Editor’s note: Kelly Short is director of global communications for San Diego-based Interactions Marketing and the editor in chief of Retail News Insider.
Most of us know a few teens and tweens who always seem to have their earphones in, one hand on their smartphone texting and the other on a tablet checking out their friends’ latest Instagram photos. That’s Generation Z. Born between 1995 and today, this group of constantly-connected, multitasking, technologically-savvy do-gooders is getting ready to turn the retail industry on its head.
This next generation is the fastest growing consumer group in the world – making up over a quarter of the U.S. population. And they are quickly making it clear that they’re not following blindly in the shopping footsteps of the generations that have come before them. Get ready to meet Generation Z – the future shoppers retailers and brands need to start preparing for today.
The question isn’t whether Generation Z will have an impact on the retail market but when. Despite the fact that many of them aren’t even in high school yet, Generation Z is already a driving force in the economy. According to a report by advertising firm JWT, over 70 percent of parents say their Generation Z children influence buying decisions about apparel and family meals. More than half say their children are also influential when it comes to electronics and entertainment purchases. Beyond their parents’ wallets, thanks to allowances, part-time jobs and propensity for saving vs. spending, Generation Z already holds the keys to $44 billion in spending power.
What’s more, in just a few short years, nearly four in 10 consumers will be from Generation Z – and their purchasing power will rise exponentially over the next five to seven years as they grow to be the single largest group of consumers worldwide. According to consulting firm Strategy&, by 2020, Generation Z will make up 40 percent of the population in the world’s biggest markets, including the U.S., Europe, China, India, Brazil and Russia.
“I would [engage with a brand or retailer that asks for feedback] because they’re reaching out to provide better service to their customers.”
—Theresa U. (age 16)
Though it may be a few years off, the retailers and brands starting to work to understand the needs and preferences of Generation Z now will be primed for potentially huge successes – and sales. We’ve seen this with nearly every generation that has come before. Take Millennials and Apple. Apple made a name for itself with bold, iconic commercials in the 1990s and 2000s. These advertisements focused on users’ experiences more than the product itself, garnering the attention and loyal following of Millennials, whose members are drawn to simple, authentic messages. According to a survey by CNBC, by 2012, 63 percent of Millennials – that’s nearly two out of every three – owned at least one Apple product.
“[When choosing between stores,] I’d pick one mostly based on what people have said about how they treat their customers.”
—Caitlin P. (age 17)
Electronics retailer Best Buy bet big on the potential ROI of engaging with digital natives when they developed Twelpforce in 2009. Twelpforce was a groundbreaking service that offered real-time, free tech support through Twitter. The service was hugely popular with Millennials, the first generation to fully adopt social media, and set the standard for what a social media-based customer service program should look like. It’s also estimated to have increased Best Buy sales by $5 million and reduced customer complaints by 20 percent. (The service has since been transitioned to a new platform, reflecting the changing social media environment.)
“My favorite brands are Forever 21 and Divine by H&M because they always have a sale of some sort.”
—Theresa U. (age 16)
Brand success in adopting marketing strategies aimed at the newest up-and-coming generation isn’t limited to technology retailers and CPGs. For example, Starbucks grew from a small Seattle coffee roaster with four locations in 1986 to a huge international powerhouse with over 18,000 stores by taking a new approach to coffeehouse service that appealed directly to Generation X’s desire for individuality, higher-quality items and social atmospheres.
“The store I shop most, I connect with the employees and I feel at home there. They talk to you like you’re a real person and not just someone who’s putting money into their pockets.”
—Caitlin P. (age 17)
Similarly, Scope broke into the mouthwash market in the 1960s by presenting itself as the sweeter, better-feeling alternative to Listerine’s “medicine breath” formulations – appealing to Baby Boomers who, unlike their Silent Generation parents, were more interested in what felt good than what was good for you. By the mid-1980s, Scope had managed to capture nearly half of Listerine’s previous market share.
So what will it take to engage with Generation Z? On the surface, you might think the same techniques used for technology-driven Millennials would work, given that both generations grew up in an age where having a home computer was typical. But recent surveys have shown that today’s children and teens don’t use technology in the same ways as 20- and 30-somethings. Where Millennials grew up on desktop computers, followed by laptops, Generation Z is growing up on smartphones, tablets and other portable devices that enable 24/7 connectivity. Generation Z also multitasks more on these devices, typically using five or more screens, compared to Millennials’ two.
Research is just starting to reveal the implications of these differences and the opportunity is ripe for retailers and brands to delve in for a deeper understanding. But to start, we know that to grab Generation Z’s often divided attention, messages need to be quick and simple, relying more on visuals rather than text. And they should be less about telling the retailer’s or brand’s story and more about starting a conversation. That really gets to the heart of the matter. Generation Z wants you to get to know them – and when you make that effort, they’ll get to know you.