What the pandemic has cemented about Gen Z
Marketing to young shoppers this holiday season will look different — and create different winners — but much of the group's core values have stayed the same.
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By Cara Salpini
Published Nov. 23, 2020
"The pandemic may stick out as a uniquely disruptive event in the lives of most, but for Gen Z, it might just be the cherry on top of a lifetime of disruptive events.
Gen Z Planet, which studies the demographic and defines it as those born between 1998 and 2016, described the group as coming of age during a series of "seismic events" in a recent report. Those span from the Great Recession and the Sandy Hook school shooting, to the threats of climate change and the rise of the #MeToo and Black Lives Matter movements.
"[A]ll have been absorbed by Gen Z in a visceral, instantaneous way that no other generation has previously experienced — delivered through their smartphones and social media channels," the report reads. "These events have informed their beliefs and behaviors and impacted them in several ways."
Since they have come of age during these events, the pandemic hasn't actually changed much in terms of the "core" of their behavior, according to Hana Ben-Shabat, founder of Gen Z Planet. Ben Antenore, an analyst at Kantar Consulting, agrees.
"COVID-19 didn't so much change things as accelerate current trends," Antenore said. "So when we think about centennials, a lot of truths that we may have held about them in the past few years still are true, but they've just been sent into hyperdrive with the pandemic."
Those include Gen Z's values-driven purchasing behavior and the cohort's tendency to live their lives online. Both have been strengthened by a year that highlighted racial inequalities and sent consumers home in great numbers.
"Gen Z is the most equipped to deal with the changes and transition to the so-called new normal that we're living in," Keith Niedermeier, a clinical professor of marketing at the Kelley School of Business at Indiana University, said. "They're digital natives. They're used to communicating with one another through devices, through apps, through platforms, through Zoom."
That isn't to say they don't also miss interacting with their friends in person, or going to stores and other places physically, but they were more prepared than most for the transition. And according to YPulse, which conducted a survey of 13- to 39-year-olds, most young consumers are planning to continue staying home for the holidays. Of those the company studied, 60% will stay home for Thanksgiving and 69% for the holidays, both up from 53% and 59% the year prior.
As expected, those numbers come with lower percentages of young people planning to go on vacation or visit nearby friends or family's houses for the holidays. But the majority (76%) are also leaning harder into making the holidays special to "make up for the year we've had" — a sentiment shared by consumers more generally as they look toward the end of a difficult 2020.
Retailers will need to be cognizant of that sentiment in their marketing without forgetting that many consumers, including Gen Z, have been routinely stressed out or depressed this year.
"Many of them are just balls of stress at the moment," Antenore said. "Retailers and brands that can address that in an organic, convincing way, in a way that aligns with their mission and their values as we think about how centennials are so values driven, will definitely have an upper hand versus other brands."
Signs of the times
In understanding what will motivate younger consumers to spend this year, retailers have to start by understanding where Gen Z's head is at. According to Gen Z Planet, 40% of the demographic says the pandemic has affected their mental health, and many are anxious (42%), sad and depressed (41%) or angry (27%). Antenore added that the pandemic and the election exacerbated many of Gen Z's already existing stressors, and there's a feeling of powerlessness for many.
In terms of purchasing behavior, those stressors could lead to several results, one of which is a movement toward more "thoughtful consumption," including buying from brands that are sourced responsibly, environmentally friendly, or support Black Lives Matter or other important issues, Antenore said. Both sustainability and racial equality are key points of focus for Gen Z shoppers this year, sources noted.
Certain types of businesses might also get a boost. In a report on Gen Z by Morning Consult, 27% of Gen Z respondents said they planned to buy more items from local businesses compared to before the pandemic outbreak, while 24% said the same for items from Black-owned businesses and 21% for items from minority-owned businesses.
"This past summer has really focused Gen Z on social justice, there's no doubt about it. That's kind of the defining issue of this generation," Niedermeier said. "When you talk about generational cohort effects, clearly we're going to have the fact that this generation came of age during a global pandemic, and they came of age during a social and cultural reckoning on racial justice, and that is going to express itself in their brand preferences, in their consumer choices."
Gen Z Planet found in its own research that 40% of the demographic will aim to support small businesses in the future, and Ben-Shabat highlighted that both environmental issues and the recent protests on racial inequality have raised the group's awareness about where they spend their money. Fast fashion, for one thing, was out for many Gen Zers Ben-Shabat talked to, not only because of sustainability concerns but also because of social justice concerns.
