September 6, 2019
Straddling adolescence and adulthood, Gen Z is at a turning point. The oldest members of Gen Z have already graduated college and are now in their early 20s. Considered a thrifty generation, Gen Z has posed a challenge to key general merchandise industries, which have struggled to drive dollar growth among this cohort over the past two years.
Gen Z accounts for 27 percent of the U.S. population. That means when these consumers enter the workforce, it will be especially important to tap into their increased buying power. Unlocking their full purchasing potential and winning their loyalty now requires that brands and retailers appeal to Gen Z’s desire for seamless digital experiences, purpose, and convenience.
To see what smart marketers are doing to win over Gen Z in 2019 and beyond, we dug through our information assets in general merchandise, digital content, and food. Read on for a deep dive on Gen Z. Take a look at the latest trends and opportunities so you have the facts needed to stay top of mind with this important group.
- Retailers and brands should offer digital and in-store experiences that appeal to Gen Z’s passion for unique products. “Gen Z wants unique products sold by unique retail, made by unique brands,” said Sports Industry Advisor Matt Powell.
- New digital platforms, like Twitch and other video game streaming services, have high engagement among Gen Z, offering brands an exciting medium with which to connect with younger audiences.
- Purposeful and convenient options are critical to winning over the hearts and minds of Gen Z consumers—businesses that provide both have captured Gen Z’s attention and spending in recent years.
1: Drive In-store Traffic, Digitally
While online shopping growth continues to outpace growth of brick-and-mortar, physical stores still represent a majority of sales in most categories. Apparel Industry Analyst Maria Rugolo says Gen Z has a propensity for in-store shopping across general merchandise. Lower rates of credit card ownership drive much of this behavior – for the time being, brands and retailers must focus on in-store strategy to reach Gen Z.
Stores present an opportunity for retailers to appeal to Gen Z by curating unique assortments. “Gen Z wants unique products sold by unique retail, made by unique brands,” said Sports Industry Advisor Matt Powell. Recently, the run specialty footwear channel reversed years-long sales declines after certain retailers began carrying brands that weren’t available elsewhere, as shown by our Retail Tracking Service information.
To see what’s working in stores, we turned to Checkout, our consumer receipt panel, to look at the top 10 most penetrated apparel brands (the brands with the highest buying population) across brick-and-mortar among Gen Z for the 12 months ending April 2019. Most of those brands had penetration declines versus the prior year. Adidas, however, was an exception, enjoying year-over-year penetration increases. So why did Adidas capture more Gen Z shoppers in brick-and-mortar while other big brands struggled?
The answer likely has to do with Adidas’ promotion of its e-commerce DTC business, and in particular, consumers’ interest in the Yeezy line, Matt Powell explained. With an often-limited supply and various colorways, Adidas has been able to build cachet around the Yeezy line through its own DTC site and flashy social media campaigns. While an e-commerce/digital strategy driving in-store traffic may seem counter-intuitive, remember that a large portion of Gen Z consumers don’t have credit cards. So it’s common for this group to learn about products through social media/brand.coms and execute purchases in-store. Given Gen Z consumers’ affinity for all things digital and their reliance on stores, it’s especially important for brands and retailers to blend the online and offline worlds when engaging with Gen Z.
2: Tap into Emerging Content Formats
Video games aren’t just about gaming anymore. Gen Z was the first generation to be raised fully immersed in a digital environment, resulting in a high level of connectedness on digital platforms. Thus, it’s only natural for video games to extend into other aspects of young gamers’ lives, explained Dr. Heather Nofziger, Director of Consumer Research at EEDAR, an NPD Group company.
Nearly two-thirds of U.S. boys aged 13 –17 watch gaming content on video services like Twitch and YouTube in addition to playing video games, as shown in EEDAR’s 2018/2019 Consumer Segmentation report. Nofziger noted that while girls in this age group are less likely than boys to watch games, girls still represent a sizeable chunk of the audience. For those who watch games, it’s a big part of their lives. The average gamer who watched gaming content, across all age-groups, watched for seven hours per week, the study revealed.
