Often thought of as the Generation glued to their phone, those born between 1997 to 2012, commonly known as Generation Z, are now at the ripe age of working full time and earning salaries. With fewer financial commitments than other demographics, and a higher disposable income, retailers are having to change their marketing strategy to ensure they’re targeting this new group in the best possible way.
The main thing to note regarding how Gen Z spend their money is their complete change of attitude compared to older generations.
Director of Research for the Massey University Group Jonathan Elms says that for the Gen Z cohort, they are valuing experiences over material goods.
Elms says that they are prioritising experiences because they are aware that they are and will be unable to put money into things of high value such as property because they are seen as unattainable.
He adds that Gen Z consumers are shifting their spending from ownership on to other opportunities.
“The experience drives people to really want to see what is in the big wide world, very much less likely to believe in the American or Kiwi dream [and are] very happy to go overseas to look for higher salaries, lower cost of living and huge variations of opportunities.”
Compared to the baby boomers, Generation X and Millennials, Gen Z are presented with more opportunities to travel the world and switch career paths, meaning their money is placed onto items that require less commitment such as houses.
In a Gen Z and Millennial survey run by Deloitte, both generations expressed that the cost of living has become a top personal concern as they don’t feel financially secure on a personal level and are concerned about the wealth inequality at a societal level.
“The reality facing Kiwi Gen Z’s and Millennials is that house prices are averaging over $1 million, fuel prices are nearly three times the cost of other countries and many are needing to take on second jobs to ease their financial pressure,” says Lauren Foster, Deloitte New Zealand Human Capital Partner.
Elms points out that the Generation X and Millennials cohort have a mindset of instant gratification, always wanting the “best and the brightest thing right here, right now”. Unlike them, Gen Z are willing to defer gratification, put things off and save money.
Possibly fuelled by Covid-19 with the delays caused by supply chain issues, Gen Z are willing to save up for quality product and wait for things to be delivered from overseas.
“A very different mind shift relative to the older generations before them,” Elms adds.
When it comes to spending money, Elms says that Gen Z are considering three main things when they spend their money – sustainability, convenience, and safety.
Read more: Covid-19 prompts Kiwis to shop local.
Elms says that Gen Z want to spend their money on places that have an “authentic message” that align with their values and preferences which concern climate change and Covid-19.
As digital natives, born into the digital technology and internet era, when it comes to spending their money Gen Z turn to the internet where there is a wealth and breadth of accessible knowledge.
For Gen Z, sustainability drives the consumer to purchase a product, and it has become extremely easy for the cohort to understand whether the product meets those criteria.
Foster says for Gen Z, climate change is a top concern, with respondents to the survey expressing the urge for organisations to invest “resources to help combat climate change”.
In recent years, fast fashion has often led the topic of conversation when it comes to the environmental impacts of retail, with fashion as one of the leading polluters.
“Sustainability around transparency, transparency in supply chains, the entire marketing channel from source to shelf, and everything in between is becoming a key priority,” says Elm.
“It is not good enough to just be in the market, you also need to be sustainable, you need to be transparent, you need to be authentic. Otherwise, you will get found out quickly with this group who are heavily, heavily, heavily connected with the internet in its variety of different forms… there is very little place to hide,” he says.
Auckland-based vintage store Magic Hollow says that for Gen Z, sustainability has become a norm and a high priority when they think about what they purchase.
Adam Thompson, Owner at Magic Hollow says that many people come into the store for the “cool factor” of having an item that no one else has, unlike a fast fashion brand that could be worn by thousands of other people.
“With the younger generation you have to be very careful how you communicate those kinds of messages… they’re ruthless, brands get dissected. It’s not worth it,” says Thompson.
In a post-Covid world, Elms says Gen Z are very particular when it comes to their offline retail experience. He emphasises that the youth are very aware of the implications of the pandemic and are putting safety at the top of the list.
If a Gen Z person was to visit a brick-and-mortar store “the in-store environment really needs to be the best that it can”, ensuring the correct Covid protocols are in place while also receiving the best customer experience.
Elms adds that Gen Z people are still nervous about open spaces and being close to people.
“[The environment] needs to be very much showroom-y, but at the same time showcase their values, their value systems and use their physical space as a manifestation of the brand,” says Elms.
For Gen Z, their retail experience is very vital, with Elms saying that if they see something they don’t like or if it is subpar “their instant reaction is to go on the internet and purchase it that way”.
Thompson says it is a priority to give the best retail experience for their customers visiting Magic Hollow, ensuring they walk away with the right item and feeling good.
“The evidence is showing one of the most disappointing aspects of Kiwi and international consumers in this particular cohort is that retailers have got to work harder,” says Elms.
The best way for retailers to combat the everchanging mindset of the industry with the introduction of a new generation is to “tap into the psyche” of Gen Z as they’re the ones with the “money in the back pocket nowadays”.
Elms says that the best way retailers can meet Gen Z is by ensuring they follow these values and be authentic and transparent about it, “not just simply riding the bandwagon on certain activities”.
Consumers will find out if a business is following through with their message, with Elms putting H&M up for example who promised to pay 850,000 workers living wage by 2018, yet failed to do so.
People of Gen Z are constantly on the lookout for authentic messaging from brands who are correspond to their own ethical values and not simply because they are in the market.
“[Retailers] need to understand that their life experiences are very different to those before them and those that have come subsequently.”