"They've seen how wallets and belts have had to tighten. They're also keenly aware of the value of $1."
Ben Antenore
Analyst at Kantar Consulting
"I think that made a lot of people, but especially Gen Z, pause and think, like, 'Where do I put my money? Who am I actually supporting with my purchases?'" Ben-Shabat said of this year. "And I think one thing that we may be seeing in the coming months, as we go to the holidays, is Gen Z probably diverting some of their holiday cash to support their local community and local businesses."
MaryLeigh Bliss, vice president of content at YPulse, added that 60% of young consumers want to buy more gifts with social good components over the holidays — and it could be a good way to make them feel better about spending money, too. According to YPulse, Gen Z is already planning to spend less on others ($133 compared to $171 last year) and on themselves ($141 compared to $183 last year) this holiday season, and 34% plan to use installment payment services while shopping.
Even more (71%) will be relying on Black Friday and Cyber Monday deals "because of a tighter budget" and 67% would use a second stimulus toward holiday shopping. Niedermeier said there's "no doubt" that the demographic's expendable income has taken a big hit this year — indeed, Piper Sandler reported in October that Gen Z spending had hit an all-time low — and that could impact what type of retailers they buy from this year.
In particular, Niedermeier said Gen Z is less interested in luxury and prestige brands, and Morning Consult's report features price-focused retailers Amazon, Amazon Prime and Target in the top 10 of Gen Z's most loved brands. YPulse also recorded jumps in some mass retailers Gen Z expects to buy gifts from this year, including Walmart (which improved from 38% to 65%) and Target (35% to 47%). Amazon declined slightly, from 56% to 52%.
While many Gen Zers are under the age of 18, the generation is increasingly a key part of the workforce, and they're suffering from the same financial challenges as the rest of the country in that respect. Gen Z Planet found that many (42%) said their family finances have suffered due to the pandemic, while 28% reported a change in their employment status, either due to reduced hours, furloughs or layoffs. Over half (59%) plan to be more conservative with their finances going forward, Ben-Shabat said.
"The Great Recession was a formative experience in their lives," Antenore said. "So they've seen either mom or dad or both losing their jobs. They've seen how wallets and belts have had to tighten. They're also keenly aware of the value of $1 … This is not a generation that's particularly, I'd say, wasteful or consumption crazy. It's very much about making sure that they're buying the right products that really align with them and what they believe in."
Who else might get a lift?
While the year will certainly be more challenged than previous ones, with many Gen Zers focused on finances and social issues, some aspects of the demographic's shopping behavior will benefit more traditional holiday categories. Gaming was a chorus oft-repeated when asked which categories would succeed this year, especially with the upcoming launch of the PS5 and the Xbox Series X.
Video games make up 10% of total teen wallet share, according to Piper Sandler, which is a survey high, and 63% of the cohort expects to buy a next generation console. By YPulse's measure, GameStop grew by 11 percentage points as a destination for holiday gifts, from 12% in 2019 to 23% this year. The retailer has already seen a boost from the pandemic this year — and part of that may be tied to the social isolation caused by the global health crisis.
"Gaming today, to this generation, is interactive. People are playing eSports against each other, people are playing on these consoles and communicating through headsets at the same time, and it's become really their town square," Niedermeier said. "This is where they're meeting and talking and interacting and competing and entertaining each other and having fun. I think that really leads into what some of these trends for the holiday season will be. I think certainly gaming and gaming-related products are going to be super popular, kind of the holy grail of this holiday season."
Home, entertainment and self-care also came up as potential winners for the demographic, along with mass merchants like Walmart and Target, where Gen Z parents are bringing them for regular grocery and household shopping anyway. Bliss noted that outside of its convenience and budget-friendly prices, many also cited Walmart as their favorite place to buy apparel.
On a broader scale, online shopping will also be a winner this season, especially for Gen Z. Almost all (94%) of Gen Zers interviewed by Gen Z Planet said they were strictly adhering to social distance guidelines and 60% said they only left home for grocery shopping or exercise, likely putting a damper on foot traffic this season. Over half (57%) of young consumers surveyed by YPulse said they weren't comfortable shopping in stores for the holidays, and Bliss noted that the company recorded for the first time a higher percentage of young consumers planning to do all of their holiday shopping online rather than in stores (53% this year, compared to 43% in 2019).
