The future face of shopping
The generation Z consumer: 14 to 19-year olds have a radically different approach to shopping which will demand a thorough retailing rethink.
Above: For generation Z shopping is a form of entertainment so Westfield organises events such as gigs by Taylor Swift and Justin Bieber (below)
Understanding the way that young consumers blend the online and offline world will change the way retailers attract and retain customers in the future.
Generation Z – consumers who are 14 to 19-years old – are in a constant state of ‘partial attention’ owing to the growing influence of digital media and particularly mobile in their lives, according to an exclusive new report by consultancy Fitch. The constant need to document, share and explore options primarily through social media is changing what these teenagers want when they go shopping.
“They are the savviest group of consumers,” says Westfield’s director of marketing, UK and Europe Myf Ryan. “Constantly connected, they’re always operating online and it’s a key strand of their lives. This group wants brands and experiences aligned to personal values. Brands that respond with hyper-personalised [offers] and [understand] this group’s intuitive digital expectations with transparency and honesty will win respect.”
In contrast to Generation X (those born between the late 1960s and the early 1980s) and Generation Y (born from the early 1980s to the early 2000s) shoppers – with some crossover with Generation Z) there is a gap between seeing and buying that Fitch identifies as ‘aspirational browsing’.
So for Generation Z, rather than seeing an item and buying it, they ‘hunt’ it out - seeking retail experiences, creating scrapbooks and documenting potential purchases. Critical to serving this group is acknowledging that they are predominantly time rich, cash poor.
“The value exchange is very important,” claims Alasdair Lennox, creative director of Fitch Europe and Russia. “This generation has the time [to hunt out items and share them] unlike Generation X and Y. This pushes brands harder to have great price value but they also have to have a ‘sticky’, interesting brand.”
Not all retailers are convinced that Generation Z presents a unique challenge. Neil Blackburn, marketing manager for footwear retailer Schuh, says: “I don’t think this is limited to Generation Z. We’re quite aware of the challenges when trying to communicate with the modern consumer and cut through all the noise. We try not to define our customers and change our message accordingly.”
Nevertheless, the report identifies five critical stages in Generation Z’s path to purchase. First, this group seeks out potential purchases, influenced by what their friends suggest, celebrities, ads and in-store browsing. The group continues browsing via Google, then create look books with images scraped from Pinterest – and finally they assiduously check the prices of their chosen items on the internet. Beginning online, this behaviour is by no means limited to digital as groups of friends will often convene to make ‘recce’ visits to stores.
“This demographic enjoys spending a lot of time in the [shopping] centre because of its leisure potential. Offering something new to consumers who want to hang out in-store is key. Some retailers have done a very good job of creating a 360 experience,” Ryan reveals, citing H&M’s flagship store on Oxford Street in London as a key example. The store, which underwent a large-scale transformation in March 2013, now offers a hang-out space as well as Wi-Fi in recognition of the fact that shoppers are not just browsing in-store, they are also browsing online in-store.
Tailoring the experience in-store to this shopper is something the Abercrombie & Fitch group, including Hollister and Gilly Hicks, has done very well in the opinion of both Ryan and Lennox. These labels are important not because of their obvious cachet when being worn – there is often little to differentiate them from other brands available on the high street – but the experience involved in acquiring the goods.
“When you walk into the London store and see the models outside in swimsuits, it is the perfect age filter,” Lennox suggests, noting the obvious discomfort of the older shopper. “One or two steps inside and the darkness is like being in a nightclub. In retail terms it’s like visiting a sporting event. The biggest spike in merchandise sales is at the end of a race or a concert. It’s a memento of the experience.” By likening the shopping experience to an event rather than an opportunity to acquire goods, it is easy to see how Generation Z’s priorities are a dramatic shift from the X and Y groups that preceded them.
To believe that the interaction ends with purchase is to underestimate the key role this generation plays as influencers. There is the post-purchase stage of ‘show and tell’ where shoppers share details of what they habe bought on social media, adding to their look-books on Pinterest and transmitting their preferences across peer groups.
Lennox notes that a marketing community comprising of mainly Generation X and Y finds it difficult to grasp the concept: “The idea of making a video of your shopping haul is alien. Generation Z finds this interaction seamless, they are digital natives. Older generations are having to adapt.”
While this generation is all about instant gratification and will often prefer to take a first generation product than wait until it is refined, they are also happy to delay purchase in order to canvas the opinion of their peers and price check once more.
‘Showrooming’ is an increasing trend of value to Generation Z and addresses their willingness to visit stores with little or no intention of making an immediate purchase. For example, Tokyo’s Sample Central displays brands ready to try on but none are for sale.
