Host:
Welcome to Insight Exchange, presented by L.E.K Consulting, a global strategy consultancy that helps business leaders seize competitive advantage and amplify growth. Insight Exchange is our forum dedicated to the free, open, and unbiased exchange of the insights and ideas that are driving business into the future. We exchange insights with the brightest minds of the day, the most daring innovators, and the doers who are right now rebuilding the world around us.
Chuck Reynolds:
Welcome to this episode of the podcast. My name is Chuck Reynolds. I'm a managing director at L.E.K. and a leader within our digital service line. We're going to cover some key insights around Gen Z shopping behavior and really what brands and retailers need to know about capturing this generation's attention. We're going to unwrap insights from L.E.K.'s gen shop special report and really going to discuss four interesting insights from the research. The first discovery in shopping is constant. Gen Z is perpetually in a shopping and browsing state. The second is really around the physical store is not dead.
Gen Z is definitely using digital means to research and browse, but they haven't stopped shopping in store. The third is really that Gen Z cares about being informed. They're research driven, and they're focused on making every purchase count. Last, really around, Gen Z, they care about personal curation. They're not shopping traditional department stores. Rather, they're creating their own curated assortments on Amazon and directly with brands. Join me and my fellow experts as we explore Gen Z shopping behavior. I'm joined by our experts Laura Brookhiser, who has a focus on soft goods and durable, and Jen Wu, who has a focus on consumables and food and beverage. Welcome. Would you each take a moment to introduce yourselves?
Laura Brookhiser:
Thanks, Chuck. Hi, everyone. I'm Laura Brookhiser, a managing director in L.E.K.'s Boston office. As Chuck alluded to, I spend my time advising clients in consumer durables from footwear and apparel to home furnishings, with a focus on how to better understand and reach their target consumers.
Jen Wu:
It's great to be here with both of you. My name is Jen Wu, and I'm a partner in our New York office, focused on consumables. My primary area of focus is food and beverage, but our team has deep expertise in pet food and treats, health and wellness, and VMS as well.
Chuck Reynolds:
Great. Thank you very much, both Laura and Jen. Let's unpack the four findings. First, can we just discuss what did we find out about discovery and shopping as constant? What about Gen Z are they constantly shopping?
Jen Wu:
That was definitely an interesting finding, Chuck. What we found here was 40% of Gen Zers say that they are continuously shopping or browsing due to their digital accessibility. This is compared against only 15% of Gen X and boomers and 35% of millennials saying the same thing. It makes sense when you think about the consumer path to purchase, which really starts with discovery. Discovery is where we see the most change happening because Gen Zers are really that first digitally native generation, where they're most engaged online and on mobile. I mean, they're always browsing because their phones are at their fingertips. So, not only are they passively consuming content that they've curated on their feeds, but they're also constantly being served ads and content from brands and retailers in an active fashion as well. The majority of Gen Zers are saying they couldn't go more than four hours without the internet, without feeling "uncomfortable". While other generations are more comfortable signing off, the digital and physical world are just blended for Gen Z, they're always on.
Chuck Reynolds:
Jen, that's fascinating. One really interesting point is that while they're always on digitally, they still shop in store. Our second point is around the physical store is not dead. So, maybe you can elaborate a little bit more on how Gen Z appreciates brick and mortar shopping despite their digital upbringing.
Jen Wu:
Yeah. That was a surprising one. I mean, you would think that with Gen Z being digital natives, that they do all their shopping online. What we found was it's really just integrated. Gen Z highly values in-store shopping. In fact, 65% prefer to shop in store, and this preference is far more than millennials, gen X, and boomers. What happens here is they're highly digitally engaged, and so they're comfortable purchasing online but also picking up in store. They also really value the experience of shopping in stores. You also see a lot of retailers focusing on driving that traffic in stores through a lot of activities or foods or creating this curated environment so that Gen Z is coming into the store, getting inspiration, seeing and touching products, and often getting together with friends. This is especially true when you think about consumables and goods like apparel, they're very tactile, and also food and beverage, where the first trial of something, whether it be a beverage or let's call it a protein bar, is typically going to be a single unit before someone commits to buying a bulk e-commerce package.
Really, this generation is moving seamlessly between the digital and physical worlds. 80% of Gen Zers say that they've bought something that they first saw on social media, but that's only the beginning of their purchase journey. They'll do that research online, but ultimately buy it in store. The other research that we've seen, which is not limited to Gen Z, shows that digitally influenced retail sales are going to grow from 2.7 trillion in 2022 to 3.8 trillion in '23. Further demonstrating that blurring across channels and the desire for a unified commerce experience.
Chuck Reynolds:
Wow. Really, what we're saying is that digital influences in-store sales, and really not only are Gen Zers doing their research online, but they're also doing their research by buying one or two items in store to really understand whether they like a product or not. They're really becoming extremely informed. Laura, maybe you can talk a little bit about how informed Gen Z is, and how does this really compare against other generations in terms of really doing their research and figuring out what and where and how they want to buy?
Laura Brookhiser:
Great. Thanks, Chuck. We found that 92% of Gen Z respondents do research before making a purchase, and this was the highest of any generation that we surveyed. We've also found that Gen Z is highly likely to return items that don't meet their needs. We take away from this that Gen Z is really focused on making every purchase count. I think this speaks to sort of two underlying drivers that we see with this generation. One is really around information overload and trust concerns that come with being a digitally native generation. These consumers have grown up with being inundated with vast amounts of information, and they're also savvy enough to understand that not everything they see advertised or online is accurate and truthful. They're really used to doing their diligence and trying to understand for themselves what products are going to meet their needs.
