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Blending Retail Series Part 7: A deeper understanding of Generation Z

· blended retail,small business,retail,Generation Z,customer loyalty

By Tony Giudici

In Blending Retail Series Parts 1 and 2, we discussed and introduced the Blended Retail concept and how Retail is transforming. In Part 3, we looked at the in-store experience, and how retailers have had to adapt and transform. In Part 4, we looked at what Generation Z means to the future of retail. In Part 5, we looked at what's next in 2019 and beyond. In Part 6, we looked at how the sales associate role is changing and how companies are preparing for an omnichannel experience. Now, in Part 7, we will take a deeper look at what is important to Generation Z and how and where they will spend.

Gen Z is best defined as people born in 1996 or later. Millennials grew up with technology as siblings, but Gen Z was born into a post-digital world that makes technology the center of their lives and not an accessory.

5 Core Characteristics of the Gen Z Shopper

  1. They have higher expectations. Their expectations of a retailer are more demanding and higher than any other generation. If the store experience does not deliver, they will walk. They want a store that embraces technology the way they do, that makes products accessible and easy to test, yet they still desire human interaction.

  2. They have less patience. If the expectations are not met (exceeded) then they will move on. They rarely give second chances. And when they have a poor experience, they usually share it on social media.

  3. They are not as price conscious. While other generations were all about the "deal," Gen Z tends to be more about the experience and they are willing to pay for it.

  4. They are distracted. Most Gen Zers have more than one device they interact with during the day. They deem themselves huge multi-taskers, jumping from one app to the next in a flash.

  5. They are influencers. According to a study by Interactions, 70 percent of parents turn to their Gen Z kids for help in making a buying decision. So not only are they impacting their own buying decision, but also those of their family.

Generation Z shopping habits

What Role Does Technology Play with Gen Z?

The omnichannel experience in the retail industry might sound like an overrated buzzword, but it perfectly describes the new way customers are now shopping using every kind of option available, from apps to smart TVs to social media. Millennials, especially, like to take advantage of the variety of online tools and they have started to bring to the retailers’ attention new shopping channels, such as voice search, Augmented Reality (AR) and Virtual Reality (VR).

According to a report from Euclid marketing analytics*, "as the most connected generation ever, Millennials are savvy, skeptical, and filled with information about almost everything. They want authenticity and engaging experiences. So, if you want to catch their attention, immersive experiences that blend technology, personalization, and price is the way to do it”.

Whether online or in-store, the Millennial market is set to transform retail dynamics, connecting the physical and digital to create a new, all-in-one immersive experience.

The changing retail landscape does not end with Millennials, also known as the “mobile pioneers.” Gen Z, currently in their early/mid-teens, are set to change things further. As “mobile natives,” they are the first generation not to have lived without technology, including smartphones and social media. They are practical and quick shoppers, they trust influencers more than traditional advertising, love to be part of the product development rather than simply getting personalized items and, of course, tend to go digital when it comes to payment. Although they have just started to enter the retail market, this consumer group already has huge purchasing power and they will certainly reshape the future retail experience.

How social media affects shopping habits

Gen Z and Social Media

Social media is about to become the shopping mall of the future. In fact, social channels are already generating new audiences for retailers that need to adapt their sales strategies, ways of communicating and tone to meet and engage with consumers. This is a huge challenge, but also a great opportunity for both retailers and consumers. eCommerce can be a powerful tool for retailers that embrace social media as an opportunity to generate a conversation with consumers.

Retailers will need to be aware that the future will depend on whether they can transform by adapting to changing consumer demands or remaining the same. New companies certainly have more time to tailor and experiment with new concepts, without having to change the core of the brand. In any case, reinvention will be the key.

For Gen Z Technology Must Drive the Shopping Experience

According to another research study commissioned by Euclid, the desire for a brick and mortar store remains intact. Gen Z still prefers to shop in a store versus online. This is good news. However, they want retailers to understand that technology must drive the shopping experience. Now, that doesn't mean they're asking for robots to assist them. They still want knowledgeable sales professionals. In fact, the study showed that Gen Zers are more likely to seek out a salesperson in the store than Millennials.

The problem is that most salespeople they encounter are anything but knowledgeable and professional. We discussed this point in previous blog, so they have to turn to Google and social media for advice. While they do want technology at the center, they do not want it to replace people.

For example, 53 percent of Gen Zers desire free Wi-Fi in the stores they shop, up from 41 percent of Millennials. They want to be able to access coupons and incentives proactively. The store would serve a coupon or discount to the shopper's mobile device based on location in the store. When a customer is in the shoe aisle, the deals for shoes are displayed and when in the food aisle manufacturers coupons are delivered—all without the shopper having to do a thing.

