Pay by Link: Your short-cut to contextual commerce
Millennials are changing our economy, especially in retail. Now between ages 23 and 37, Millennials are in the midst of their professional careers and have a steady income, making them a key shopping demographic. But there’s another group poised to cause the next big shift in how we shop (and buy). Enter Generation Z, (Gen Z or Gen Zers).
We recently commissioned a survey of 2,010 US consumers between the ages of 18-55, to understand their shopping habits, expectations, hopes, and fears of this up-and-coming generational group. We know brick-and mortar isn’t dead, but what do retailers need to know to appeal to Gen Z shoppers now and in the future?
Born between the mid-1990s and mid-2000s, the oldest Gen Zer is around 22 years old. That defines this up and-coming generation as today’s teenagers, with a firm grip on future purchasing power. But that doesn’t mean Gen Zers aren’t influencing consumer spending today.
At 32 percent, Gen Z makes up the second-largest age demographic of tastemakers — the group of early adopters identified in our first Evolving Retail white paper earlier this year. According to a 2017 National Retail Federation report, more than 70 percent of Gen Zers said they influence their family’s spending, including clothes and shoes (60 percent) and electronic devices (61 percent).
Additionally, Gen Z has its own spending power — $44 billion worth to be exact. That’s a lot of purchasing power for a generation of teenagers. By tailoring experiences to Gen Z, retailers are not only influencing their current spending, but also building shopping models that will be relevant for years to come.
Gen Z has grown up entirely in the digital age. They know the internet only as a high-speed connection and never had to endure dial-up modems. Their idea of a phone has always been mobile. As they have come of age in this connected world, 3 out of 4 Gen Zers spend most of their free time online, and to many, social media is a huge part of their life.
This is important to retailers for a few reasons. First, what Gen Z sees on social media impacts purchasing decisions. Even more than Millennials, Gen Zers have been influenced and have purchased a product because of YouTube videos (30 percent vs. 22 percent of Millennials) and Instagram (26 percent vs. 22 percent of Millennials). Gen Z (41 percent) and Millennials (44 percent) are both influenced by Facebook ads.
This phenomenon indicates that different social media platforms also attract varying crowds. Whereas social media was once seen as a new tool, it’s now a channel that retailers can’t afford to ignore.
As the future power shopper, Gen Z brings a new expectation for the retail experience. They expect retailers to demonstrate that they’re trustworthy. And it pays to gain their trust now for brand loyalty in the future. Similar to Millennials, Gen Zers also want to be heard. Sixty percent of Gen Zers think it’s important for brands to value their opinion, and when they do give feedback, they are twice as likely to provide positive feedback than complaints.
Roughly half of Gen Zers also expect high quality, eco-friendly, and socially responsible products. Beyond their altruistic tendencies, this new generation expects the online and in-store experience to work together. Forty-eight percent of Gen Zers expect to be able to return or exchange items bought online in the store, and 33 percent expect to be able to buy online and pick up in-store. Gen Z’s expectations from retailers have also taken a cue from Millennials. Whereas 63 percent of Millennials have ordered items online to be picked up in-store, Gen Z has followed suit, with 54 percent saying they’ve shopped this way.
Gen Zers are a group that likes to shop and research brands on their own terms. Properly preparing for the future shopper starts before they even walk into a store. Retailers need to eliminate some shopping experiences that are causing barriers to buying and holding back in-store experiences for the Gen Z shopper. Additionally, retailers will be well-served to listen to the technology that this generation understands but doesn’t want to see as part of the shopping experience.
Gen Z shoppers are young and tied to their devices, but they don’t want to have their hand held. The future power shopper is perfectly capable of researching their own product info. Gen Z would much rather do their own research or listen to friends and family for recommendations — only 7 percent wanted sales associates readily available to make recommendations while shopping inside a store.
For Gen Z, the most popular way to research new brands and products is by going to a specific store’s website (49 percent), word-of-mouth (45 percent) and searching megastore apps (43 percent).
