Generation Z Poised To Surpass Millennials In Buying Power

NEW YORK— While marketers, manufacturers and retailers are trying to win the Millennial consumer, there’s another generation in town with $44 billion in spending power and projected to comprise 40% of all consumers by 2020, according to industry analysts, a vast demographic unwise to ignore: Generation Z.

There are some similarities between Gen Z, those born after 1996, and their siblings, parents and grandparents, but it’s their dissimilarities and nuances— who they are and what they want— that will help inform the future of their interactions with the housewares industry.

Marketing to this generation means stepping away from a one size fits all marketing prototype to focus on specifically tailored content for each individual and burgeoning segment of arguably the most diverse generation yet, according to analysts.

“What happened with the Millennials is that so many people said, ‘If you want to target the Millennials you do this, this and this.’ That was a mistake. Let’s not repeat it with Gen Z,” Gregg Witt, youth marketing strategist, trend analyst and evp at youth marketing firm Motivate, told HOMEWORLD BUSINESS®.

Generation Z is driven by its birth into the tech age, unmatched diversity and the financial experiences of its predecessors, traits that have informed how this generation is expected to consume everything from information to housewares products.

However, while gleaning into what makes this new generation tick, it’s important not to alienate older generations who still command substantial buying power or diminish their capacity for influence.

Meet Generation Z

Meet the new digital natives. Generation Z is the first generation to be born into a world of instant access, streaming content and global communication with no memory of what it was like without it.

“Tech is no longer separate from us, it is synonymous with who we are. And that makes for a very interesting conversation about how we are consuming content differently, sharing things differently and how we are behaving and interacting with humans,” said Connor Blakley, a member of Gen Z and founder of the youth marketing firm YouthLogic.

This “unrelenting relationship with info and tech” has shaped who they are, what they want and how they shop for it, according to Witt, including their craving for experiences.

The Great Recession affected Gen Z unlike its predecessors, at a time when they were building their first memories and coming into adolescence, and helped shape their financial culture.

Those born after 1996 were in early adolescence when the great recession hit, and their first memories were that of financial turmoil and emotional upheaval.

“We were seeing our parents go through the recession, we were seeing our houses get foreclosed on, we weren’t going out to eat. It made us much more conservative with spending habits,” Blakley said.

Influenced by the hardships of previous generations, Gen Z has evolved into “agents of entrepreneurism,” according to Witt.

 

“The world is set up to build small businesses now, but the driver is that they saw mom and dad move out of a house and into an apartment. They saw some serious stuff go down, and they don’t want to be out there in the world and have nothing,” said Witt.

He added, “It’s a big thing that needs to be embraced. There’s a lot of big initiatives from brands going on to embrace that entrepreneurism and burn that into their company DNA.”

Joe Derochowski, executive director, home industry analyst, for the NPD Group, added that while Gen Z is developing financially conservative viewpoints they put value above cost.

“When they hear 10% off or 20% off they view that as ‘you’re trying to sell me something. You’re not trying to establish a relationship with me.’ The impact of promotions may not be what we think,” he said.

Already at 70 million and strong, Gen Z is projected to be the most culturally and ethnically diverse group in history, according to analysts.

Coupled with their multicultural backgrounds is the fact that those born after 1996 are the first generation not to be living “in the shadow of 9/11,” according to Blakley, which helped shape a politically progressive worldview.

Having no first hand memory of the events, Gen Z grew into adolescence reflective of the unity the aftermath inspired.

“They are more tolerant than any generation but they also are inviting of the fringe. They welcome voices from the fringe, and really celebrate interesting cultures, plurality and multiplicity,” said Witt.

This uniqueness and welcoming spirit makes it more nuanced to market to Gen Z, he added. “Gen Z is not one monolithic group. You have to take these lifestyle and cultural connections more seriously because of the enormity and uniqueness of them and the amount of information they are processing. It’s not new, but so important.”

Influencing And Being Influenced

While Gen Z might not currently have the buying power, seeking out nuances by generation is key, analysts agreed.

However, delving into the youth market doesn’t mean alienating older generations. In fact, due to technology and the speed at which information is consumed, “There has never been a better time to have generations influence each other,” Witt said. “Part of what enables that process is that a lot of these generations are hitting the same needs. The needs of health, experience and convenience.”

In addition, Witt noted that Gen Z and their parents are more connected today. “Mom and Dad are not necessarily weird and kooky. It makes it easier to influence family spending,” he said.

In fact, according to Goldman Sachs research, 93% of parents agree their Gen Z children maintain at least some influence on household spending and purchases.

Analysts agreed that while the nuances of Gen Z are the key to the future of the industry, they align with the demands of previous generations, if somewhat heightened.

The upheaval retail has undergone in the past few years has led the industry to turn its attention to creating experiences in order to satisfy the needs of multiple generations. However, for Gen Z, those experiences have to be shareable because “the new social currency is experiences,” Blakley noted.

“When they are buying a product, it’s not just about the product, it’s the ability to take a picture and show people,” Derochowski said.

When it comes to retail, he said, “They have to create an experience not just to create traffic but to create a story that the consumer can tell because that story is a reflection of who that person is and their self worth.”

Due to the group’s size and diverse backgrounds “shotgun marketing is dead,” according to Witt, and the group demands authenticity from both retailers and vendors, which is heightened for Gen Z but a need that crosses generations.

One way to accomplish that, according to Witt, is to focus on niche audiences.

“The landscape for marketing is completely changed, and niche audiences drive mass consumption,” he said. “You need to find like-minded groups that matter most to the brand and then commit to them, and not just for this quarter. You commit to them long haul, and when you earn their respect you can build on them.”

For example, “it’s not just the cool white sexy girl laying on the bed to sell sheets” Witt said. Manufacturers and retailers need to be aware of how she is portrayed. Her sneakers matter, her diversity level matters, and how marketers are connecting all of the elements to the story they are telling matters, he said.

Like their predecessors, Gen Z wants their information straightforward, clear and original, analysts agreed.

“You can’t be a poser, and you can’t have a lot of marketing fluff. It applies to many audiences, but with Gen Z they won’t even see your stuff if it’s not clear. They won’t go gimmicky,” Derochowski said.

He added that historically the housewares industry has “been a little bit ‘I build it, I put it on the shelf and I tell the consumer what to buy. We are going to have to evolve to think what is the consumer really thinking and wanting and making us much more consumer driven than we are now, and part of that is about building trust.”

Status is everything for Gen Z, analysts agreed, and manufacturers and retailers alike need to make it “cool” for Gen Z to associate with their product.

“One thing that is not talked about at all is the art of being cool,” said Blakley. “Coolness is something that everyone has experienced and can relate to, but no one knows what it actually means to be cool.”

In order to accomplish “coolness,” brands have to be relevant, he said, and to be relevant brands have to be culturally sound and in tune.

“When something happens and there’s a cultural shift you have to be aligned with it. If brands are showing up on time and meeting us where we’re at instead of where they want us to meet them I think those are the brands that win,” said Blakley.