Generation on the Rise

As Gen Z’s buying power increases, here are five things you need to know about marketing to millennials’ younger siblings.

Generation on the Rise

April 2019   minute read

By: Terri Allan

Thanks to a nearby technical training school, Mike Fogarty, founder and CEO of Denver’s Choice Market, gets to witness the buying habits of Generation Z consumers every day. “They’re digitally social and very interested in locally made foods and drinks,” the retailer said of the teenage and young adult customers who shop his convenience store.

As a result, Choice Market utilizes the marketing tools this emerging generation prefers. “We engage with them through technology,” Fogarty explained, whether it’s via online ordering, in-store self-checkout or the store’s new app. And with two more locations expected to open this year, Choice Market will further appeal to Gen Z consumers with amenities like EV charging stations, frictionless checkout and perhaps an electric-scooter charging station.

Generation Z—broadly defined as those born between 1997 and 2012—is just beginning to demonstrate its buying power and emerging clout. According to IRI, Gen Z comprises 23% of the U.S. population, on par with baby boomers, and nearly as significant as millennials in size (which are 24% of the population). Gen Z currently accounts for about $44 billion in consumer spending, but that is expected to soar to some $600 billion by the time all members have matured.

“This generation is poised to be one of the most influential generations in history,” remarked Lynne Gillis, principal of survey and segmentation at IRI, which has been studying Gen Z since 2016. As with previous generations, Gen Z is defined by the events of its formative years. Gillis pointed to terrorist attacks, mass shootings, a major recession, the first African-American president and a heightened awareness of human equality as events and tendencies that have made a mark on this generation.

CPG marketers report similar findings. “Gen Z is a product of challenging and rapidly evolving times and a marker for how environment can influence outlook,” said Laura Lynn Freck, director, shopper insights, at Red Bull North America. “They’re an extremely thoughtful group that seeks meaning and authenticity in all things they do and associate with.”

To be sure, Gen Z members share characteristics with millennials, including multiculturalism, technological intuitiveness and the desire to discover new experiences and products. But there are significant differences too. “Gen Z is a more serious, measured generation,” said Gillis. “They show a greater bias to action than millennials. They’re more pragmatic. They expect to work for what they want.”

In a study recently conducted on Gen Z, Engagement Labs, a data and analytics firm, found “massive changes” in what members of the group talk about when it comes to consumer brands, as compared to conversations held by millennials five years ago, Brad Fay, commercial officer, explained. “There are less conversations about brands in general,” said Fay, noting that is likely due to the decline in TV viewership at the hands of commercial-less streaming services.

Make Way for the Future

Fay cautioned, “When it comes to studying generations, it can be hard to predict whether the changes we find are life-stage affected or generational affected.” Nevertheless, he added, “Retailers would be smart to plan that it could be generational.” Indeed, progressive c-store operators like Fogarty are already positioning their shops as destinations for Gen Z consumers.

Here are five key findings about Gen Z that retailers need to consider as they prepare to service this dynamic consumer group:

1. Gen Z Members are Digital Natives.

These consumers have grown up in front of screens, and according to Gillis, “they’re really good at sorting through information. Technology connects them.” Social media support, therefore, is vital for retailers that want to communicate with Gen Z consumers.

“We’re becoming more tech savvy,” said Pam Throckmorton, co-owner of Throx Market Station, in Winchester, Virginia, “concentrating on social media outlets such as Instagram and Facebook, and looking to generate content on Pinterest and YouTube in the future.”

The Goods Mart—the bicoastal c-store with locations in Los Angeles and New York City—meanwhile, is a heavy Instagram user, according to owner Rachel Krupa. “With Instagram, we’re building a platform for communication,” which allows the stores—specializing in good-for-you and locally produced food and drinks—to feature newly stocked items and to provide information on merchandise offered, the retailer explained. The social media platform also allows the Goods Mart to “engage with our customers about community events or the nonprofits that we regularly support and to share the stories that our customers post within our stores,” she said. Good Mart also uses Instagram to connect directly one-on-one with its followers through direct messages.

Due to members’ technological prowess, Generation Z is “an incredibly visual generation,” Gillis remarked. “Because they’ve always had a smartphone in their hands, they process visual information faster than any other generation.” For retailers, then, “visual merchandising is huge” when targeting these consumers, Gillis added.

