By Casey Noenickx20th December 2023
Young consumers have a lot of money – and they're eager to spend it. But they're not shopping haphazardly.
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As Gen Z grow up, their dollars matter more and more in the global economy. This generation, born between 1997 and 2012, represents an estimated $450bn (£353bn) in spending power across the world – with $360bn (£282bn) in the US alone, according to some estimates. Their economic influence is only expanding, as more of them age into adulthood.
These young people not only have this money – experts say they're also willing to spend it, even amid a period of high financial anxiety. However, Gen Z's buying patterns are different than the generations that came before them. They're not simply spending on whatever they want the moment they think of it; instead, they're being extremely deliberate with who gets their dollars, and when.
Part of this choosiness is because of how much and how hard they're working to have discretionary income in the first place. Money is a daily concern for many Gen Zers, especially right now. Not only are most of them still on entry-level salaries, but they are also having to stretch their paycheques during a period of spiking inflation and high cost-of-living.
Yet although this generation is still navigating challenges such as skyrocketing rent prices and student debt, that doesn't stop them from finding ways to pay for their wants. Many young people are working overtime to bring in extra money, whether through passive-income schemes, side hustles or additional employment. According to an upcoming IBM survey of 20,000 American consumers seen by the BBC, 53% of Gen Z are doing freelance work – a number higher than any other age group surveyed, says Joe Dittmar, retail industry leader, vice president and partner at IBM Consulting.
The fact they're putting in so much time to earn extra cash may feed into their extreme discretion around how they end up spending it, says Dittmar, who is also on the board of directors at the National Retail Foundation (NRF).
Many Gen Zers are working hard to bring in extra discretionary income, and they're eager to spend it on the right purchases (Credit: Alamy)
Gen Z may be picky, but they are also practical. Tamara Charm, a partner at McKinsey & Company, says that because they're true digital natives, young consumers can research and select products in new ways that make them the shrewdest shoppers.
She says this group has begun to put a great deal of time and consideration into their purchases to make sure a product checks all their boxes. "[Gen Zers] are really savvy at going between their phone, their apps, the website, the store and back, again and again to figure out, 'What do I want? What do I need? When am I going to get it?', and being really intentional about that shopping," she says.
In contrast to impulse-buying, this type of consumption involves patience. Charm says Gen Zers are willing to delay purchases until they truly need them, and also holding out until they can find the best deals.
They also have exacting standards for the products themselves. Although Gen Zers are still seeking the best prices possible, they're not willing to compromise on quality, according to Charm's holiday shopping research at McKinsey & Company. The report showed Gen Z were the only generation to rank quality as more important than price. They're also more likely to read and leave reviews for products, and are quick to find another option to a product with poor reviews.
IBM's Dittmar agrees "quality is critical. If your product isn't living up to the quality, they're not going to give you a second chance". As a result, young shoppers aren't simply going to stick to a brand for its name alone if it doesn't meet their standards. Dittmar characterises this generation as enthusiastic and exploratory, willing to break habits and take risks. "They're not just going to one place," he says. "They're experimenting."
[Gen Zers] are really savvy at going between their phone, their apps, the website, the store and back, again and again to figure out, 'What do I want? What do I need? When am I going to get it?', and being really intentional about that shopping – Tamara Charm
As Gen Z begin to wield more economic power, their preferences and behaviours will begin to shift the retail landscape. And if brands want to be in line to capture this discerning generation's dollars, they'll need to evolve in lock step. This is especially the case in a world where Gen Z are increasingly prioritising sustainability.
"We only see consumer sentiment going up in importance around buying from companies who are authentic, buying from companies who are transparent, buying from companies who are responsible," says Charm.
Gen Zers care that the products they purchase are made and handled sustainably, and that the companies they buy from are committed to positive climate action, agrees Charlie Reed, global sustainability lead at Intuit. "This generation is taking personal steps to reduce their environmental impact. If they're not seeing their purchases align with that, then they're going to push for a better option."
There's one more important consideration, however: although may be emerging trends in Gen Z's behaviour and preferences, they're not a monolith. "This is not a one-size-fits-all group," says Dittmar – especially as trends change quickly, and social media means information is available to consumers instantly.
Gen Z have a long list of requirements to go check off before they deem a product worthy of purchase – and if retailers want the money they're happy to spend, they're demanding brands meet them where they are.
