This is the third in a series of articles about today’s luxury market and consumer. My last article, “Meet the HENRYs” focused on the millennials as a luxury market consumer. Now we turn to Gen Z, who will follow millennials into the workplace. Will they surpass millennials as a target consumer segment?
In 2015, Goldman Sachs issued a report entitled, “What If I Told You?” which, as one of the “tells,” said that “Gen Z will be larger andmore influential than millennials.” Numbers for this generation have ranged as high as 90 million, and they boast unique attributes, which we will review below.
But first, let’s be sure we all agree on the generational delineations. Starting points for Gen Z and ending points for millennials have varied a year or two, but based on Pew Research Center’s latest data, Gen Zers were born between 1997 and 2012, and currently range from ages 10 to 25.
So, why should we be excited about Gen Z and what questions are there to be asked about their consumption habits?
To begin, Gen Z were “born connected.” In 1997, the internet already existed and was quickly turning into a viable business mode (Amazon started in 1994). After the dot-com crash of 2000 (the oldest Gen Zers were only 3), those survivors formed the core of today’s online marketplace. By any assumption of when Gen Zers started to use the internet for social media and shopping, the medium was already thriving. Gen Zers grew up with devices in their hands and they know how to use them. This is not to say that they are addicted to online shopping, but having a device in their hand all day is in their DNA.
Gen Zers were born into a troubling world, and are growing up with phenomena like the above and COVID-19. Does the plethora of social media opportunities make them feel like important parts of the global community? Apparently not — 79% of Gen Zers reported feeling lonely, as opposed to 71% of millennials and 50% of Boomers; the feedback was evenly divided between men and women.
This trend extends to a disturbing increase in suicide rates, especially among girls. CNN reports that “Starting in 2007, the rates of suicide for girls 10 to 14 increased 12.7% per year, compared with 7.1% for boys the same age. A similar trend was seen for teens 15 to 19, with rates of suicide going up 7.9% for girls and 3.5% for boys.” The report added that girls may be more vulnerable to the negative effects of social media and cites a report from the Journal of the American Medical Association, saying “Compared with boys, girls use social media more frequently and are more likely to experience cyberbullying.”
How does the above influence Gen Zers as customers, given that their numbers are so large and that they will doubtless enter the HENRY (high earner, not rich yet) ranks in the near future? Some trends in their purchasing outlook continue the trend that was begun by their Millennial elders, but with more emphasis.
Let’s begin with the social profile of Gen Zers:
• They are better educated: 59% of Gen Zers were pursuing college in 2017, compared with 53% of millennials in 2002.
• They are more racially diverse than millennials: 48% of Gen Zers were nonwhite in 2018, as opposed to 39% of millennials in 2002.
• One in four Gen Zers are Hispanic, with numbers increasing in the Western U.S.
• The median household income where Gen Zers live exceeds that of older generations, at $63,700.
• They tend to be more liberal than earlier generations and vote in greater numbers.
Here we have a customer who is more diverse, more educated than older generations, totally connected and sometimes unhappy. How does that affect their purchasing outlook and power?
In addition to becoming a consumption powerhouse on their own in the near future, Gen Zers are influencing the spending of their households now. A report from The Shelf stated, “Gen Z commands a remarkable $143 billion in buying power. That’s almost 40% of all consumer shopping … Ninety-three percent of parents say their Gen Z children influence their household spending. Another 70% of parents ask their Gen Z kids for advice before making purchase decisions.”
Other highlights from that report include: Gen Z values privacy and security, being wiser to the power of global connections; they are loyal to brands who meet their product, price and social expectations; they are working earlier and more than millennials did at their age; having grown up during a recession, they are thrifty; they are passionate about social issues; they prefer authenticity and transparency in marketing and are the perfect example of ROPO (research online, purchase offline) as 81% of Gen Zers surveyed prefer to shop in store as opposed to online, according to The Shelf.
While we have so far focused on U.S. statistically, we should remember that the purchasing power of Gen Zers in Asia is huge — and will account for 50% of luxury spending by 2025.
The fact that Gen Zers have grown up with some insecurity makes them even more of a passionate candidate for luxury brands. According to a Crobox report, the Gen Zer fits the psychographic profile of the luxury consumer:
• Luxury purchases are hedonic, releasing dopamine and making the buyer feel good.
• They are impulsive, as gifts or “treats” making the purchaser feel they “can do it.”
• Luxury shoppers give the purchaser a feeling of financial power (even if they don’t necessarily have it yet).
• Luxury consumers demand that their brands be “woke” in terms of sustainability, ethics, etc.
Further, the luxury customer falls into one or more of the following clusters, all of which appeal to Gen Zers:
• The Need for Uniqueness: I am not just a number on social media.
• Costly Signaling and Status: Showing others you can spend it.
• Building the Self and Self-Narrative: Who I am and who I want to be.
Troubled, concerned and passionate. This profile of the demographics and psychographics of Gen Z customers has me convinced that they will surpass their millennial elders as the bedrock of the luxury business in the near future. The time is now for brands to start cultivating and following them.
