- Retailers and brands are still trying to figure out how to appeal to Gen Z, the generation that currently spans the ages of 7 to 22 and has a spending power of $US143 billion.
- Business Insider spoke to industry experts about how companies can court this generation, whose spending habits and expectations vary substantially from older generations.
- “The prevailing cultural narrative often pegs Gen Z as a digital generation,” said Jeremy Baker, chief technology officer and cofounder of Retail Zipline. “The reality is they care about connections and community.”
- Visit Business Insider’s homepage for more stories.
It’s no secret that the retail industry went through a shakeup in the last decade.
The 2010s alone saw the closure and bankruptcy of many iconic brick-and-mortar stores, including the once-beloved Henri Bendel, Payless Shoesource, Sports Authority, (briefly) Toys R Us,Victoria’s Secret, and perhaps most notably, Blockbuster and Barneys New York.
Most of these stores suffered from stagnating sales, while others struggled against the rise and popularity of e-commerce and online retailers, in addition to the changing tastes of the millennial and Gen Z cohorts. A study conducted by Influential – an artificial intelligence and social data company that connects influencers with brands – found that consumer technology and fashion retail were the top two areas that had substantial year-over-year increase in social mentions, with an 89% and 128% increase respectively.
For stores looking to connect with Gen Zers – who have a spending power of $US143 billion and will account for about 40% of global consumers this year – it’s clear that retailers and brands need to invest in researching how this new generation shops, even if it means disrupting traditional blueprints. One of the biggest issues for traditional retailers and brands to overcome will be the rise of more direct-to-consumer (DTC) and e-commerce brands, who are able to provide more of an intimate and personalised experience for shoppers.
The secret to Gen Z marketing success
According to Influential’s study, the top three fashion brands mentioned among Gen Zers are Vans, Adidas, and Nike. This is in line with data from consulting agency Interbrand, which listed Nike and Adidas as two of the top global brands in 2019, with a $US32.3 billion and $US11.9 billion brand valuation respectively. But they aren’t the only brands who have successfully courted the younger generation.
Gucci, for example, had great success in the last decade when it came to attracting Gen Z. As Interbrand reported, Gucci was 2019’s fastest growing luxury brand, with a growth rate of 23% and brand valuation of $US15.949 billion – nearly double the valuation it had when Alessandro Michele first took over as creative director in 2015. In addition, in a 2017 interview with CNBC, Francois-Henri Pinault (the chairman and CEO of Kering, Gucci’s parent company) said that nearly 50% of Gucci’s sales were coming from millennials. Today, Interbrand reports that number has jumped to more than 60% with their fastest growing audience being Gen Z.
To court younger generations, Gucci employed a “Millennial Shadow Committee” to help make decisions about the best way to connect with shoppers. The luxury brand also partnered with modern day icons such as pop star Harry Styles and photographer Petra Collins, and launched inclusive advertisements and collaborations, in addition to taking steps towards becoming a more sustainable company – all moves which appeal directly to younger shoppers.
“This type of interactivity between a consumer and a brand that’s more relational resonates as authentic rather than a brand that’s presenting to you a product and selling it to you,” Steve Mormoris, CEO and founder of Edge Beauty, told Business Insider. “Consumers have mobile phones in which they’re able to interact with brands, but on a more frequent basis than 30 years ago where you would only interact with the brand when you saw [it on] television, and then the next day you walked into a store to buy it.”
Nordstrom demonstrates a brick-and-mortar retailer’s secret to success
On the retail front, Nordstrom has remained a popular destination for e-commerce brands looking to enter into the brick-and-mortar sphere. Brands like DTC beauty company Glossier, sustainable clothing company Reformation, and luggage company Away are popular with both millennials and Gen Z, and Nordstrom’s partnerships with each allowed for the companies to be introduced to customers they otherwise might not have been exposed to.
“People are not finding a deep degree of gratification or satisfaction going into a luxury department store anymore. And why that exactly is, I don’t know,” Mormoris previously told Business Insider. “I think a lot of it has do with people looking for physical spaces that make them feel comfortable and [where] there’s some degree of intimacy in the shopping process.”
Pop-up shops have become the new favourite for various e-commerce and direct-to-consumer brands looking to create curated experiences for shoppers, rather than commit to the longterm, often impersonal feel, of a traditional retail shopping experience.
Though, to court younger consumers, it might be best for brands to focus less on pop-up experiences, and more on establishing a long-term presence – at least according to one study conducted by communication management company Retail Zipline, which found that many Gen Zers prefer longstanding retailers over pop-up shops. 58% of Gen Z respondents saying they would rather shop in stores with an established presence, compared to the 11% who preferred pop-up shops.
“The prevailing cultural narrative often pegs Gen Z as a digital generation that gets caught up by trends they see on social media,” Jeremy Baker, chief technology officer and cofounder of Retail Zipline, said in a press release sent to Business Insider. “The reality is they care about connections and community – we know this because they prefer to shop in situations where they can chat with their friends, engage with store associates, and feel confident that their purchase decisions are supporting businesses that treat employees well.”
Nordstrom’s traditional brick-and-mortar setting, combined with the intimate experiences of a pop-up, has allowed for the retailer to establish itself as good partner both for brands and for shoppers.
In 2013, the retailer launched its “[email protected]” series, which showcases new pop-ups every four to six weeks. Oftentimes, the pop-ups sell exclusive-to-Nordstrom merchandise, Business of Fashion reported. In October 2019, CNBC reported that, in addition to working with Reformation and Glossier, Nordstrom has also worked with shoe retailers Allbirds and Birdies, jeweller Kendra Scott, and beverage company Dirty Lemon.
The industry’s secret to longevity lies in appealing to both ends of the consumer spectrum
For traditional retailers and brands, their survival in this next decade will depend on their ability to engage young shoppers, according to Gensler, an architecture firm that designs retail stores. This means creating intimate experiences and personalised moments, in addition to establishing an authentic identity.
“On some level, all companies and all brands strive for this concept of authenticity,” Mormoris told Business Insider. “The difference is today, people find authenticity in a messaging that tends to be relational rather than transactional. Very often, consumers like a brand that admits they make mistakes, that asks them to participate in the creation of the brand or is involved in charity giving or making the planet better.”
But as the adaptation to appeal to the young goes into full effect, the industry must also not forget the still expansive spending power of Gen Xers and baby boomers. On January 5, The Guardian, citing research from the International Longevity Centre-UK, reported that ageism could cost the fashion industry over $US14 billion in the next 20 years.
“Fashion and beauty brands have been ignoring their older customers for ages. Rather than trying to reach this savvy demographic, they prey on their insecurities and use fear and ageist propaganda to sell beauty products that promise the ridiculous and harmful ideology of ‘anti-ageing’,” Ari Seth Cohen, creator of the blog Advanced Style, told The Guardian. “There have been numerous beauty and fashion campaigns featuring silver-haired models, but I don’t think brands have quite figured out what their older customers want and how to reach them.”
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