For a while now, all we have heard about is Millennials and their desires in a retail store. And this is important, after all, Millennials make up the majority of the workforce today—which means they have the income to spend in a retail store. But the next generation, dubbed Gen Z, is expected to have a bigger impact on retail shopping behavior than their predecessors. It is estimated that the Gen Z group will be about 1.5 million folks larger in size than the Millennial group. In fact, by 2020, it is estimated that one-third of the US population will be Gen Z. So you can see that a major shift in retail is coming—in fact, it's already here.
Gen Z is best defined as people born 1996 or later. Millennials grew up with technology as siblings, but Gen Z was born into a post-digital world that makes technology the center of their lives and not an accessory. And as I will discuss in a moment, retailers have to embrace this idea quickly.
5 core characteristics of the Gen Z shopper
- They have higher expectations. Their expectations of a retailer are more demanding and higher than any other generation. If the store experience does not deliver, they will walk. They want a store that embraces technology the way they do, that makes products accessible and easy to test, yet they still desire human interaction.
- They have less patience. If the expectations are not met (exceeded) then they will move on. They rarely give second chances. And when they have a poor experience, they usually share it on social media.
- They are not as price-conscious. While other generations were all about the "deal" Gen Z tends to be more about the experience and they are willing to pay for it.
- They are distracted. Most Gen Zers have more than one device they interact with during the day. They deem themselves huge multi-taskers jumping from one app to the next in a flash. But we see them more as distracted. They miss key points in a sales presentation and are more difficult to communicate with.
- They are influencers. According to a study by Interactions, 70% of parents turn to their Gen Z kids for help in making a buying decision. So not only are they impacting their own buying decision, but also those of their family.
Technology Must Drive the Shopping Experience
According to a research study commissioned by Euclid Analytics, the desire for a brick and mortar store remains intact. Gen Z still prefers to shop in a store versus online. And this is good news. However, they want retailers to understand that technology must drive the shopping experience. Now, let's not get too carried away. They are not asking for robots to assist them, they still want knowledgeable sales professionals. In fact, the study showed that Gen Zers are more likely to seek out a salesperson in the store than Millennials. The problem is that most salespeople they come in contact with are anything but knowledgeable and professional. So they have to turn to Google and social media for advice. So while they do want technology at the center, they do not want it to replace people.
For example, 53% of Gen Zers desire free wifi in the stores they shop, up from 41% of Millennials. They want to be able to access coupons and incentives proactively. So the store would serve a coupon or discount to the shopper's mobile device based on location in the store. When a customer is in the shoe aisle, the deals for shoes are displayed and when in the food aisle manufacturers coupons are delivered—all without the shopper having to do a thing.
Another way technology will shape retail is through the checkout process. The number one reason a Generation Z person will choose online versus in-store is not having to wait in lines. POS is going to have to become mobile and truly at the "point of sale." Retailers like Apple have already moved in this direction eliminating the traditional cash wraps and equipping store associates in every department with mobile devices that can take the customer's payment information as soon as they decide their purchase. Every smartphone operating system has a mobile payment option for their customers.
The biggest upcoming expense to retailers will be improving their POS infrastructure. Gen Z will demand it and will choose shops and stores that have it. Take Amazon's grocery store with no checkout lanes, for example. The scanners in the store monitor what's in your basket and charge you for it as you exit the store. Now, truly, retailers have a long time before this is the norm or a demanded expectation, but it is coming.
Once, the big trend in stores was to create an area for the kids to play while the parents shop. For Gen Z, charging stations are desired for their devices while they shop. Since these shoppers use their phones so much in the stores, keeping the batteries fresh is important.
Facebook was the favorite of Millennial shoppers; apps that are instant shopping capable are the Gen Z favorites. Texting leads the way, but apps like Snapchat and Instagram all had high usage in-store among these users according to the Euclid study. This means store design and layout will need to think about this behavior and adjust. It becomes more important to show a complete solution on endcaps versus a bulk stack of an item. They move quickly and make decisions quickly so accessories need to be part of the body of the sale and not the add-ons that they have been for other generations.
What about loyalty programs? Do Gen Z shoppers like them or are they too fickle? In fact, the study showed that the desire and usage of loyalty programs were the same for Gen Z as it was for Millennials, meaning that it is just as important. However, this generation requires the loyalty program to be digital and not paper. So punch cards and key ring fobs are out if you want a Gen Z person as part of your loyalty program. Give them an app or better yet, just let them give you their mobile number as their ID. Many POS systems have already figured this out and have adapted. Square, for example, allows its retailers to award "stars" for loyal purchasers. All the customer needs to do is provide their phone number and they're in.
The bottom line is that Gen Z still wants a brick and mortar store, but more than ever they want an experience. And if they do not get an experience that exceeds their expectations, they will move on. When asked what they would do if the store they loved closed, the majority said they would find another store, not go online. It's clear they desire an in-store shopping experience. But that experience is going to have technology as the hub. Technology will be the new employee.