Four Ways that Gen Z Is Changing Shopping Forever

Gen Z shoppers are radically changing the retail world. Notice more "buy now, pay later" services offered at online checkouts? QR codes on store shelves? You're welcome, says Gen Z.

Defined by the Pew Research Center as those born between 1997 and 2012, Gen Zers have accelerated a number of shopping trends that millennials started while simultaneously carving out several new ones of their own. And for retailers, the stakes are high to adapt. The generation's buying power is more than $140 billion, consulting firm Barkley Inc. estimates.

Here are four ways Gen Z is flexing its consumer muscles.

PER Gen Z 01
Iza Habur/Getty

Redefining Value Shopping

Brand hunting used to largely center around price, quality and customer experience. But Gen Z wants more: brands that feel authentic in their messaging and support social causes important to them like racial equality and environmental protection, says The Center for Generational Kinetics, a Gen Z market research and consulting firm.

Gen Z ranks brand authenticity as a much higher factor in their purchasing decisions than all other adults, data from eMarketer has found. For example: about eight in 10 said they would trust a company more if it used real customer images in its ads, according to a survey from WP Engine. In other words: less polished, says Salesforce.com research.

Brands must be genuine and vocal about the causes they support and how they support them as well. That same WP Engine survey found that 72 percent of Gen Z shoppers are more likely to buy from a company that contributes to a social cause. And they claim they're willing to spend a bit more for that product, too. According to research from The Center for Generational Kinetics, some $14.45 more, on average, per $50 purchase (or $3.86 more than millennials).

"Gen Z isn't just buying a product, they're buying into a brand, and they want to feel a deeper connection to that brand through their shared values," says Jasmine Enberg, an Insider Intelligence principal analyst.

The Gen Z crowd is also willing to punish companies that fail to take a stand or take a position they disagree with. About 55 percent told The Center for Generational Kinetics they will stop using a product or service if the company's position on a social issue doesn't align with their own.

But a brand's commitment can't just come in the form of a donation or a tweet, says Jason Dorsey, president of The Center for Generational Kinetics. Gen Z expects brands to actively call out bad actors, while also being transparent about their own workplace practices, environmental impact and supply chain through visuals and social media stories. Six in 10 say a company's reputation as an employer influences their decision to make a purchase.

"They're looking beyond tangible products and actually trying to understand what it is that makes the company tick. What's its mission? What's its purpose? And what is it actually trying to build for us as a society?" asks McKinsey & Co. partner Bo Finneman in a podcast on Gen Z.

PER Gen Z 02
Lesley Wang/Getty

Buying Via Social Media and Influencers

With Gen Z spending about three hours a day on social media—more than any other group—it's not surprising that they like to shop where they go to socialize and find news and entertainment.

"Social shopping is like a digital shopping mall," says Enberg. "You get to connect, hang out and have fun with friends and influencers, but also shop and browse trending content." About 40 percent of Gen Z say social platforms most heavily influence their purchasing decisions, unlike older generations who lean more on family, friends, TV ads and online reviews, according to McKinsey.

They also conduct their product research on social media a little differently than other groups. While millennials favor consulting the larger online collective to get a sense of how good a product is, Gen Z tends to seek out specific individuals it believes are in the know, says McKinsey.

This might be the reason why more than half of Gen Zers say they're more likely to try a product or service if their favorite influencer recommends it, The Center for Generational Kinetics found.

"Gen Z places a lot of trust in individual voices for news and information to help them form their opinions," says Monica Deretich, retail industry advisor to CM Group. "Retailers are leaning on this with more native marketing" or sponsored content as it is also known.

Merging Digital and In-Store Experiences

Three-quarters of Gen Z shop on their smartphones—more than any other generation. But they still seek out in-person experiences too, says CM Group. In fact, Gen Z, more than millennials, prefer to shop in a physical store for certain items like electronic devices and clothing.

Jumping between digital and physical storefronts puts pressure on brands to be just as nimble. For instance, while in stores, Gen Z shoppers like to scan items on their phones to check out through the brand's app, receive personalized discounts or coupons on their mobile devices and scan QR codes on shelves to learn more about a product. "They want the in-store experience to merge seamlessly with their phone," says Dorsey.

But Gen Zers also want physical stores to offer more than they can get online. They see shopping as a social excursion and prefer brands that also offer them unique immersive experiences. Think things like product customization stations, climbing walls in sporting goods stores or free workshops to better learn how to use a new tech gadget.

"Retail companies with physical stores will reallocate floor space to experiential media, like selfie walls and AR experiences," says Deretich. "You can't just have a physical presence."

Finding New Ways to Pay

Gen Zers

aren't just shopping differently, they're also paying differently, becoming increasingly reliant on alternative options like "buy now, pay later" (BNPL) services and peer-to-peer payment apps.

Buy now, pay later providers, like Klarna and Afterpay, offer consumers a new-age version of layaway at online checkouts in which the bill can be paid in installments—often for zero interest.

These services have proven so popular with younger shoppers that they've expanded to in-store shopping too, offering the same extended payment plans via debit or app-based digital cards. By the end of 2022, 44 percent of Gen Z will have used one of these credit services in the past 12 months, predicts eMarketer.

"Gen Z uses BNPL for smaller, more everyday transactions," says Neeko Gardner, principal in management consulting firm Oliver Wyman's payments division. "A lot of Gen Z doesn't trust credit cards or have access to credit yet because of their age, so BNPL has in effect replaced the role of credit cards for them in terms of access to a credit line and the ability to purchase more than they think they can."

Younger shoppers are also driving merchants to adopt peer-to-peer payment apps like Cash App and Venmo—traditionally used to transfer money for free to friends and family. By the end of 2025, Oliver Wyman expects 62 percent of Gen Z will be using such apps.

Currently, these contactless and often QR-code based methods of payment pop up at checkouts for retailers like Hollister, Forever 21, Lululemon, Poshmark, Urban Outfitters, Uber Eats and Seamless. Amazon says later this year you'll be able to use Venmo to pay on its site and app.

"Merchants are always interested in accepting additional forms of payment," says Beth Costa, Oliver Wyman partner. "They don't ever want a shopper to abandon their cart or be turned away because they can't buy things they want."