STUDY: Winning Over Gen Z is Essential
Two-thirds (64 %) of Canadian retailers agree it is crucial to attract Gen Z customers for the success of their business, up from just over half in 2019, according to new research from American Express Canada. The research also suggests that while retailers have made progress in reaching this increasingly powerful demographic, they have yet to close critical gaps that drive true brand loyalty.
The new research is based on a comparative study of Gen Z's spending preferences, and retailers' shifting attitudes toward the demographic between 2019 and 2023. According to the new research, conducted by Maru Public Opinion, an increasing number of retailers recognize the growing consumer power of Canadians in their teens and 20s. In fact, the percentage of Canadian retailers targeting Gen Z more than doubled between 2019 and 2023 (25 vs 57%).
"While there were clear differences between retailers' priorities and the unique needs of Generation Z in 2019, retailers who recognized this at the time are now actively making efforts to bridge the gap," said Kerri-Ann Santaguida, VP and General Manager of Merchant Services at American Express Canada. "Together with Millennials, Gen Z wields unparalleled influence on the future of retail, driving trends that continue to reshape the industry. Retailers can propel future success by effectively targeting this cohort and making the right investments to drive loyalty."
Opportunities for retailers to invest in Gen Z are plentiful and worthwhile, as they may be one of the most loyal generations to date. Nearly half (47 %) of Gen Zs say they are brand loyal most of the time.
In-Store Intel: Identifying room for growth
While 61% of Gen Z consumers consider in-store their preferred method of shopping, and more than one in four (28%) say they shop in retail stores more now than they did before the pandemic, many retailers have not addressed the generation's desire for memorable in-store experiences. Just a quarter of retailers (27%) are offering unique in-store experiences, only slight increase from 2019 (23%).
These findings present an opportunity for retailers to invest more in creating stronger retail store experiences for increased brand engagement and foot traffic. Examples among retailers prioritizing in-store experiences include creating a soothing sensory experience for Gen Zs while they shop, and merchandising that focuses more on storytelling.
Driving Home Digital: Adapting for Gen Z
Since 2019, the use of mobile and contactless payments has accelerated greatly among Gen Z consumers and retailers. In fact, 61% of retailers currently offer mobile or digital wallet payments, nearly doubling the figure reported in the 2019 survey. The pandemic has no doubt played a role in this acceleration, with almost half of Gen Zs adopting digital payment solutions more now compared to before the pandemic.
Payment options have a powerful impact on brand loyalty, with 30% of Gen Z respondents saying they would not shop with a retailer again if their preferred form of payment was not available.
Loyalty Leverage: Opportunity for more
Despite being one of the most loyal consumer demographics out there, Gen Z appreciate being rewarded for loyalty. In fact, 45% of Gen Z respondents said they would buy a brand again if they earned valued rewards on purchases, indicating a good loyalty program is a great place to start for retailers.
"When you win with Generation Z, you could be winning a customer for life if you understand their expectations and preferences," said Santaguida. "The challenge for retailers is that Gen Z is a generation of diverse tastes. At times, they value frugality and sustainability, shopping at thrift stores and looking for a deal, but they're also willing to pay more for high-quality products."
The key is creating a loyalty program that is easy to participate in and offers achievable rewards to keep Gen Z actively engaged.
"Loyalty programs offering a personalized, seamless experience that keeps customers actively invested in and engaged with the brand have proven successful," said Santaguida. "Those provide opportunities to interact through advertising, social media, the brand website, and brick-and-mortar stores with app integration."
By offering a variety of payment options, prioritizing the in-store shopping experience, and rewarding Gen Zs for their loyalty, retailers can capitalize on the growing power and influence of this generation to ensure success for years to come.