Ben-Shabat expects them to return to stores after the pandemic — and in fact 51% said they would visit stores as much as they did before the pandemic when it's over — but for this unusual holiday season, it might also mean a spike in virtual gifts, so to speak, like subscriptions.
"Their 'not going to stores' is a temporary break," Ben-Shabat said. "But if they had to go to the store, the expectations that they have are very high. Obviously, frictionless experience, safe experience, and so on, but also, what additional experiences you're creating for them."
A willingness to go back into stores for the holidays might be reliant on that last point — giving the generation a convincing reason to show up in the first place — and will likely vary by location, depending on how widespread the coronavirus is in different parts of the country and how seriously it's being taken by residents.
Not the year to "jingle all the way"
With physical stores shrinking in importance this year, digital is the place to be for retailers looking to reach the younger generation — and there are many different channels within that, that brands could hit.
Social commerce is perhaps the most obvious of those, as platforms like Instagram, Pinterest and TikTok continue to capture the attention of young shoppers. Among those, Piper Sandler found that Snapchat was still teens' favorite social platform, but TikTok took over the No. 2 spot from Instagram. It's also where Gen Zers are going to make purchases — 56% make impulse purchases driven by social media feeds and online advertising, according to Gen Z Planet, while just 28% cited in-store promotions as driving impulse buys.
Bliss noted that the majority of Gen Z uses social media to browse for products they want to buy, and with the addition of tools to enable that on social platforms, it's "absolutely" where brands should be. Video and interactive ads are also the ones the demographic are most likely to pay attention to, Bliss said, another point in social media's favor.
"One of the things we know young consumers want is for brands to create content that authentically fits into the platform," Bliss said. "It should look and feel like other content that they're seeing, which makes sense. To be successful, create content that feels like the content that's successful on the platform."
Social also serves as a stand-in for the human interaction Gen Z is craving, Niedermeier said, and the group turns heavily toward influencers, reviews, blogs and other corners of the internet to drive their purchasing behaviors. TikTok, in particular, may be the place to be for brands this year, but Niedermeier added that no one has "cracked the code" on interacting with consumers on that platform.
"They're not so much little kids with pester power anymore."
Keith Niedermeier
Clinical Professor of Marketing at the Kelley School of Business at Indiana University
While retailers should clearly be interacting with the demographic online, and through social media, that's also what every other brand will be doing during the holidays, which may make it harder for companies to stand out. As a result, some channels may rise to the fore while others fade into the background. Email should be one of the latter group, according to Antenore, and gaming platforms like Twitch and YouTube Gaming are worth adding to the list.
"It's pretty remarkable the amount of Gen Zers who consider themselves gamers as like an actual identity," Antenore said. "And a core part of that is visiting these online platforms like Twitch where there's a lot of opportunity for brands and retailers to tie in."
Streaming and other video services may be another opportunity. Piper Sandler found that teens spend 34% of their daily video consumption on Netflix, followed by YouTube. Most importantly, though, may be the creativity brands bring to their marketing. Ben-Shabat recommended retailers offer more content to the generation while they're stuck at home, which doesn't necessarily have to be tied to a product.
The demographic is even turning to brands for help celebrating the holidays, according to YPulse. Over half (51%) said they wanted help from brands in how to hold virtual holiday celebrations, and a substantial number are still planning to do the same or more of traditional holiday activities like decorating (77%) and cooking (75%), which could provide opportunities for brands.
While it's easy to think of Gen Z as children, being one of the youngest generations with spending power, the oldest of the group are in their early 20s now, and even those living at home have practically unlimited access to the internet, so brands should be trying to speak directly to them as consumers, rather than just their parents, sources said. Marketing to Gen Zers directly not only gets brands the influence children have on where their parents spend, but also allows brands to start building up that relationship earlier on with a group that already has a strong online presence.
"The bulk of Gen Z right now is adolescents to young adults, and that's really where you see consumers starting to develop their own personality, starting to make their own decisions," Niedermeier said. "They're not so much little kids with pester power anymore as they are consumers that might not be spending purely their own money, but are increasingly making their own decisions."
The tone, however, will be important. Bliss highlighted honesty and humor as two avenues brands could take, while being sure to avoid ... "
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