The other underlying driver that we see with this generation is really a desire for authenticity. They aren't transactional. They're very values driven, and Gen Z is really looking to shop, wear, and eat brands that reflect their values. This could be sustainability related, it could be related to social issues, but it also could be just finding a brand that reflects their personality and how that individual wants to express themselves in the world on a day-to-day basis. All in all, we found that Gen Z is more considerate and planful in their purchases than other generations are.
Chuck Reynolds:
Well, thanks, Laura. Really, what we're talking about is that there's a lot of things that go into meeting the preferences of Gen Z. They like to buy online, they like to do their research, they like to pick up in store, they want authenticity. Really, if we look at all of the ways in which Gen Z is shopping, which retailers are winning with Gen Z today?
Laura Brookhiser:
Well, of course, the answer to this question varies a lot depending on what specific category and product you're talking about. There are a few themes that we found across categories, some of which may not be surprising, but some may be. The first is Amazon is really a standout with this generation. It has higher utility scores with Gen Z shoppers than other generations across almost all categories, so things as different as footwear to furniture to groceries. In some of these categories, Amazon was the number one preferred retailer for Gen Z shoppers. In fashion categories, where it was number two, it was only surpassed by consumers going directly to brands they love. In particular, athletic brands. While Amazon might have previously been viewed as a place for basics or inexpensive merchandise, I think we're seeing with younger generations that Amazon is a stop for them for all types of products that they're looking for, including more premium goods.
Now, what we see that Gen Z isn't shopping then is the traditional department store, Kohl's, Macy's, JCPenney, and the like all ranked lower for Gen Z than other generations. While some of this may seem like, "Yes, we've heard that news before," I think there's a few underlying drivers that are relevant to explore here. The first is around that this generation was raised with UX and user experience in a mind. They are used to having intuitive consumer driven products and services put forward to them. I think when you go to Amazon, it's hard to deny that its simplicity, ease of use, and convenience cannot be overstated.
At the same time, this generation caress about individuality and personal curation. They grew up creating their own playlists and picking individual streaming songs versus having to buy CDs or watch whatever program happened to be on TV at the time. I think as we look at how they shop, they either want to curate their own set of products themselves by going directly to those brands and seeking them out one-on-one. Or, they're leveraging technology through sites like Amazon to have personally curated sets of offerings based on their previous shopping behavior. They're not interested in the generic set of categories and products within those that a traditional department store might offer. Really, here, for them it's about personalization, ease of use, and an intuitive and easy experience.
Chuck Reynolds:
Laura, Jen, one just question on that. How do we reconcile this Gen Z love to shop in store and buy online, pickup in store, but yet Amazon being the number one brand and retailer that they like to shop?
Jen Wu:
I think that's an interesting question, Chuck. I think the way that we would square that circle is viewing Amazon as really the starting point for a lot of consumers when it comes to browsing and doing their research. When you think about research, I mean, Amazon reviews are one of the most cited sources of research just in terms of stars, in terms of comments. I think the other thing here is when you think about those connected devices, if it's Alexa, Google Home, oftentimes consumers are just using that as that first point. You know, "Alexa, tell me more about this product." Amazon becomes that default starting point for a lot of consumers.
Chuck Reynolds:
Yeah. That's really interesting. I mean, when I really start to think about all of the things we've talked about, brands and retailers really have an opportunity to create a distinct shopping experience for Gen Z. We've talked about a number of different things, but if I were to summarize it, I'd really say brands need to articulate a really clear and concise value proposition that builds on convenience and trustworthiness and can be backed up by simplicity of the experience. Brands really need to have a clear omnichannel or unified commerce strategy that understands the role that every channel is going to play, be it in terms of discovery, research, fulfillment, or otherwise.
Since consumers are constantly shopping and browsing often on TikTok or Instagram, it's imperative for brands to also adopt that always-on approach and having that consistent experience and assortment and messaging across both shopping channels and the media and entertainment channels. This really allows for consumer diligence around thinking about how are you going to be pricing and how are you going to be really building your assortment to meet the needs of your consumers across all the different touch points that they have. It doesn't mean that the price needs to be the same at every channel, but you need to have a thoughtful strategy on how you're going to price in this unified commerce world.
And really understanding how your consumer's purchase path is, how that's different across the segments at which you target, it's different across the channels that they consume. And really understanding that there is no more linear customer purchase path that every consumer takes, and what roles and really what touch points are the most important at what point in a consumer's journey that you really have to emphasize and double down on. Really, I think that these are interesting points that brands and retailers can take away from the research and apply to their strategies. But, again it's not one size fits all. There's no one silver bullet that's going to say, "If you do this, then you're going to win with Gen Z," and it's really being thoughtful around how you apply the learnings to your strategy to win with your consumers.
Laura Brookhiser:
That's a great summary, Chuck. These are some of the exact topics that we're actively having conversations with clients about. Whether that is a unified commerce strategy, omnichannel pricing strategies, or really deep diving into understanding their consumers and their specific purchase journey so that they can evolve their offering and customer experience to better reach those target consumers. We can't wait to share these gen shop special report insights with them.
Jen Wu:
For those of you who are listening and are interested in learning more, please don't hesitate to reach out. We're more than happy to provide detailed discussions on a one-on-one basis and share more of L.E.K.'s extensive experience in providing strategic support to leading consumer brands and retailers.
Host:
Thank you, our listeners, for joining us today at the Insight Exchange, presented by L.E.K. Consulting. Links to resources mentioned in this podcast can be found in the show notes. Please subscribe or follow for future episodes wherever you listen to your podcasts. Also, we encourage you to submit your suggestions for future insights online at lek.com.