Other generations may have a hard time wrapping their heads around the practice of watching video games. To explain, Video Games Analyst Mat Piscatella compared it to his own behavior. “I’ll tune in to watch [MLB player] Mike Trout, because he’s fun to watch. In the same way, gamers are watching their favorite streamers [gamers who broadcast their gaming experiences] because they’re fun to watch.” Gamers can also use these videos as a learning tool. In fact, 51 percent of gamers who watch streamers said they watch these videos to improve their gameplay, the EEDAR study reported.
Big Brands Jump in the Game:
Gaming is also creating new opportunities to advertise to Gen Z audiences. Fortnite developer Epic Games and Nike recently partnered to integrate Nike’s Jordan Brand shoes into gameplay. With the partnership, Fortnite players (often Gen Z) could customize their characters’ outfits by purchasing the Nike “skins” that were visible to other gamers. The move generated buzz among people who play and watch video game content online. A popular Streamer discussed the collaboration, generating more than 3 million views, in a recent YouTube video. Nike’s approach was a smart way to appeal to Gen Z. In stores, Gen Z footwear purchase frequency decreased 8 percent, while spend per purchase increased 5 percent versus the prior year, shown by our Checkout information. This means that while Gen Z footwear consumers shopped in stores less, they spent more when they did shop in stores. As it becomes more challenging for traditional forms of advertising to generate foot traffic, brands and retailers, regardless of their category, should consider looking to emerging digital content formats to drive Gen Z to physical stores and deliver offline experiences that deepen ties to the brand.
3: Satisfy Gen Z’s Appetite for Purpose and Convenience
“Meals are no longer viewed as isolated occasions. They’re part of an integrated lifestyle,” said Food Industry Advisor David Portalatin. 19 percent of U.S. Gen Z consumers said food is their passion and an essential part of their lifestyle and identity, compared to 16 percent of Millennials, as shown by a June 2019 CivicScience poll. Gen Z consumers really are what they eat. And their meals increasingly need to have purpose. To see how this translates to consumption, we recently turned to our National Eating Trends® service to identify the fastest-growing foods consumed at home. Foods increasing in consumption by Gen Z include ethnic cuisines like Asian and Hispanic dishes. “This generation grew up in a global environment with more diverse classmates than prior generations. As a result, Gen Z expects to explore the world through their food,” said Portalatin.
Gen Z consumers also value convenience when eating. Foodservice delivery orders by Gen Z amounted to 552 million, just a million shy of Millennials’ delivery orders in the year ending December 2018, as shown in our Delivering Digital Convenience report. This is impressive, given that only a portion of Gen Zs are old enough to order their own delivery.
Foodservice operators, like Jimmy John’s, effectively blend purpose and convenience into their messaging. The Jimmy John’s website tells the story: “[We use] only the freshest ingredients. Quality is our way of life. That’s why we spend six hours slicing and baking every day to make tasty sandwiches in just 30 seconds or less.” This chain has done especially well with Gen Z, over-indexing substantially with the group; it is considered strongly developed with the cohort, as shown by our CREST® information.* While Gen Z consistently shows a preference for healthy meals, convenience is critical to making those options accessible and appealing to the group.
*Chains that index with Gen Z by 120 or more are considered strongly developed
Are You Meeting Gen Z’s Expectations?
As Gen Z continues to grow in commercial importance, it’s critical to keep up with the latest trends in order to win. Smart marketers are leveraging social media, DTC, digital content, and in-store experiences to find novel ways to engage this generation. “Success will come from doing it right, differently, and with added benefits. Innovation drives growth,” said Chief Industry Advisor Marshal Cohen. Whether it’s in a video game, an app, or a store, now’s the time to discover fresh ways to rise above the noise.
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1 Source: The NPD Group/Consumer Tracking Service, 12ME May ’19 vs. 12ME May ‘17. Industries studied include apparel, footwear, accessories, and consumer technology. Apparel and footwear industry data is based on wearer (e.g., parents buying clothing for their Gen Z children are included). For this study, Gen Z is defined as being between the ages of 13 and 24.