Beauty retailers are seeing a digital-engagement spike from Gen Z consumers

Retail’s future lies in the hands and wallets of Generation Z — the same young individuals performing TikTok dances, spending hours on YouTube, flipping through Instagram and brushing up on financial literacy. 

 If you think one of those is unlike the others, you’re right. As much as Gen Z embraces trends and curates its image, it’s also a generation of savvy shoppers with an independent streak. With 89 percent of Gen Zers saying that planning for their financial future makes them feel empowered, they expect brands to offer flexibility, control and transparency during the shopping journey.

 This year, Gen Z will represent 40 percent of consumers in the U.S. and control $143 billion in spending power. The merchants that understand Gen Z’s needs and values will find themselves on the leading edge of a retail revolution and future-proof their businesses. 

 Spanning the ages of 18–25 years old, more than half of Gen Zers are students and 63 percent live in urban locations. Those who work hold part-time or service roles in industries including hospitality and tourism, making them one of the generations hardest hit by COVID-19 and the subsequent quarantine. These factors, coupled with an upbringing amid the 2008 global financial crisis, has resulted in a generation that saves early, spends wisely and is wary of lenders. And while Millennials have tended to turn away from credit cards, Gen Zers aren’t even signing up. Eighty-three percent would rather save money than use a credit card, and are turning to alternative credit options that offer them more flexible and responsible ways of paying. 

 “Building connections with Gen Z now can set retailers up for long-term success,” said Melissa Davis, Afterpay’s Chief Revenue Officer, speaking about those kinds of options from the solutions provider’s point of view. “This generation is unlike any other in their financial prowess and high expectations for  brands. The ability to buy what they need today and pay over time — on their terms — puts control back in their hands. That builds immeasurable trust, and trust is critical in the post-COVID retail landscape.”

 A quarter of Gen Zers trusts brands more than government, the media, organized religion and influencers, according to recent research from Afterpay and The Future Laboratory. While Millennials look to influencers to guide their purchasing decisions, Gen Zers are the influencers: 82 percent trust the recommendations of friends and family over any other source to influence what they buy. 

 They’re also values-driven and gravitate towards brands that are committed to transparency, from supply chain and product provenance to marketing standards. Gen Z is three times more likely than other generations to say the purpose of a business is to serve communities and society, and seek out retailers that reflect their values. The uncertainty of COVID-19 has only made trust and transparency more important to this generation of shoppers, creating an ideal moment  for retailers to evaluate their social responsibility strategies. 

 Looking forward, shopping will almost certainly remain drastically altered, even as society transitions back to normal, and many retailers are looking to Gen Z shoppers to help them navigate the path forward. For good reason, it turns out: 49 percent of Gen Zers say they will change their purchasing behaviors post-COVID. 

 Afterpay, with a user base that’s 25 percent Gen Z, has been tracking the generation’s online purchasing habits throughout the pandemic to help merchant partners anticipate the months ahead. The most popular categories — shorts, T-shirts, sneakers and casual dresses — reflect a new work (and study) from home culture. With outings and events on hold, Gen Zers are gravitating towards items that can serve as multi-purpose basics — think white tees and chinos —  and investing in fitness shoes and apparel. 

Beauty retailers are performing well, too. Gen Zers are doubling down on skincare and beauty routines, whether to look good for video lectures or virtual happy hour, or to keep skin clean and healthy when germs are top of mind. 

 And when brick-and-mortar begins to reopen, merchants should plan on stocking and promoting items that fall into the casual apparel, fitness and beauty and wellness categories. It’s also a good time to start gauging interest in other categories, like workwear and formal wear, to anticipate fall demand via omnichannel marketing strategies. The simple act of shopping in a physical store — no longer something that we take for granted — may well steer Gen Z back to normal seasonal shopping patterns.  

 Meanwhile, leading retailers are continuing to push aggressive e-commerce strategies, as 50 percent of Gen Zers say they’re shopping online more now than before the pandemic, and 34 percent say they will continue to shop online post-pandemic. 

One way for retailers to elevate their ecommerce strategy is to offer a robust mobile shopping experience. It should come as no surprise that 95 percent of Gen Zers own or have access to a smartphone, and they spend nearly three hours each day on social networking and messaging apps. Eighty percent of Gen Zers have made a purchase on a mobile device, and, as more young shoppers discover brands on social media, seamless mobile checkout can make the difference between a sale and an abandoned cart. 

 These mobile power-shoppers still love the in-store experience. Afterpay and The Future Laboratory found that eighty-one percent of Gen Zers prefer to shop in stores and 73 percent like to discover new products in person. Tracking Gen Z’s return to brick-and-mortar will help retailers adapt over the short-term and evolve for the future of shopping. Policies for product testing and returns to store capacity will flex as more regions reopen, and things may never fully return to normal. Expect curbside and in-store pickup options to grow in popularity.

 Perhaps the biggest shift will be an increase in customer-centric stores — a shift brought about by Gen Z, and accelerated by COVID-19. As merchants revamp stores to accommodate for social distancing, frequent cleanings and physical protection for staff, they should open a dialogue with both employees and customers. Understanding what Gen Z shoppers and employees are comfortable with will ease the transition back to full operations, while indicating changes to implement for the long-term. Use this transition period to evaluate the role your physical footprint can play in creating deeper connections with Gen Z.

 The secret to unlocking Gen Z’s loyalty is simple: ask. Gen Zers who are asked for opinions give twice as much positive feedback as they do complaints. They’re eager to contribute to ideation around product development, and vocal about the desire for personalization and flexibility in their shopping journeys, especially in terms of spending. Giving them the ability to voice opinions, stand for values, and contribute to the evolution of the brands they love gives Gen Z a sense of ownership that will help define the future of retail.

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