Analytics

Move Over Millennials: Generation Z is Retailers’ Next Big Buying Group

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Millennials are currently retailers’ largest demographic, with a massive consumer base dwarfing the size of their once-dominant Generation X predecessors. And they love to shop online — during the 2016 holiday season, more than one-third of online shoppers were Millennials.

But just as Millennials overtook Gen X, there’s another big buying group retailers and consumer brands need to plan for, and it’s even larger: Generation Z. Born between the mid-1990s and mid-2000s, the births of U.S. Gen Zers outpaced Millennials by 3 million, hold $44 billion in buying power and are definitely a different kind of shopper. According to a new study by the National Retail Federation and IBM’s Institute for Business Value, members of Generation Z are “digital natives” who cannot remember what it was like not to have access to the Internet — no matter when, no matter what, no matter where.

The “Uniquely Gen Z” study is based on research from more than 15,000 consumers aged 13-21 from 16 countries and looks at Gen Z’s digital preferences and consumer expectations.

The study found 74 percent of respondents spend their free time online — five hours or more a day, for a quarter of them; 73 percent use mobile devices to text and chat socially with family and friends. But they are also looking to have engaging conversations involving brand relationships: 42 percent would participate in an online game for a campaign and 43 percent would participate in a product review.

They love collaborative engagement.

These findings present a significant challenge for retailers to create a personalized, interactive experience that constantly reflects the latest digital advances. Those retailers who don’t provide that experience risk falling behind. Members of Gen Z are going to shop with brands they feel they can interact with and can contribute to. While the study found they care most about product quality and availability, participation and engagement is what they really value in a long-term brand relationship.

An example of this experience is 1-800-Flowers.com. The company’s Gifts When You Need program guides shoppers through an interactive shopping experience to help them purchase the perfect gift for an occasion. GWYN is based on IBM’s recently acquired Fluid’s Expert Personal Shopper software, which uses the IBM Watson cognitive technology system to personalize the customer experience and improve product discovery.

A customer can inform GWYN that they are looking for a Christmas gift for their mother, and GWYN will follow up with a series of questions such as type of occasion and sentiment in order to ensure that the right product suggestion is given. GWYN can tailor responses to each customer by offering personalized feedback and help. As consumers continue using GWYN, the system learns more about their needs and refines the shopping experience.

Almost half of Gen Z members surveyed said the most important thing to them when shopping is the ability to find things quickly, and more than 60 percent say they will not use apps or websites that are hard to navigate or slow to load. That means retailers must use engaging technologies — like 1-800-Flowers.com did with GWYN — to create more interactive engagement.

With information always at their fingertips, both Millennials and Gen Z can consistently find something different out there. That means forward-thinking retailers need to create a personalized, interactive experience if they hope to serve this “always on,” mobile-focused, high-spending demographic.

President and CEO, National Retail Federation

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