Can retailers keep up with Gen Z’s digital savviness?
While more digitally-savvy, Gen Z is expected to differ from Millennials in a few other ways, according to an American Express survey.
A study of 1,027 Gen Y (ages 23 to 37) and Gen Z consumers (ages 16 to 22) by Forrester Consulting identified differences within three key themes:
- Starting From a Trusted Place: When compared to Gen Y, Gen Z cares more deeply about the reputation and image of the brands they use (50 percent vs. 42 percent). Gen Z was twice as likely as Gen Y to stop using a product, brand or service due to responsiveness on social media (21 percent vs. nine percent).
- On the Go, On their Terms: Compared to Gen Y, Gen Z is 22 percent more likely to prefer in-app notifications to receive offers, incentives and sales notifications. They are also 23 percent more likely to prefer interacting via social media to receive offers, incentives and sales notifications. More than twice as many Gen Z consumers ranked using text/SMS messaging, searching online resources and talking over the phone with an automated system (i.e., not speaking with a customer service rep but rather using automated menus) as their top three preferred customer service channels to solve a problem.
- Tech-Driven Loyalty: Gen Z respondents were more likely than Gen Y to become disloyal to a brand due to poorly designed mobile features, slow response during online chat for sales or customer service issues, or poor features/responsiveness on social media. Gen Z was two times more interested than Gen Y in features that embody instant gratification such as one-hour delivery made by drones, the ability to purchase products or services via chat apps or social media, personalized experiences via bots and AI, and the ability to pay using a watch or other wearable device.
“To capture Gen Z’s attention, business leaders have to go beyond simply thinking digitally,” Forrester concluded in the report. “They need to become customer obsessed and deliver experiences founded on the pillars of empathy and delivering utility such as immediacy, personalization, security, and entertainment.”
Discussion Questions
DISCUSSIONS: How do you think Gen Z will differ from Gen Y as shoppers as they reach their peak spending years? In what aspects of the shopper experience may retailers likely have to double-down on investments?
Poll
BrainTrust
Charles Dimov
Vice President of Marketing, OrderDynamics
Ken Lonyai
Consultant, Strategist, Tech Innovator, UX Evangelist
Integrating mobile into the physical shopping elements of discovery, getting product information, having fun, getting input from friends and creating memorable moments is a worthy investment for brands and retailers targeting all demographics. Retailers will have to work hard to overcome the influence of Amazon as its algorithm-based interface continuously improves the service to shoppers. The traffic and conversion that are the lifeblood of retail will continue to undergo huge advancements that threaten physical retail.
I agree with you Lyle that retailers are going to have to work harder and faster at both deploying and adapting new retail technologies. Amazon is already clicking with the Gen Y and Gen Z audiences. The trick is going to be to keep up with their technology/novelty needs and giving them something Amazon cannot yet provide — instant gratification. Getting this right will be a saving grace.
It seems to me that Gen Z will represents the final nail in the coffin for the definition of loyalty as we have know it since the rise of the Boomers. As product differentiation began to dwindle, Gen Y began to look for new reasons to declare their fealty: philanthropy, ethics, social outreach, mobile options, etc. The people of Gen Z, whose parents never had any product-based loyalty, are now doubling-down on that trend: as the study suggests, service experiences, marketing experiences and social experiences have now reached the tipping point as key drivers of loyalty. Therein lies the road map for retail investments.
For more on my point of view on Centennials and retail, check out my SlideShare presentation, “Meet the Centennials.”
Habits form early. If Gen Z is already more engaged with technology, that’s not going to change as they hit peak spending years. Retailers — this is a wake-up call. It means your omnichannel practices need more tech spice. Your key retail technology needs to be connected to the communication systems your new customers want. Instant gratification is big with Gen Z. When they order online, you need to have it ready for them within one to two hours. I still see several pickup T&C’s stating the product will be ready for pickup in two to five days. This isn’t going to fly with Gen Z … or Gen Y.
Charles, I agree but also disagree to an extent here, as more customer-facing tech spice may not be the answer. Gen Z is digital native and their expectations of technology will continue to increase as such. So, as the world has been mobile-first for some time now, I suspect there will be an inflection point where the expectations of technology will be that it should become less intrusive in our everyday lives. Essentially, people will revolt from constantly checking their phone screens, getting notified by apps and developing carpal tunnel from texting.
The world is slowly moving toward AI and more natural interactions with technology, and the most forward-looking retailers will double down in this area to make the shopping experience more seamless and our lives more enjoyable. Instant gratification, as you mention, is critical, but not just when it comes to order management. This will also be the case when the consumer would prefer instant gratification by interacting with AI in some natural spoken form rather than pulling their phone out of their pocket, unlocking it, typing on the tiny keyboard, fixing the autocorrect suggestion, etc. — in short, Alexa.
