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How Gen Z and Millennials spend their money


yesyoung people has been bothering their elders. Young people today are no exception. Indeed, they are puzzling. They have thin wallets and good taste. They value convenience and social conscience. They want shopping to be both seamless and personal. They crave authenticity while constantly immersing themselves in an artificial digital world. As they start spending seriously, brands are trying to understand what these walking paradoxes want and how they shop. The answers will define the next era of consumerism.

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Their sheer numbers are staggering. The EU has almost 125 million people between the ages of 10 (the youngest will become consumers in the next few years) and 34. There are also 110 million such Gen Zers and millennials in the US, one-third of the US population. In 2021, annual household spending led by Generation Z and millennials in the United States will reach $2.7 trillion, accounting for about 30% of total spending.

A good place to start dissecting the psyche of young consumers is to consider the economies that shape them. On the one hand, today’s 30-somethings grew up during the 2007-09 global financial crisis and ensuing recession. Their younger peers have had better luck, starting their careers in years when a tight labor market pushed up wages. Until, that is, the covid-19 pandemic upended the lives of many of them.

These two shocks have caused pessimism among young people who have experienced it. A 2022 study by consulting firm McKinsey found that a quarter of Gen Zers doubt they will be able to afford retirement. Less than half believe they will own their home forever.

Uncertainty about the future may encourage impulsive consumption of limited resources in the present. Young people, more disrupted by covid than other generations, are now enjoying a rebound. According to McKinsey, US millennials (born between the 1980s and late 1990s) will spend 17% more in the year ending March 2022 than in the previous year. Despite the short-term recovery from the dark days of the pandemic, their long-term prospects are far less promising. American Millennials and Generation Z have amassed less wealth than their Generation X or Baby Boomer counterparts.

Easy access to split payments may encourage splurges (see Figure 1). According to another McKinsey survey in October, 45 percent of Europeans in their teens and early 20s plan to make some kind of splurge in the next three months, while 83 percent of baby boomers born before 1964 are more likely to do so. Behavior to say “no”. Market research firm Forrester found that most users of “buy now, pay later” apps are in their 20s. Megan Scott, a 20-year-old student from London, admitted on behalf of many of her peers that when it comes to shopping, she has no restraint – until, she laughs, the bill arrives.

In many ways, young people’s shopping habits, like their lives, are defined by the “attention economy” – it’s much quicker and easier to buy things online than to go to a store. The proliferation of social media means there are many new ways to catch consumers’ attention. Young shoppers will never know a world without smartphones. More than two-thirds of Americans ages 18 to 34 spend four or more hours a day on their devices. In the age of Airbnb, Amazon, and Uber, expectations for convenience have grown. Young people want their shopping to be completely problem-free.

Lightspeed Online also seems to be less tolerant of long delivery times. A study by business software giant Salesforce found that Gen-z Americans are the most likely group of all ages to expect their groceries to be delivered within an hour. They are more likely than others to use their phones to pay for purchases, Forrester said.

These “always-on buyers,” as McKinsey calls them, often eschew the weekly shop for quicker fixes on everything from fashion to furniture. They love subscriptions and often prefer to share products over owning them outright. That has boosted online rental sites such as Rent the Runway for fashion and streaming services. Investors may have fallen out of love with Netflix, but Gen Z hasn’t; the company remains one of the most popular brands in America among that age group.

The Internet has also changed the way young people discover brands (see Figure 2).print, billboard or television Advertising has given way to social media. Instagram, part of the Meta empire, and TikTok, a Chinese-owned video-sharing app, are where young people go for inspiration, especially when it comes to fashion, beauty and items like sportswear where appearance matters. TikTok’s user-generated videos can even drive small brands to instant fame. Such apps are increasingly adding features that allow users to shop without leaving the platform. According to McKinsey, by 2021, six in 10 Americans under the age of 25 will already have completed a purchase on a social media site. Some are emulating China’s “social commerce” model, combining live entertainment with opportunity stores.

For now, though, younger Western consumers prefer to shop outside of social media and often look for bargains on sites like Amazon. Subscriptions to Amazon’s home delivery and entertainment service Prime are second only to phone bills, food and travel in young people’s shopping baskets, according to investment bank Cowen.

Brick-and-mortar stores are not entirely excluded, as long as the experience is personal and, ideally, combines the virtual and physical worlds. Nike, for example, has successfully targeted younger buyers by allowing them to design their own sneakers on its website, pick them out in person after taking an in-store dance class, and then encourage them to share them on TikTok or Instagram.

The new world of shopping also enables young people to learn more about the companies they buy from. Rather than dulling young people’s senses, the information overload of the attention economy seems to be oversensitizing them, especially to any brand that pretends it’s not. PR firm Edelman found that seven in 10 Gen Zers in six countries fact-check claims made in ads. Forrester cites survey data showing that some teens shy away from certain brands because of their moral bottom line, calling young consumers a “truth barometer.”

Brands that don’t meet the long list of requirements are best to watch out for. Young people are happy to try new things if they don’t get what they want and how they want it. According to a McKinsey October 2022 survey, nine in 10 Gen Z and Millennial Europeans have changed how, where or what brands they shop in the past three months.

This young store is clearly in flux. What they buy is also changing. What older generations considered discretionary, such as health and luxuries, have become necessities. Self-care is all the rage. In search of clothing that will set them apart, young adults are turning to younger and younger fashion brands. According to consultancy Bain & Company, Gen Z shoppers make their first luxury purchase at an average age of 15, compared with 19 for shoppers in their 30s. Some people buy luxury goods as a hedge, believing they will hold their value even in tough times. Helpfully, these items are now easily traded on second-hand sales platforms like Vinted and Vestiaire Collective.

More broadly, younger consumers claim to be more values-driven than previous generations. Forrester research shows that this attitude is more prevalent among teens and 20-somethings than among people who are a little older. Some of these values ​​center around identity (race, gender, etc.). Others stem from issues young people care about, such as climate change. KPMGGen Zers in 16 countries worry more about climate change and natural disasters than any other generation, an accounting firm has found. Young people in emerging markets are more restless, according to a survey by Credit Suisse.

Displayed preferences paint a more nuanced picture. On the one hand, Forrester has identified Patagonia, a premium outdoor apparel brand with a green track record, as a Gen Z favorite in the affluent world. Of all age groups, young adults are the most likely to try and stick with alternative proteins like oat milk and plant-based meat alternatives. But not at any cost. On average, global consumers will pay an average 9% premium for greener grubs, Credit Suisse found. Younger consumers in rich countries are less willing to pay a premium for these alternatives than their counterparts in emerging markets.

Young people’s appetite for instant gratification is also fueling some decidedly ungreen consumption habits.Young people almost invented fast commerce, observes Isabelle Allen KPMG. And that convenience is affordable because it’s not priced in all the externals. If couriers deliver meals in batches on gasoline-powered motorcycles, the environmental benefits of eating plants instead of meat will quickly disappear. Shein, the fastest growing Chinese apparel retailer in fast fashion, tops Gen Z survey Although criticized for being wasteful, it is most popular in the West; its fashion garments are inexpensive and can be worn once and thrown away. Young people, then, are ambivalent, like everyone else—because, like everyone else, they’re just people.

Correction (January 18, 2023): The original version of this article incorrectly suggested that Gen-zs in the US could become the majority of their shoppers by 2026. Feel sorry.

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