Last updated: Retail reality: The truth about Gen Z purchasing power

Retail reality: The truth about Gen Z purchasing power


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Marketers talk all the time about Gen Z purchasing power. Gen Z’s age currently ranges from 10 to 25 years old. Just as they were with Millennials and Gen X, brands are obsessed with Gen Z’s shopping behavior as they come of age.

Their influence on household purchasing decisions, the trends they favor, and how they’re leading their cohorts to be more discerning have been hot topics  since the first members of this generation hit their teens. But all that glitters isn’t gold.

Let’s take a look at the myths surrounding Gen Z purchasing power, the factors impacting their ability to spend, and how retailers can use this information for effective engagement.

Gen Z purchasing power: By the numbers 

As marketers eagerly anticipate Gen Z, we’ve been overestimating their purchasing power as an independent demographic. But Gen Z has faced obstacles the likes of which their predecessors couldn’t even imagine.

After more than two years of lockdowns due to a global pandemic, they’re grappling with an inflation rate that’s reached historic, 40-year highs. They’re paying huge sums for housing and gas while trying to pay off their student loans.

While one study found that they steer the lion’s share of family household purchasing decisions, those who live alone have far less purchasing power than their predecessors.

Some sobering stats:
  1. Gen Z actually has 86% less purchasing power than baby boomers did when they were in their 20s
  2. Gen Zers have more student debt than millennials
  3. A Deloitte survey found that almost half are living paycheck to paycheck and 30% don’t feel financially secure

We need to start looking at the realities of marketing to Gen Z –– they’re a financially strapped and stressed demographic that want to see real value in any products they consider purchasing.

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Where the real purchasing power lies

Millennials are actually the largest customer group, while Baby Boomers have the most spending power.

But rather than trying to assess the worthiness of marketing to a specific age demographic based on the size of their disposable income, retailers’ should look at what demographics align with their existing offerings.

It’s a lot easier to expand inventory or marketing campaigns to target groups with similar priorities once you’ve already homed in on a core customer base. Once the core customer is understood, it’s easier to find copycat shopping priorities that drive customers towards the brand base.

A demographic’s attributes, purchasing history and behavior can tell us a lot more about how to market to them with the right message than creating campaigns based on generation alone.

A multi-faceted approach for multiple generations

Seeing where customer sub groups correlate can help retailers create sourcing strategies and marketing campaigns specific to those they serve. It’s about going further than targeting the youngest generation due to faulty assumptions.

Instead, retailers need to target sub groups based on shared behavior. Here are two examples:

  • Both Gen Z and Boomers look for comfort first when shopping for apparel. So a company that specializes in say, Croc look-alikes would want to source styles and colors that appeal to both age ranges.
  • Millennials and Gen Z share a preference for sustainable brands. But there are some nuances. Millennials tend to look for sustainability in brand ethos/messaging, Gen Zers want to know the details of retailers’ supply chains. To appeal to both millennials and Gen Z, a retailer could highlight their sustainability efforts with a customized focus for each priority to optimize their message.

Gen Z doesn’t lead in terms of spending power, but that doesn’t mean it’s safe to discount this frugal powerhouse of a generation. Savvy retailers will learn to broaden their appeal by customizing their messaging across generations.

Retail doesn’t rest.
A recent survey of digital execs shows where e-commerce is going.
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