While Gen Y might be termed “digital natives,” Gen Z is the generation that sees the world through the portal of smartphones. Gen Z literally grew up with a digital device in their hands. More than ever before, marketers must think mobile first, personalized and “there’s an app for that.”
What comes after Gen Z? Connections hardwired into the brain?
Bravo for your reaction, as always, Chris. (Unless you’re being facetious, there will probably be a couple more levels between Gen Z and hardwire that we haven’t yet thought of.)
Technology continues to evolve from web-based to mobile to voice-activated. It’s moving fast and retailers are smart to pour resources into it. But it’s clear that building brand loyalty among a group that prizes it is not just a matter of keeping up with tech advances.
First, does the retailer engender loyalty through the relevance of its product and site or store experience? Second, does it execute well enough to meet the “Amazon test” of rapid response and instant gratification? Retailers and brands who meet these tests (and others) are likely to capture more share among Gen Z shoppers.
This is going to be a real problem for retail. Many retailers’ insistence on keeping legacy technology is going to impact their ability to navigate newer technologies that appeal to digital natives. Leveraging the right technology is going to be an imperative, and will change consumers’ relationships with the retailers they love.
Sometimes I get the feeling that retailers just want all this technology to go away and “Make Retailing Great Again!”
This is a question for my 9-year-old grandson who helps me with all my mobile technology.
If we understand the Millennial generation to be brand agnostic, socially empowered, digitally native and always connected, we can see Generation Z as an even more extreme version of this. The lines between the digital and physical shopping experience from the Generation Z perspective are even further blurred. Generation Z leverages their social platforms not only to share, collaborate and curate stories, but also to make shopping decisions.
The challenges for retailers are to make the necessary investments to leverage the richness of data, consumer insights and attributes about their customers from the social platforms such as Instagram, Twitter and Facebook. While Amazon has their powerful algorithms and review systems firmly established, retailers can compete with this by fully maximizing their integration between the social and commerce channels and making the mobile experience even more seamless.
Although retailers have been pounded with the message of appealing to Millennials, they will be in for an even bigger shock with Gen Z. While Gen Y is considered a “digital native” generation, Gen Z is fully digital integrated — meaning, digital is so deeply integrated into their lives they not only have never known an alternative, but assume everything is already seamlessly integrated with digital experiences. Retailers that cling to legacy technologies and assume they can layer new mobile technology on top of that legacy will be in for a severe awakening! Gen Z won’t respond to the traditional loyalty generating approaches retailers have grown accustomed to. They will need to not only embrace mobile, social, voice-based automated experiences, chatbots, etc. but they will need to think of these techniques first to reach and keep a Gen Z customer. Failure to do so will only cause them to become irrelevant to this new generation.
Gen Z’s emerging shoppers will deepen their commitment to social responsibility and environmental issues. The world has become a connected community for this group.They aspire to experience more than ownership and they communicate, learn, explore and shop while on the move with their mobile device seemingly never leaving their grasp. Retailers must figure out how to connect human emotions and the retail experience through a mobile device in order to maintain a meaningful and sustained relationship with these digital natives.
This study indicates what those in the industry already know: Gen Z shares many traits with the Millennial generation but is much more invested in interactive technology that allows shoppers to easily access a brand or product and quickly make purchases. Retailers that invest in technology with well-designed features that better meet Gen Z’s need for ease of use and instant gratification will be a few steps ahead, but must still remember that this selective generation will only buy something that they really want, no matter how deep the discount or interesting the shopping experience. As these digital natives take over more of the consumer base, retailers will need to invest more not just in front-end technology, but back-end technology that allows them to craft quality, on-trend products that meet Gen Z’s needs.
This discussion is like a logical sequel to the recently-posted article centered on the question “How can companies avoid the seven deadly sins of retail laggards?” If they DO avoid the sins enumerated there, they will win Gen Z’s attention and loyalty.
Gen Z is the upgraded version of “digital” customers for whom the technology is no longer a dominant source of life enhancement or assistance — it is already a part of their daily routine. Retailers have to offer a unique experience that can be easily integrated into the lives of Gen Z representatives, as their buying habits have already proved that shopping is not limited to going to a mall or offline store. Remember that retail is literally in omni-consumers’ pockets right now and get armed with strategies for smartphones or other devices.
It is unclear if retailers understand the massive transformation required to align with Gen Z’s expectations for a customer experience. ANY friction introduced into the customer journey — a hard-to-use app, lack of proactive notifications, etc. — will drive these consumers to another brand, with no second chances.