This may be seen as driving customers once again online and to price comparison sites that erode retailers’ margins. Nokia’s global head of retail strategy and shopper marketing, Richard Stoppard, suggests that bricks and mortar will continue to play an important role.
“Beyond the in-store ‘theatre’ there is the simple question of ease of collection. Ordering online is still inconvenient when it comes to delivery of the goods. With 79 per cent of the world’s population being in an urban environment by 2020 there is an opportunity for hub delivery systems. This will be an expectation for this set of consumers,” he says.
Low disposable income means the prime concern for consumers is finding the best deal. The research finds that [Generation Z] have no problem making multiple store visits but complete their purchase online and seek parallel products on auction sites such as eBay.
To keep up with these shoppers seems dizzying if they are constantly searching for cheaper or better alternatives while in-store. Retailers will therefore have to reconfigure how they approach targeting this group, from merchandising to marketing and beyond.
Wanelo, a website that describes itself as ‘an online community for all of the world’s shopping’, which looks like a combination of Pinterest and a shopping site, focuses on making online shopping social (see box, below). It has more than 10 million users, up from 1 million in November 2012.
Vice-president Sean Flannagan explains: “Shopping has long been a form of entertainment and a social activity for many and now a lot of that recreation time is happening online and on a phone. Younger shoppers in particular aren’t really aware of another way. Shopping is not just a means to an end for them – it’s fun and stimulating and inherently social.”
Meanwhile, more traditional retailers such as Uniqlo are using the influence of social media and Generation Z’s price sensitivity to keep purchasers close to the brand. It offers fluid pricing and creative promotions such as the ‘Lucky Counter’ where the more tweets an item receives, the lower the price falls.
Wanelo’s Flannagan states that looking to their behaviour online is an important source of information to manage interactions in-store: “A number of users have told us stories about going to a store location to buy something they discovered on Wanelo, only to find the item out of stock. Retailers who want to cater to these shoppers might do well to watch what’s trending for their store on Wanelo and possibly highlight it in-store.”
Schuh’s Blackburn claims that it is already able to address the ‘always available’ pain point: “A Schuh customer is choosing our brand irrespective of channel and we know that they expect the same level of service wherever or however they choose to shop. That means that every shoe we stock is available to the customer in every location,” Blackburn states. “As customers become more multichannel and promiscuous in where they shop, it’s never been more important to create a retail experience that is memorable.”
Nokia’s Stoppard notes that the variety of retail touchpoints is a roadblock to adapting to the needs of Generation Z. “Companies need to know what happens between owned and concession retail environments, online and offline. Retailers working in an old way, controlling their influence over pricing, delivered in the way they want - those environments are going to be dominated and defined now by the people who shop in them and the influence of Generation Z is going to play for a long time.”
Lennox adds that this may lead to wholesale reorganisation for retailers: “There are still too many silos to navigate. A lot of organisations will have to move from the vertical to horizontal to be able to focus on customer experience rather than selling product.”
However Stoppard believes that these brands and many more must focus on this group: “The question for me is not about shopping for a t-shirt today but how this group’s consumer behaviour will be when they are the main breadwinners and have children. The sooner we understand that these consumers will be defining the shopping environment of the future, the better.”
Case Study: Wanelo
Wanelo (short for ‘want, need, love’) is an online shopping community organised in a Pinterest-type format. Every product is posted by members, most of whom are young girls and women: 90 per cent of users are female and 60 per cent are 24 and under.
Users can post things they want as gifts, things they have bought and want to buy.
In essence, Wanelo mimics the mall experience with friends but online. However, while items can be purchased then and there, tapping into the Generation Z desire for showrooming and multiple retailer visits, it can be used by retailers to highlight their wares in the curated form that is rapidly gaining popularity with this demographic.
“People discover products through the people they’re connected to and they’re increasingly immune to advertising. The influence of other people is amplified by the technology we use,” claims Wanelo’s vice-president of product, Sean Flannagan.
Retailers can use Wanelo to find out which are their most popular product lines and discover what other brands are attracting the same type of consumer. Store pages on Wanelo are created automatically as users post and share products. Retailers can claim their store pages and start communicating with followers directly.
Flannagan claims Wanelo’s curating approach makes it more effective than other social media sites. The company states that Urban Outfitters has around 2 million followers on Wanelo compared to 1.8 million on Facebook and 80,000 on Pinterest.
It also taps into the instant gratification characteristic noted within the Generation Z group. Flannagan insists: “Wanelo users vocally complain if they start seeing things that they can’t buy. Social shopping is not about flash sales or group buying or adding share buttons to product pages. It’s people sharing and talking about products with one another the way they always have in the real world.”