The youngest generation of consumers, Generation Z, are traditional retail’s worst nightmare.
Generation Z is loosely qualified as anyone born after 1990.
While most of them are still too young to have their own income, they have significant control over household purchases, such as toys, groceries, and clothing, according to a study by Sparks & Honey, a New-York based marketing firm. They also have an average allowance of nearly $US70 a month, which translates to $US44 billion a year, the study found.
But unlike generations that have preceded them, they lack brand loyalty.
“The products themselves are more important to Generation Z than the brands that produce them, and these consumers will change brands easily in search of higher quality,” according to Arkansas-based marketing agency Martin-Wilbourne Partners.
When millennials were teens, they were spending the majority of their budgets on clothing, according to Piper Jaffray’s semi-annual survey on teen spending.
Members of Generation Z, on the other hand, spend most of their money on food and beverages, Piper Jaffray’s most recent survey found. Starbucks is their favourite restaurant brand, followed by McDonald’s, Chipotle, Olive Garden and Taco Bell.
This shift in spending has contributed to the downfall of shopping malls, which were once considered prime destinations for teen meetups. Mall traffic among teenagers has declined 30% over the past decade, according to the Piper Jaffray survey. American teens visited malls an average of 29 times in 2014, compared to 38 times in 2007.
The trend has spelled disaster for many mall-based teen brands, such as Abercrombie & Fitch, Aeropostale and American Eagle, which are all experiencing sales declines.
To make things even more difficult, today’s teens are making it harder for retailers to track their activity online.
“As social media natives attuned to NSA surveillance issues, they are more concerned about disabling their phone’s geolocation than their privacy settings,” according to the Sparks & Honey report. “Gen Z are drawn to incognito media such as Snapchat, Secret and Whisper.”
To reach the youngest generation of consumers, companies must engage them across multiple social media platforms and never attempt to stifle conversation about their products, according to Kathy Savitt, the founder and CEO of Lockerz, a Seattle-based social commerce site.
“Companies that expect Generation Z to be loyal based on a carefully crafted brand image and marketing message will find that their effort is wasted,” Savitt writes in an editorial published by Mashable. “Generation Z simply doesn’t buy it. Instead, the product itself is what’s important, regardless of marketing campaigns.”
“What does Generation Z care about?” she writes. “Finding and sharing the best stuff in the world. They aren’t just consumers, they are curators… As a result, marketers need to make it easy to share what their Gen Z customers love. From Facebook ‘Likes’ to branded tweets to Polyvore’s brand expression collages, it’s never been easier to share your opinion online.”
But companies should be careful not to moderate or hide negative reviews, she adds.
“Promoting an ‘open brand’ ethos will lead to better informed and more passionate curators,” Savitt writes.
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