2. Gen Z Consumers Demand Authenticity.

IRI research released last year found that a brand’s authenticity is more important to Gen Z than preceding generations. “Authenticity is key. This generation does not want to be sold to,” Gillis said. Rather, she suggested that convenience retailers “create relationships with these consumers,” such as with personalized text messages or alerts or via social media. Indeed, with Gen Z consumers viewing fewer ads on traditional mediums, Engagement Labs’ Fay advised retailers to “be creative in connecting,” particularly when it comes to in-store merchandising. He recommended partnering with suppliers on displays and signs that “point to the value of a c-store as a marketing location.”

Nothing says authentic more than locally produced merchandise and locally owned businesses, including c-stores themselves. The Goods Mart, for example, features sandwiches, quinoa bowls and overnight oats in its “grab and go” section, which are prepared by local chefs, using locally grown ingredients, Krupa noted. Jonathan Polonsky, CEO of Oregon’s Plaid Pantry, said he sees opportunity in marketing the chain as the only locally owned convenience store in the market, and that the concept recently added in-store graphics and social media support to communicate to its customers. “We believe it will resonate with these consumers,” Polonsky said of the effort.

3. Generation Z Consumers are Health- and Wellness-Focused.

Like millennials before them, Gen Z members are increasingly seeking out food and drinks perceived as healthy and good for them, including products low in sugar, high in protein and with few added ingredients, c-store operators reported. “Generation Z seems to parallel millennials, and serving this consumer group is core to our business model,” Choice Market’s Fogarty remarked. “We focus on fresh, locally made food, sustainability and protecting the environment. Choice Market is an authentic brand that resonates with these consumers.”

Polonsky added that Plaid Pantry is also committed to offering “clean” foods. “While we’ve always brought in clean labels, we thought we could do better,” the c-store executive said. “So we’re now focused on a wider breadth of clean labels.”

4. For Gen Z Consumers, Variety Is a Must.

“Variety is huge. These consumers like to have options,” Gillis remarked. In fact, according to IRI’s most recent study of the group, the number of unique UPCs purchased by households with Gen Z members is significantly higher than those without. The Doritos brand—with its numerous variants—has been cited by Gen Z consumers as a “brand that gets it right,” Gillis said. For c-stores with space constraints, the IRI executive recommends seasonal or rotational displays, “or simply trying to display things in different ways.”

5. Some Gen Z Members Show Little Enthusiasm for Automobiles.

A characteristic of some Gen Z consumers that is likely concerning for c-store operators is their aversion to driving. According to Engagement Lab’s study, the conversation level for automobiles has fallen dramatically among members of the generation as compared to previous generations. Fay cited the growing popularity of rideshare and bike-share services, as well as increased use of public transportation.

On the flipside, Gen Z members are showing an increasing preference for neighborhood stores, such as the corner convenience or drug store. (Engagement Lab’s study showed a 300% increase in the frequency of conversation about 7-Eleven, Fay said.) This bodes well for Plaid Pantry, Polonsky noted, as “out of our 108 stores, only nine sell fuel. Our stores are truly neighborhood, walkable stores.”

Throckmorton and Fogarty also see opportunity in non-driving Gen Z consumers. The Virginia retailer points to partnering with Grubhub and UberEats, which “gives us the capability to tap into this market with a mobile ordering system for pick up and a delivery system that I don’t have to oversee or staff.” Fogarty, meanwhile, believes that electronic charging stations will one day replace fuel pumps. “That’s why we’re building this type of format,” he said of Choice Market’s planned supercharging stations.

Transparency, Honesty, Rawness

C-store suppliers also take Gen Z consumers seriously. According to Red Bull’s Freck, the beverage marketer has conducted a wide variety of research into the group for the past two years. In addition to foundational research and focus groups, Red Bull tracks Gen Z consumers in its shopper panel data, “enabling us to monitor ongoing purchase behavior in retail across our key channels,” she said. The marketer has found that “transparency, honesty and rawness are the mark of authenticity for Gen Z,” Freck added. Members also have “high expectations of brands and believe they have a major role to play helping to leave this world a better place.”

While older members of Gen Z are just entering the workforce and total expenditures are lower than for other generations, Freck sees immediate opportunity for c-stores. “Convenience stores are perfectly positioned to capture their smaller baskets and desire to try new snacks and beverages and should carefully monitor Gen Z brand and product SKUs.”

Choice Market’s Fogarty is optimistic long term. “I’m quite encouraged,” the Colorado retailer said. “Money and materialism don’t drive these consumers. Rather, they’re focused on environmental and community issues. We’re pleased that they support brands with the same ethos. It’s an exciting generation.”

Terri Allan

Terri Allan

Terri Allan is a New Jersey-based freelance writer. She can be reached at [email protected].

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