CACI , A leading data driven consultancy firm, hosted the ‘Born Digital’ Conference at the Charlotte Street Hotel. The Conference offered insights into the consumption characteristics and trends relating to those of the upcoming generation of consumers ‘Generation Z’.
Alex McCulloch approaches the topic of ‘Who are Generation Z?’. First, we must understand the system under which generations are categorised. The scope of this lecture considered the four largest groups of consumers: ‘Baby Boomers’, ‘Generation X’, ‘Millennials’ and ‘Generation Z’. These consumer groups are segregated using the year of birth. Generally, each generation consists of people born within, approximately a fifteen year time-frame.
The ‘Baby Boomers’ generation occupies a time period following the second world war, the moniker attached to the group is derived from the considerable uptick in fertility rates following the end of the war. Original in 1946 through to 1964 this generation was the original rebel generation, advocating ‘Peace and Love’ and the proponents of free spiritedness, liberalism and anti-consumerism. The population of Baby Boomers in the UK is around 17.5 million and worth about 20% of retail expenditure. This group is generally considered to be the more traditional shoppers whom live and shop out of town, paying extra for quality goods and services.
The ‘Generation X’ time-frame stretches from the mid 60’s to 1980. This generation came of age in the late 80’s and 90’s, shaped by a thriving economic environment and hedonistic culture of consumption. The population of Generation X consumers in the UK is around 11 million and are the most valuable shopper group to retailers. Despite being infrequent shoppers they are the biggest retail and catering spenders and the most likely group to click and collect.
Millennials, born in the early 80’s through to the late 90’s grew up during with technology and tend to be comfortable with the adoption of new tech. This group interacts more readily with social media, more likely to stream content from the internet and more likely to play video games. Millennials number about 12.8 million and consume a large amount of leisure and catering services.
Generation Z, born in the late nineties and crossing into the early teens, has had a distinctly different upbringing compared with previous generations. Widespread technological usage and a more interconnected world has influenced the wants and desires of this consumer group. Having grown up during a time of recession and austerity, Generation Z are most concerned about transparency, fairness, ethics and authenticity. This group’s hyper-connected world of democratised information has allowed this generation to find, online, what they are looking for with relative ease. Mediums like YouTube and Facebook make interactions possible with those with similar interests and opinions, no matter the spatial distribution. This level of technological engagement creates an environment which can be exploited by firms looking to reach their target consumers. Generation Z’s willingness to share their data allows for better targeting of consumer groups with more effective content, tailored to the individual.
However, we must ask ourselves, does this generational segmentation reflect the realities of these consumers; Would an individual born in 1981 be relevant to the description of ‘Millennial’ whilst one born in 1980 would more appropriately fit into ‘Generation X’? This is the overwhelming issue of this categorisation system, those at the margins may be misinterpreted and bungled in with a generation which might not truly reflect their interests, goals and dispositions. Looking further at behaviour, each generation considers itself the bastion of liberalism but moves gradually towards a more perceived conservative alignment with age, slowly becoming the establishment that the younger generations wish to distance themselves from.
The Generation Z lifestyle:
Generation Z, rather unsurprisingly, is far more likely than any other group to live at home with parents, 95% of generation Z still live at home.
Considering that the oldest individual in the generation is 20 years of age one might consider the majority of people in this age bracket are still in adolescence and education, thus remaining in the family home. One might muse that the relative cost of housing is partially behind this phenomenon; Interestingly, those from a wealthy background are more likely to be living at home and depending on their parents to sustain their consumption.
(CACI, Born Digital)
Lifestyles of Gen Z’s are influenced by geography, the case studies included being Leicester and London. In Leicester, 38% of Gen Z’s research in shop and buy online whereas the number for Gen Z’s in London is much higher at 69%. Those of wealthier households are far more likely to research products and services online. Affluent Gen Z’s are the biggest users of both online and offline retail for consumption. By 2035, Gen Z’s will be second only to Millennials in terms of retail spend and will tend to spend more on eating out and leisure services.
(CACI, Born Digital)
We can summarise the most important influences on this consumer group into three distinct aspects: life stage, Affluence and Geography. Thus, it can be a struggle to segment consumers purely on the basis of age. True, it is an important factor, but the way a Gen Z consumes is influenced as much by their parents’ wealth and where they live.
Catching some Z’s:
Gen Z’s, as consumers, focus on experiential goods rather than physical possessions. Socialising with friends and enjoying a consistently great experience is paramount to the group. Firms which cater to this craving for authentic and new experiences will do particularly well. Lego’s strategy has been to innovate and increase technological utilisation to engage more readily with its target market. Lego epitomises the experiential factor for its consumers. Lego’s flagship shop in London is colourful, playful and interactive, they also retain an Instagramesque picture sharing app which helps instil creativity in its users whilst promoting the product. In a climate where experiences, rather than the goods themselves, are important it is retailers like Lego which will flourish. Lego finds itself in the fortunate position that its product is an experience in itself; its consumers create and engage with others.
Vapiano, a restaurant chain, has embarked on a strategy to bring snap-chat into its bathrooms, by using a vinyl on their mirrors they encourage customers to take photos to share with friends. Through this, Vapiano has seamlessly improved the overall experience, not through their food offering but through provision of a fun way to engage with friends.
Pathway to purchase:
(CACI, Born Digital)
The consumer pathway for Gen Z’s is more complicated and convoluted than ever. CACI consider that there are five main points on the pathway to purchasing a good or service. The first, Inspiration, is far more influenced by social media than for previous generations. The process of inspiration and discovery is an experience in itself, in today’s current state of technological utilisation, available channels to influence discovery abound.
Gen Z’s are likely to spend time to research a product they want before buying it, this research includes going in store to browse goods as well as looking online via YouTube reviews of the goods. This research aspect plays into the authenticity and expectation of quality from their purchases.
Justifying a purchase for a Gen Z is much more involved than for previous generations. The inextricable link to Social media plays a considerable role as access to input from peers has become nearly instantaneous. This peer influence for a purchase has become an integral aspect of the justification process.
When looking at how a consumer buys a good, be it through an online or offline retailer, the process has as much to do with the cost of the good or service as it does the immediacy of the fulfilment and the convenience of acquisition for the shopper.
The overall experience delivered through this process and the enjoyment of the good after purchase influences the loyalty of the customer to the brand. The avenues through which consumers can interact with the brand are important and play a role in the research and justification stages for other Gen Z’s.
Much of what influences consumers in the way they purchase and consume a product comes down to a few key factors, of which, age is one. The use of this age based categorisation system is useful as, with incredible technological development, each decade is very different from the last as an environment in which to form an impression of the world. In the middle ages, where economic growth was close to zero and one generation lived in much the same way as the next, a generational segmentation mechanism would make little sense. However, following the industrial revolution, the pace at which the world has changed in the last 200 years has manifestly impacted technologies, polities and economies in a way which is distinct from the previous decade. Each group is manifestly different from the last as a result of this rapid change. Whilst Millennials and Gen Z have grown up with rapid technological advances they have been influenced in a particular way by the changes in world order, economics and political environments, which is in itself distinct from the experience of prior generations. Whilst this generational categorisation system is useful for delineating age and the related consumption trends of that group, intragroup differences persist and are heavily influenced by more traditional metrics such as geographic location and relative affluence.
To improve your understanding of all things retail, our next Introduction to Shopping Centre Investment course in London augments our delegates with a broad understanding of the retail market, the capability to make more informed decisions and identify better opportunities. Contact us for more info.