Though social media plays a crucial role in influencing Gen Z’s purchasing decisions — 26 percent of Gen Z have been swayed into a purchase by an Instagram post — the future power shopper still turns to the advice of family and friends (and their own research) over influencers and social media adverts.
While Gen Zers prefer to research everything for themselves, they do want a real live person to help them complete their purchase — paying with an associate at the register was still ranked first as Gen Z’s most preferred checkout experience. As such, retailers should let Gen Zers do the research, but be there at the end to see it through.
Though using biometric data like scanning a fingerprint or retina is cutting edge security technology, it’s still a bit much for shopping, even for Gen Zers. While 23 percent of them thought this technology was possible for shopping in 2-5 years, when asked about future shopping experiences, 35 percent of Gen Z shoppers said they did not want this feature to be part of their future.
Gen Z is inherently digitally savvy. When they use devices, 73 percent are using them to text and chat. The Gen Z shopper can be influenced on social media, but they haven’t fully embraced chatbots and chat apps to communicate with brands. Still, compared to Millennials, more Gen Zers have used chat apps to communicate with brands (46 percent vs. 41 percent). This upward trajectory can be attributed to Gen Z’s immersion with technology. Yet there is still hesitancy from both Gen Z and Millennials to make purchases from a messaging app. Only a little over a quarter (26 percent) of Gen Zers and 29 percent of Millennials are willing to purchase from a messaging app.
While today’s purchasing power is with Millennials, tomorrow’s power shopper is setting the trend for how retailers should plan for the future. With easy access to virtually anything they can think of, Gen Zers crave efficiency. For Gen Zers, if their preferred shopping experiences were implemented, 50 percent of them would shop more overall. So how can retailers meet the needs of Gen Z?
If the future power shopper is going to spend money in a store, they want to make sure they’re making the most of their trip. For Gen Z shoppers, 66 percent would visit a store more if they could check if an item they wanted was in stock beforehand. And once they’re in the store, the Gen Z shopper would opt to pick up the items they need and have the store automatically charge their account. More than a quarter (39 percent) of Gen Z shoppers hope that this “just walk out” technology is a standard experience in the next 12 months.
Savvy retailers are already embracing showrooming (i.e., providing physical space for consumers to examine products and then buy these items online), but Gen Z shopping preferences should provide even more urgency to do so. Approximately 1 in 3 Gen Zers want showrooms to be commonplace within the next 12 months, a reflection of their need for a purpose to go into a store and the blended retail experience they desire.
The problem is that Gen Zers and Millennials don’t have confidence in retailers’ ability to get with the trend anytime soon. Only 22 percent expect showrooms to happen in the next 2 to 5 years. But retailers that cater to these preferences will reap the dividends: showrooms represent a massive opportunity that has the potential to drive 50 percent more shopping.
Retailers are starting to use AR and VR to change the way consumers interact with products — both inside and outside stores. Gen Z shoppers have latched on to the possibilities of AR, with 44 percent wanting this technology to come to fruition within the next 12 months. From using augmented reality to see how a dress would fit, or how furniture would look in a home, to using virtual reality to see what your concert would look like in person, AR and VR are perfectly poised to be a normal part of the shopping experience — eventually. Twenty-eight percent don’t expect it to happen for another 2 to 5 years, but retailers would be well-served to prove Gen Z wrong and make AR and VR a reality sooner rather than later.
Gen Z shoppers were born with wireless technology. They’re accustomed to technology being every part of their life. At the end of the day, retailers who understand and adapt to these preferences as this up-and-coming generation matures will be rewarded with loyal, connected, deep-pocketed customers for generations to come.
Survey methodology: In February 2017, we commissioned a survey with a national sample of 2,010 U.S. consumers between the ages of 18-55, to understand perceptions of shopping and payment experiences currently and in the future. The 12-minute online survey was implemented by Morar Consulting. Survey fieldwork was carried out between February 20-25 2017. Sampling variation of survey results is 2.2 percent.
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