or just under the GDP of Nevada. And while Baby Boomers currently outspend Gen Z and Millennials, that won't last forever. According to a recent report by VISA, Gen Z will surpass Baby Boomer spending by 2025.
Digital is king
Gen Zers have never known a life without the Internet. Figuring out where to reach them and how to sway their purchasing decisions presents an inflected challenge.
While Gen Z literally have the world at their fingertips, they still prefer shopping at brick and mortar stores. Much like the three generations before them, this habit is born from the desire to spend time with their friends. In a recent survey from Comscore, nearly 50 percent of 18-24-year-olds said that shopping with friends was their main reason for going to stores. That said, they don't necessarily buy there. In the same survey, nearly 65 percent of females 14-18 said that they had purchased clothing from Amazon in the previous six months. The number one reason for this was free and fast shipping.
What’s more, nearly two-thirds of 18-20-year-olds said they would pay more than $5 for one-hour shipping of goods and more than half said they would switch companies if shipping were offered faster.
So, where are they?
The Internet; specifically, social media platforms.
Almost half of Gen Z in a recent Pew Research poll said that they are online “almost constantly,” and more than half said they are online 10 or more hours per day. In a 2018 study, more than 90 percent of Gen Zers age 16-21 reported having access to a smartphone. That’s a 22-percentage-point increase over the 73 percent of teens who stated this in 2014-15. Over a quarter of Gen Zers use their smartphones more than 10 hours a day and nearly a third say that they feel uncomfortable if they are without their phones for more than 30 minutes.
However, while Gen Z consumers are more than two times more likely to shop than Millennials and nearly a third like to receive communications from brands more than once per week, their preferred platform for interacting with brands is Instagram by almost half. A recent eMarketer survey predicts that nearly 50 percent of U.S. 12-17-year-olds will be on the platform by the end of 2019. However, in self-reporting, 51 percent of 13-17-year-olds report that they use Snapchat more than Instagram.
YouTube is a major factor that covers both Millennials and Gen Z with 95 percent of people under the age of 34 accessing the site for at least six hours per month. Among 13- to 17-year-olds, 89 percent of males and 81 percent of females were YouTube viewers.
Still, the best place to reach them may not online. A recent eMarketer study reports that four in 10 of them felt overwhelmed by the amount of notifications they receive. They are also twice as likely as their Millennial counterparts to have installed ad-blocking software. This illustrates their love-hate relationship with advertising, with less than 25 percent having a positive perception of four major ad categories (online search, online display, desktop video and mobile video). Still, more than three-quarters were willing to engage with ads that are targeted properly.
Now is the time
In spite of all the conflicting information, Gen Z’s behaviors are somewhat stable (while very different than what we are used to) and still young enough to not have strong brand preferences. Retailers and brands would be wise to dedicate time and resources to build brand-awareness and loyalty. Now is the time to act before this generation reaches the stage of dominant buying power.