Another way technology will shape retail is through the checkout process. The number one reason a Generation Z person will choose online versus in store is not having to wait in lines.

POS is going to have to become mobile and truly at the "point of sale." Retailers like Apple have already moved in this direction eliminating the traditional cash wraps and equipping store associates in every department with mobile devices that can take the customer's payment information as soon as they decide their purchase.

The biggest upcoming expense to retailers will be improving their POS infrastructure. Gen Z will demand it and will choose shops and stores that have it. Take Amazon's grocery store with no checkout lanes, for example. The scanners in the store monitor what's in your basket and charge you for it as you exit the store.

Once, the big trend in stores was to create an area for the kids to play while parents shop. For Gen Z, charging stations are desired for their devices while they shop. Since these shoppers use their phones so much in the stores, keeping their batteries fresh is important.

Facebook was the favorite of Millennial shoppers; apps that are instantly shopping capable are the Gen Z favorites. Texting leads the way, but apps like Snapchat and Instagram all had high usages in store among these users according to the Euclid study. This means store design and layout will need to think about this behavior and adjust. It becomes more important to show a complete solution on end caps versus a bulk stack of an item. They move quickly and make decisions quickly so accessories need to be part of the body of the sale and not the add-ons that they have been for other generations.

How social media affects shopping behaviors

Generation Z When It Comes to Loyalty Programs


What about loyalty programs? Do Gen Z shoppers like them or are they too vacillating? In fact, the study showed that the desire and usage of loyalty programs were the same for Gen Z as it was for Millennials, meaning that it is just as important. However, this generation requires the loyalty program to be digital and not paper. So, punch cards and key ring fobs are out if you want a Gen Z person as part of your loyalty program. Give them an app or better yet, just let them give you their mobile number as their ID.

Many POS systems have already figured this out and have adapted. Square, for example, allows its retailers to award "stars" for loyal purchasers. All the customer needs to do is provide their phone number and they're in.

The Bottom Line

 

Gen Z still wants a brick and mortar store, but more than ever they want an experience. And if they do not get an experience that exceeds their expectations, they will move on. When asked what they would do if the store they loved closed, the majority said they would find another store, not go online. It's clear they desire an in-store shopping experience. But that experience is going to have to embrace and showcase technology at its hub. Technology will be the new informed associate and employee.

Generation Z will account for 40 percent of all shoppers by 2020, as reported by USA Today. Engagement Labs, the data and analytics company that assists marketers, says the group of people born between 1997 and 2016 are 86 million strong, and influence $600 billion of spending by families. This group is also big on conversations – both online and offline.

“You see an advertisement, people know it’s a paid endorsement,” says Brad Fay, Engagement Labs’ chief commercial officer. “It’s only got so much credibility … the most powerful messages are ones that come from someone you know."

Engagement Labs surveyed 6,736 teens during the course of 12 months about what they talked about in the previous 24 hours, and found that those topics included gadgets, drinks and snack foods. Fay noted that they found Generation Z to be a very social group of people.

As a result, digital devices from the likes of Apple and Samsung are going to be popular with this group, as are food and beverage brands. “Coca-Cola, McDonald’s and Pepsi are all brands you typically consume with other people face to face, so they, too, could be thought of as social brands,” said Fay. He noted that young people aren’t too keen on unhealthy products like soda. “Both Coke and Pepsi are taking significant declines, and I think that is symptomatic of a shift away from the more sugary types of beverages toward a wider diversity of healthier types of beverages.”

Recognizing the buying power of Generation Z, reports surfaced in May that Target is rolling out three new house brands geared toward the retailer’s teen and young adult customers. Two brands will focus on clothing, while another will focus on electronics, retail news source Chain Store Age reported. “The introduction of these new brands provides us with a really exciting opportunity to create stronger relationships with the next generation of guests and show them, authentically, the role Target can play in their lives now and into the future,” said Rick Gomez, executive VP and chief marketing officer of Target.

Next we will continue to look to the future of Retail today and tomorrow, and who and how retailers are changing and re-branding their stores to provide a much craved technologically driven shopping experience.

Tony Giudici is a Director of Market Development for Excelerate America, the ultimate resource for modern entrepreneurs and small business owners. Want to learn more about Generation Z's shopping habits, or share your insight and experience on the matter? Send him an email at tony.giudici@excelerateamerica.com.

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