The direction and future of retail rest in the hands and pocketbooks of millennials and Gen Z. That’s the conclusion of a September 28 podcast involving two senior members of global research firm McKinsey.
Gen Zers, according to Bo Finnerman, a partner in McKinsey’s Miami office, are today’s lead influencers. Although he didn’t expect them to peak in population for another ten years, Finnerman said they’re already making a huge impact on Gen Xers and millennials’ buying habits.
Emma Spagnuolo, an associate McKinsey partner in New Jersey, said Gen Zers influence their Gen X parents in two ways. One is by Gen Zers guiding conversations with their parents to get what they want. The other is Gen X’s vulnerability in being influenced at the dinner table.
Shifting Values
The major reason researchers see millennials and Gen Zers leading a shift in buying habits is in their values. Finnerman attributed that to what he referred to as a “real authenticity” in how Gen Z views corporate responsibility. He added that one of the biggest things to come out of their research in the last few years focused on corporate values, mission, and purpose. Spagnuolo said she noticed the trend starting two years ago with millennials, which were then adopted and accelerated by Gen Z.
Price or Societal Value?
Questioning moved to values and sustainability. When asked whether Gen Z was willing to pay more for items like sustainable goods, Finnerman said he’d seen a major shift in how consumers, particularly Gen Z, view purchases multidimensionally and not just by price.
Luxury Items
Contrary to what some believe, Gen Z loves products that set them apart, even luxury items. The difference, said Spagnuolo, is that they don’t necessarily seek name brands as unique products. On the other hand, she said millennials and Gen Zers differ a bit on this topic. She found that millennials are more driven to show off their luxury items. Both generations, however, agree that they’re willing to pay higher prices for luxury goods.
In-Store Versus Digital
Contrary to some earlier reports, Spagnuolo said she’d seen Gen Z using all formats to shop, including an increased interest in brick and mortar stores. She said many browse online and then go into the store to see and feel the merchandise they’re interested in. She did agree that millennials are migrating to more online shopping.
Influencers
Brands using celebrity influencers also need to know that their power over Gen Z is not very strong. Spagnuolo reported that that generation trusts them less and leans more to micro-influencers. Finnerman added that while Gen Z is on social media a lot, they also tend to filter such endorsements and pay more attention to word of mouth. He said this makes brands’ emotional connection with customers even more important.
Smaller versus Larger
Another interesting discovery was that smaller brands appear to be capturing a larger share of growth than big brands. Finnerman said their research shows this trend, especially popular among Gen Zers, who want to see, experience, and try innovative and exciting products.
Sustainability
Although Gen Z cares more about sustainability than millennials, Spagnuolo said they’d noticed a growing interest and concern from millennials over four years of tracking. She said they expect the trend to continue.
Multi-brand or Single Brand?
Based on their research, Spagnuolo said they hadn’t seen much difference in buyer preferences. She revealed that Gen Z is not only shopping frequently but doing more so than other generations.
Conclusion
There’s a seismic change beyond pricing occurring in customers and affecting a growing number of consumers. Customer loyalty and best price are still important to consumers but not brand honesty and empathy.
A major challenge for brands is how to engage these consumers. Gen Zers and millennials are too diverse. Spagnuolo said marketers need to consider each generation separately and their individual needs and what they want out of their shopping experiences to achieve success.
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