The Undeniable Influence and Purchasing Power of Gen Z
When we look back on trends from the 2010s, beyond planking and the Harlem Shake, one of the most pervasive fads was a certain type of thinkpiece:
Even paper products couldn’t be spared: Millennials are killing the napkin industry.
For years, these murderous, anti-capitalist millennials were lambasted for their role in bringing down some of our most important consumer products. But as millennials begin to age out of the coveted 18–49 shopping demographic, we’re seeing less reference to their role as an economic killer. Instead, Gen Z is coming under scrutiny for their unique consumer behaviors.
Like millennials before them, Gen Z has become the subject of a number of opinion pieces in which industry analysts complain about their lack of loyalty and obsession with value. “They don’t want to pay full price for anything,” comments a consultant in this Business Insider piece on Gen Z shopping habits. In the same article, an executive director at Ernst & Young laments, “there really isn’t loyalty like in the past.”
Gen Z’s spending power is on the rise. According to a recent Bloomberg report, the young students and professionals now command $360 billion in disposable income. As that figure increases, retailers cannot afford to keep making the same mistake. With each new generation, retailers will have two choices: they can blame them for their new shopping preferences, or they can adapt to the new state of play, making adjustments to their strategy to capture the interest and buying power of each newly ascendant consumer class.
The Growing Role of Gen Z
When we talk about Gen Z, we’re talking about people who were born between 1997 and 2012, putting them between the ages of 10 and 25 at the time of this article. By and large, this generation isn’t yet sitting at the head of the boardroom or controlling vast fortunes. However, they are increasing their economic significance in a few key ways:
- First, those who are at the older edge of Gen Z are graduating from college and landing their first full-time jobs, providing them with their first opportunity to directly influence the market with disposable income.
- On the younger end, pre-teens and teenagers are directing the spending of their parents, who are responsible for purchases to keep them clothed, fed and entertained.
- In the middle, you have those in their late teens and early 20s who are influencing the spending of those older than them by establishing new trends. When celebrities like Reese Witherspoon are wearing straw hats because they previously went viral on TikTok, that’s an example of Gen Z shaping another generation’s consuming habits.
As more members of Gen Z begin to collect a regular paycheck, we can only expect their influence on the market to increase.
Motivating a New Generation
The days of a nationwide marketing campaign moving millions of sneakers or jeans are over. Instead, Gen Z shoppers are motivated by a combination of value, exclusivity and influencers. In the global marketplace, these young consumers can compare prices across thousands of websites before identifying the best offer. When brands aren’t able to compete solely on price, they can draw attention through limited product releases — think Supreme streetwear drops — and micro-influencer campaigns. Like it or not, the runner-up on this season of "The Bachelor" may have as much influence on national makeup trends as the entire marketing department at a national cosmetics retailer.
How can large, legacy brands create exclusivity and keep pace with smaller and more agile competitors? One possible solution could be online marketplaces, which turn smaller competitors into partners through third-party seller platforms. According to a recent survey of 9,000 global consumers conducted by Mirakl, Gen Z shoppers appreciate online marketplaces for their lower prices (62 percent), better delivery options (47 percent), and superior shopping experience (36 percent).
Meeting Gen Z With Marketplaces
Instead of relying on monolithic in-house resources to respond to the demands of a new generation, marketplaces make it possible for brands to explore new trends and opportunities with greater speed, minimal risk, and a lower financial outlay. Here are three tips on how to use marketplaces in the Gen Z economy:
- Keep your eyes peeled and your powder dry. Today’s trends take root and catch fire in a manner of hours. A forward-thinking brand must pay attention to popular Gen Z platforms like TikTok, Instagram and VSCO. Maintaining a robust network of sellers makes it possible to find the right product for a viral trend before the moment has passed.
- Make scarcity a feature, not a bug. With Gen Z shoppers divided into microscopic marketing segments with hyperspecific product preferences, it no longer makes sense to maintain massive warehouse inventories of each season’s new releases. As long as you have the data, algorithms and seller networks to recommend a like-for-like replacement, you never have to worry about missing a sale from out-of-stocks.
- Put the customer experience first. Recent consumer research from Mirakl found that 48 percent of shoppers will hesitate to buy from a third-party seller based on negative reviews. There's no substitute for a stellar reputation, and no shortcuts can allow a brand to overcome slow shipping or poor performance. Prioritizing the customer experience is the most important aspect to building a loyal following among Gen Z shoppers.
As we learned with millennials, retailers don’t win when they try to force new generations to play by an old set of rules. Legacy brands must recognize that the game has changed, treat their new customers with respect, and meet their needs with new tools and strategies. And when the next generation comes along to overtake Gen Z, those historic brands will be better prepared to react quickly and lead us through the next evolution in customer experience.
Adrien Nussenbaum is the co-founder and co-CEO of Mirakl, an online marketplace platform and drop-ship solution.