We call this the digital native factor and it is accelerating as we move forward. Those of us who were not born into the digital world (digital immigrants), which includes almost everyone running retail corporations today, are having a hard time keeping up with the speed of change and the acceptance of new ideas invoked by said natives. Gen Z included, obviously.
After talking to thousands of young people (natives) over a five-year period, we came up with four characteristics of the digital native mindset: 1.) openness to new things, 2.) a desire to have things changed now, 3.) a desire for on-demand service and 4.) reticence to deal with businesses that act like digital immigrants, even they are.
From our conversations, most young people felt like retailers were not moving fast enough toward the right kind of customer experience across the board, i.e., not as fast as they move from idea to idea. Or maybe a better way to put it is that these retailers don’t move as fast as the tech companies Gen Zers grew up with like Apple or — yes — Amazon.
Realizing that “Fail Fast” needs to be the new mantra will be the biggest challenge for retailers to address in terms of landing and keeping digital natives in the future.
The generational differences have more to do with exposure than psychological differences. Gen Z has grown up with more instantly gratifying technologies at hand than their predecessors, so of course, that is their expectation. Just like my great grandparents weren’t going to go back to bucket fetching when they had indoor plumbing that their parents didn’t grow up with. And expectations are rarely if ever squelched successfully.
So retailers have to accept this changing facet of an ever tougher business and meet the up-and-coming shopper’s wants and demands, or else perish at a faster rate. It’s part of the rapidly evolving retail model that unequivocally no longer accepts the “but that’s the way we always did it” excuse for not keeping up with evolving consumers.
We already have tons of influence on our parents.There is no such thing as waiting for Christmas or birthdays for Generation Z. My friend just received a Oculus VR Headset for no reason, just because he is gifted with persistence. I just received a 3D printer because I texted my father a persuasive essay a few days a week for 2 weeks. We are professionals as convincing our parents to make purchases out side of holidays.
You must start now. I was just 13 and know every available new thing out there, our parents aren’t up on things like we are, so do not wait until we have our own money as we are much more willing to spend our parents money than we will our own. Example: I have been printing 3D objects for 6 days straight since I got my lessons. I have made a minimum of $45.00 per day selling my 3D printed things at school. My father found out and asked if I was going to start paying him back for the printer, I replied, that was never in any deal when it was purchased.
As you see, we like to find ways to earn money but don’t love spending. You must treat us as if the school age years are our peak years. Right now! My soon to be released book, “The GenZ Answer Key for Business” is going to help to answer so many of these questions for businesses and brands. GenZers need to be able to buy everything we see on any commercial social media post. We don’t like Pinterest, we want to be directed straight to the product, no looking around. We hate email! We do not want to do any online chat or god forbid, have to call somewhere. We are only interested in text support like LiveSupport.com. We will never ever sit and wait to speak to someone like you do or go through some menu — we can’t pay attention long enough and won’t waste time, our most precious thing. We want immediate answers or we will go to another mobile store that can give us what we want.
It isn’t so much that we aren’t loyal, it’s that we don’t have to put up with anything today. Mean customer service people, not happening, Terrible mobile experience, click off site. Horrible checkout process, we are gone. Don’t carry what you say, never coming back. We have sooo many options at our fingertips and don’t have to drive around to find them. This is fierce competition, It’s time to start drafting your GenZ teams.
I’m here to help, just reach out. 🙂
Interesting insights Sky and not all that unexpected. One thing I’ll point out my man, GenZ at age 13, at age 25, and age 40 are very different things. The world keeps changing and life’s responsibilities change with age too, so with adult responsibilities, the GenZ apple may turn out not to have fallen as far from the tree as it seems now.
The first point to acknowledge is that not all Gen Z’ers nor Gen Y’ers are alike. Marketers need to respect this fact. That said, retailers must identify tangible characteristics of their audience to develop actions from these insights that leverage real-time personalization. I feel this capability is far and away one of the most critical tools to employ.
Retailers need to get the basics right AND leverage new technologies to improve the experience and fulfillment.
Retailers have to start planning for Gen Z now as they already have access to $44 billion in buying power and 75% say they spend more than half the amount of money that is available to them each month. Where retailers can really win over this generation is by optimizing their customer experience, particularly online and on mobile. Gen Z has high expectations and little tolerance for hurdles, meaning that ecommerce websites and checkouts that are hard to navigate and slow to load are enough for them to write off a retailer completely.
Like any generation, Gen Z will inevitably grow older and will want to make big ticket purchases. Unlike generations previously that have looked to traditional store credit cards, Gen Z will likely want payment options that are more flexible for them. Making lease-to-own or installment plans available will open up more spending opportunity within Gen Z. However it’s important to keep in mind as this demographic is tech-centric, they will expect the same financing experience at the point-of-sale whether they are shopping in-store, online, or via a mobile device.