Retailers, restaurants and leisure companies will be required to adapt to meet the demands of the upcoming generation.
According to the new report “Gen Z: Get Ready for the Most Self-Conscious, Demanding Consumer Segment,” from Fung Global Retail & Technology, having grown up with social media and assuming instant access to almost all things digital, today’s image-savvy teens and tweens want it all, and they want it now. Adapting to the wants and needs of Gen Z will be no simple feat for retailers, restaurants and leisure companies.
Not all of Gen Z has been born yet; therefore, the generation possesses substantial growth potential as a demographic group, noted Deborah Weinswig, managing director 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 wrote, 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 observed. “It is hard not to see these creating a more demanding, image-conscious consumer.”
Fung Global Retail & Technology estimated that consumers in the U.S. spent $829.5 billion on Gen Zers last year, and that approximately $66 billion of that was spent on discretionary categories. Gen Z comprises 19% of the U.S. population, and will rise to 25% in 2020. In the European Union, the generation accounts for 16% of the population, and is forecast to peak at 21% in five years.
The influence of technology on these consumers’ habits cannot be underestimated. The first members of Gen 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 noted. New brands are even emerging from social media stars such as Kylie Jenner from the U.S. 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% and their spending on cultural services by 6.7%, while retail sales rose just 1.9%. In the U.S., restaurant and hotel spending rose by 7.4% and 7.3%, respectively, in 2015, while retail sales rose just by 3.5%.
“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 said. “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 Gen Z matures, it will become more discerning, but its demanding nature is unlikely to be diluted,” Weinswig said. “We think brands and retailers will be the ones that need to change, because Gen Z looks unlikely to compromise on its high expectations.”